314 F. Supp. 3d 718
E.D. Pa.2018Background
- ATG Trust Company was appointed trustee of a Qualified Settlement Fund (QSF) in the Avandia MDL; funds were deposited under an MSA and QSF Stipulation.
- A disputed “holdback” sum remained in the trust after GSK and plaintiffs’ counsel Greer disagreed about entitlement; Greer represented some settling claimants and communicated to ATG (via Wahlstrom) that funds could be released.
- Relying on those representations, ATG disbursed the holdback to Greer; GSK later moved to hold ATG and Greer in contempt for unauthorized withdrawals.
- ATG retained Jan R. Schlichtmann for limited representation in the contempt proceeding; Schlichtmann negotiated and ATG entered a confidential court‑approved settlement making ATG jointly and severally liable to GSK, and ATG paid the settlement amount.
- ATG sued Schlichtmann for legal malpractice and breach of contract alleging failures in his limited representation caused ATG’s payment; Schlichtmann counterclaimed for breach of contract, breach of implied contract, and quantum meruit for fees.
- Both sides moved for summary judgment; the court denied both motions, finding genuine disputes of material fact on malpractice causation/damages and on whether an implied contract or quantum meruit recovery was available to Schlichtmann.
Issues
| Issue | Plaintiff's Argument (ATG) | Defendant's Argument (Schlichtmann) | Held |
|---|---|---|---|
| Whether Schlichtmann committed legal malpractice (negligence) in limited representation | Schlichtmann failed to exercise ordinary skill (conflicts not disclosed, did not appear in person, failed to defend, misrepresented facts), causing ATG >$2M loss | Settlement avoided contempt and penalties; thus no failure of ordinary skill and no proximate cause of loss | Denied summary judgment for Schlichtmann; fact disputes exist on duty/breach and causation/damages |
| Whether ATG proved actual damages from alleged malpractice | ATG paid settlement and incurred litigation to recoup from Greer; settlement recovery was limited | Loss speculative because ATG later obtained judgment/settled with Greer | Court found triable issues as to actual loss and causation; summary judgment denied |
| Whether Schlichtmann can recover on breach of implied contract for fees | N/A (Schlichtmann asserts implied contract based on retention and conduct) | ATG: no written/oral fee agreement, no contemporaneous billing, ethical rule violations | Court: genuine disputes of fact about formation and terms of implied contract; summary judgment denied |
| Whether Schlichtmann can recover in quantum meruit | N/A (Schlichtmann: conferred benefit by obtaining settlement and providing services) | ATG: no enforceable fee agreement; ethical rules not followed | Court: factual question whether unjust enrichment occurred; summary judgment denied |
Key Cases Cited
- Miller v. Ind. Hosp., 843 F.2d 139 (3d Cir. 1988) (summary judgment standard and credibility limitations)
- Anderson v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (standard for genuine dispute of material fact)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (burden-shifting on summary judgment)
- ASTech Int'l, LLC v. Husick, 676 F. Supp. 2d 389 (E.D. Pa. 2009) (legal malpractice causation and actual loss analysis)
- Associated Hosp. Servs. of Phila. v. Pustilnik, 497 Pa. 221 (Pa. 1981) (forms of malpractice actions and damages principles)
- Whitaker v. Herr Foods, Inc., 198 F. Supp. 3d 476 (E.D. Pa. 2016) (contract formation and implied contract principles)
- Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman, P.C., 179 A.3d 1093 (Pa. 2018) (quantum meruit / unjust enrichment principles)