.

Legal Updates for Lawyers' Professional Liability

Legal Updates for Lawyers' Professional Liability - RESULTS & THOUGHT LEADERSHIP

January 3, 2022

LAWYERS’ PROFESSIONAL LIABILITY RESULTS*

Jack Slimm and Jeremy Zacharias (Mount Laurel, NJ), obtained a precedent setting decision in Johnson v. McClellan, A-2683-19 (App. Div. July 19, 2021), certif. denied 2021 WL 5446825, where the Appellate Division reversed the trial court’s ruling which held that a law professor, an attorney admitted to practice in Pennsylvania, was liable for hundreds of thousands of dollars in damages in connection with the alleged unauthorized practice of law and obtaining a referral fee. The trial court entered judgment against the professor, ordering a disgorgement of the referral fee, treble damages and attorneys’ fees under New Jersey’s Criminal Statute N.J.S.A. 2C:21-22(a). The trial court ruled that the professor, by accepting a referral fee and by consulting on an underlying medical malpractice case which was filed in New Jersey, had committed the unauthorized practice of law because the professor was not admitted to practice in New Jersey. 

On appeal, the Appellate Division held that the trial court erred in finding that the professor violated New Jersey’s Criminal Statute. In addition, the Appellate Division agreed with the professor’s argument that he did not violate the Rules of Professional Conduct. The court held that an attorney admitted to practice before the highest court of another state may engage in the lawful practice of law in New Jersey if the out-of-state lawyer’s practice in New Jersey is occasional and the lawyer associates himself with a lawyer admitted in New Jersey who will be responsible for the conduct of the out-of-state lawyer in the matter. 

The Appellate Division also ruled that the trial court erred in determining that the receipt of a fee would amount to an independent instance of unauthorized practice of law. The Appellate Division found that such a finding would have rendered every attorney who violates an RPC relating to the unauthorized practice of law open to criminal prosecution. Commentators have written that this case could spare other attorneys from criminal prosecution. 

Subsequently, the plaintiff filed a petition for certification before the New Jersey Supreme Court, which Jack and Jeremy successfully opposed. The Supreme Court, in its decision, denied the plaintiff’s petition, with costs in favor of the Professor, on November 19, 2021. 

On December 9, 2021, the New Jersey Law Journal recognized this case as one of the top three legal victories in 2021. See Toutant, Charles, “Law’s Winners and Losers of 2021: Some Saw Breakthroughs, While Others Hit Rock Bottom,” NEW JERSEY LAW JOURNAL, December 9, 2021. 

Also handled by Jack Slimm and Jeremy Zacharias, in 2820 Mt. Ephraim Avenue v. Dembo Brown & Burns, LLP, 2021 WL 2934611, certif. denied, 2021 WL 5879486 (December 10, 2021), the New Jersey Appellate Division affirmed a trial court decision granting summary judgment in a $10 million tortious interference and defamation case filed by borrowers against the attorneys for a lender bank. This case arose out of an underlying deficiency and foreclosure action filed by a bank due to the plaintiff’s failure to repay a multi-million dollar loan used to finance the purchase of real estate. 

During the course of negotiations to resolve the debt, the bank’s counsel had discussions with the plaintiff’s new lender. The plaintiff alleged that during these discussions, the bank’s attorney called the plaintiff a “wannabe gangster.”

On appeal, Jack and Jeremy successfully argued that the trial court was correct in dismissing this case on summary judgment. The Appellate Division held that the trial judge correctly concluded that a statement made by the bank’s attorney to a potential new lender calling the plaintiff a “wannabe gangster” was mere name calling, not actionable defamation. Counsel for the bank’s attorney argued on appeal that this pejorative was simply name calling and did not rise to the level of actionable defamation or slander. The claims for tortious interference were based upon the lost opportunity since the new lender rescinded its conditional commitment after the alleged statement was made. The Appellate Division also held that the trial court was correct in holding that the statement was protected under the litigation privilege. The Appellate Division held that the litigation privilege is not confined to the courtroom, but extends to all statements or communications in connection with judicial proceedings. 

Subsequently, the plaintiff filed a petition for certification before the New Jersey Supreme Court, which Jack and Jeremy successfully opposed. The Supreme Court, in its decision, denied the plaintiff’s petition, with costs in favor of our client, on December 7, 2021.

Howard Mankoff (Roseland, NJ) represented an attorney who was sued by a former client, whom the attorney represented in a personal injury claim. The plaintiff alleged that the attorney failed to file suit within the time allowed by the statute of limitations. We argued in our summary judgment motion that the attorney sent two letters to the plaintiff, advising that the attorney would not file suit and further informing the plaintiff when the statute of limitations would expire. The plaintiff, who filed suit four years later, argued that he did not receive the letters and the attorney was obligated to do more than send letters. We successfully argued that the plaintiff failed to overcome the presumption that a letter, correctly addressed, was received. The Appellate Division affirmed, adopting our argument that the plaintiff could not overcome the presumption by simply claiming he did not receive the letters. The appeal was handled by Walter Kawalec (Mount Laurel, NJ). 

Aaron Moore (Philadelphia, PA) handled a complaint filed with the Pennsylvania Lawyers’ Fund for Client Security against our client attorney, which was successfully dismissed as unsupported. In a second case handled by Aaron, a surcharge claim was filed against our client attorney in the Philadelphia Orphans’ court, which was dismissed as unsupported.

Edwin Schwartz (Harrisburg, PA) successfully settled a $1.5 million liability claim for $450,000 by effectively challenging the damage model as speculative with plaintiffs’ counsel and the mediator. In a second matter, Ed convinced opposing counsel to drop his efforts in pursuing a claim of ineffective assistance of counsel against our client in an underlying criminal matter. Ed also received a favorable Report and Recommendation from a U.S. Magistrate Judge recommending dismissal with prejudice based on his motion to dismiss. Finally, two of Ed’s cases were dismissed with prejudice based on preliminary objections. 

*Prior Results Do Not Guarantee A Similar Outcome

 

THOUGHT LEADERSHIP

Josh Byrne (Philadelphia, PA) published articles in the Legal Intelligencer over the last quarter on lessons to be learned from the Disciplinary Board’s disbarments in 2021 and considerations in purchasing legal malpractice insurance. He also published an article for the PLUS Blog on the issues surrounding employing a formerly admitted attorney. In addition to authoring articles, Josh has presented on professional liability issues surrounding cyber-attacks at the Lackawanna Bench Bar Conference as well as to the Pennsylvania Bar Association.

Edwin Schwartz (Harrisburg, PA) presented the program “Avoiding Legal Malpractice” to the Dauphin County Bar Association on December 15th.

Charlene Seibert (Pittsburgh, PA) presented “Role as a Risk Manager in Avoiding Legal Malpractice Centre” to the County Bar Association’s Bench Bar.

 

The material in this law alert has been prepared for our readers by Marshall Dennehey Warner Coleman & Goggin. It is solely intended to provide information on recent legal developments, and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note tamontemuro@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2022 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved.

 

 

Firm Highlights

Thought Leadership

The Search-Incident-to-Arrest Doctrine Does Not License Strip Searches

In Beatty v. Gardner, No. 25-2860 (3d Cir. Sept. 16, 2026), Kyle Beatty sued police officers Clinton Gardner and Calvin Irvin under 42 U.S.C. § 1983 after they stopped, arrested, and searched him three times during a drug investigation in Williamsport, Pennsylvania. The officers initially smelled marijuana coming from the car in which Beatty was sitting and observed marijuana residue, giving them probable cause to arrest him. Beatty consented to the first pat-down, and the second search was conducted incident to his lawful arrest; neither search uncovered weapons or contraband. The officers then transported Beatty to the police station solely to strip-search him, but the strip search also revealed nothing. The District Court granted the officers summary judgment, concluding that the initial stop, arrest, and first two searches were reasonable and that qualified immunity protected the officers from liability for the strip search. The Third Circuit affirmed, but held that the strip search itself violated the Fourth Amendment. The court concluded that the search-incident-to-arrest doctrine does not automatically permit officers to strip-search an arrestee outside the jail or prison setting. Because strip searches are highly intrusive and the traditional justifications for searches incident to arrest (officer safety and preservation of evidence) did not justify the search of Beatty, the officers generally needed either the arrestee’s consent, exigent circumstances, or a warrant supported by probable cause to believe that a search beneath the clothing would reveal weapons, contraband, or evidence. Here, the officers had none of those justifications. Nevertheless, the court held that qualified immunity barred damages liability because, at the time of the search, the right against a warrantless strip search of an arrestee outside the institutional setting was not clearly established by Supreme Court or Third Circuit precedent. The court likewise upheld qualified immunity on Beatty’s First Amendment retaliation claim and affirmed summary judgment for the officers.

Marshall Dennehey Welcomes Special Counsel David Farkouh and Michele P. Rannie to New York City Office

News

Marshall Dennehey Welcomes Special Counsel David Farkouh and Michele P. Rannie to New York City Office

Four Marshall Dennehey Attorneys Selected 2026 “Top Lawyers” by Delaware Today Magazine

News

Four Marshall Dennehey Attorneys Selected 2026 “Top Lawyers” by Delaware Today Magazine

Thought Leadership

Two Tracks, No Preclusion: Ohio Supreme Court Preserves Separate Damages Claims After Chapter 2506 Appeals

The Supreme Court of Ohio has clarified that an administrative appeal under Ohio Revised Code Chapter 2506 does not bar a separate action for damages and declaratory relief that could not have been pursued in the administrative appeal. The Ohio Supreme Court considered Sheetz, Inc. v. Centerville (2026-Ohio-3531) as a result of a certified question from the Southern District of Ohio. The question was whether Sheetz, the gas station/convenience store brand, was barred from seeking damages in a separate action since damages were not sought in their administrative appeal. Ultimately, the Ohio Supreme Court ruled that res judicata does not bar a separate action for damages after ruling on an administrative appeal because R.C. Chapter 2506 is limited to judicial review and cannot grant affirmative relief. The case arose after Centerville’s city council rejected a site plan proposed by Sheetz, Inc. that had received unanimous approval from the City’s planning commission. Sheetz filed an administrative appeal pursuant to R.C. 2506 in the Montgomery County Court of Common Pleas, and two months later filed a complaint for damages and declaratory relief under 42 USC § 1983 as a takings action with the city, city council, and other objectors as improper takings and a violation of due process, as well as interference with business and contractual relationship. The city and city council removed the § 1983 action for damages to federal court. Montgomery County Court of Common Pleas reversed the city council’s denial, and allowed the Sheetz project to move forward. Upon that ruling, the federal court issued a show-cause order questioning whether the § 1983 action was barred by the doctrine of res judicata via claim preclusion (which includes all theories of recovery).  Sheetz argued that Ohio courts of common pleas do not have authority to award damages or declaratory relief as party of the R.C. Ch. 2506 appeal, therefore res judicata could not be triggered to apply to the § 1983 action. Additionally, Sheetz moved to certify the issue to the Ohio Supreme Court, citing differing results between the second and sixth districts on this same issue. Centerville approached the question, not from a claim preclusion standpoint, but from the holding in Grava v. Parkman, Twp which states that a final judgment rendered on the merits bars all subsequent action based on the same transaction or occurrence.  In yet another approach, an objector argued that claim preclusion was satisfied because Sheetz could have raised its damages claims in the administrative appeal – Sheetz disagrees. In their analysis, the Supreme Court of Ohio broke down the elements of a claim preclusion analysis: 1) a prior final, valid decision on the merits by a court of competent jurisdiction; (2) a second action involving the same parties, or their privies, as the first; (3) a second action raising claims that were or could have been litigated in the first action; and (4) a second action arising out of the transaction or occurrence that was the subject matter of the previous action. The Court held that R.C. Ch. 2506 does not permit a party to argue damages as R.C. Ch. 2506 limits the common pleas jurisdiction as if it were sitting on appeal, and therefore can only affirm, reverse, vacate, or modify the appealed order, or can remand the case to the administrative body. Further, the Court held that Grava’s conclusion that a final judgment precludes additional litigation for different relief is inapplicable under this fact pattern because it was meant only to apply to those matters in which the plaintiff brings the exact same case twice, but for new relief. The Court found Grava was inapplicable because Sheetz could have requested damages or declaratory relief in the R.C. 2506 appeal. Therefore, Grava would be nothing more than dicta if it even did apply. Going further, the Ohio Supreme Court disavowed Sixth Circuit precedent which, in reliance on Grava and other district court decisions, permitted an owner to seeking relief under 42 U.S.C. § 1983 alongside an administrative appeal. See Moore v Hiram Twp., 988 F.3d 353 (6th Cir.2021). The Ohio Supreme Court found that the Sixth Circuit had disregarded a critical decision in Community Concerned Citizens, Inc. v. Union Twp. Bd. of Zoning Appeals, 1993-Ohio-115, which clearly held that a R.C. Ch. 2506 appeal cannot be combined with a complaint seeking other claims for relief. Id. at ¶ 11. To that end, the Ohio Supreme Court has determined that the decisions Moore relied on (outside of Grava) are no longer good law, and that Moore was wrongly decided. The decision draws a clear procedural boundary: Chapter 2506 provides judicial review of an administrative decision, not a forum for independent claims seeking affirmative relief. Although Grava may place claims arising from a single transaction within the potential scope of claim preclusion, those claims are not barred unless the complete claim-preclusion test is satisfied. Because Sheetz could not have pursued damages or declaratory relief in its Chapter 2506 appeal, the separate action was not precluded. The remaining question for practitioners looking to apply or defend against this exception is when does the statute of limitations begin to run on damages and declaratory relief claims related to an administrative decision on appeal? A takings action in federal court has a 2-year statute of limitations, or as a state claim, 4 years (like the other tortious claims raised therein). Correlating this case with others, an administrative appeal will not likely toll the statute of limitations on claims based on a final decision by a municipal authority. Therefore, practitioners should look for these cases to be brought simultaneously.

Thought Leadership

Pennsylvania Supreme Court to Review Whether Legal Malpractice Claims May Be Recast as Breach of Contract Claims

The Pennsylvania Supreme Court recently granted allowance of appeal to consider whether a plaintiff may pursue a breach of contract claim against an attorney based on allegations that the attorney failed to provide competent legal services. The issue is significant in professional liability litigation because it concerns whether a plaintiff may avoid the statute of limitations applicable to professional negligence claims by characterizing the alleged misconduct as a breach of contract. Antoine Poteat retained attorneys Gary Asteak and Nino V. Tinari to represent him in a criminal matter. After his conviction was subsequently overturned through a Post Conviction Relief Act proceeding, Poteat filed suit against his former attorneys alleging that they breached their retainer agreements by failing to provide competent legal services. The attorneys argued that the claims sounded in professional negligence, rather than breach of contract, and were therefore time-barred. The trial court dismissed Poteat’s complaint, but the Superior Court, sitting en banc, reversed. The Superior Court held that the gist-of-the-action doctrine did not bar Poteat’s breach of contract claim because the alleged failure to provide competent legal services could constitute a breach of the parties’ agreement. The Court further held that a legal-services agreement contains an implied duty requiring an attorney to provide competent legal services, even where the agreement does not contain an express provision requiring such services. The Pennsylvania Supreme Court granted review in July 2026 and will consider whether the Superior Court’s decision conflicts with Pennsylvania precedent distinguishing contract and tort claims, including Bruno v. Erie Insurance Co. The Supreme Court will also address whether a plaintiff may maintain a breach of contract claim based on an implied duty to provide competent legal services without identifying a specific contractual provision that was breached. The Supreme Court’s decision could have significant implications for professional liability litigation in Pennsylvania, particularly where plaintiffs seek to characterize claims arising from alleged professional negligence as contractual claims.

MD Selected a 2027 Best Law Firm in Multiple Practice Areas by Best Lawyers

News

Marshall Dennehey Named a 2027 Best Law Firm in Multiple Practice Areas by Best Lawyers®

Defense Victory Obtained in Workers’ Compensation Case

Result

Defense Victory Obtained in Workers’ Compensation Case

business meeting photo

Result

Summary Judgment Obtained in Insurance Coverage Case

Complete Victory Obtained in a Workers’ Compensation Matter

Result

Complete Victory Obtained in a Workers’ Compensation Matter

Event

CLM 2026 Focus Conference

Allison joins three insurance industry leaders to discuss how cyber coverage disputes, the growing impact of social inflation on bodily injury claim valuation, and the use of artificial intelligence are reshaping the bad faith landscape. The panel will examine emerging sources of extra-contractual exposure, including evolving cyber insurance coverage issues and the challenges of accurately valuing bodily injury claims. Practical approaches to claim evaluation using AI, along with defense strategies designed to help prevent or successfully defend against bad faith litigation, will also be addressed.