Josh J.T. Byrne, Swartz Campbell

The Superior Court of Pennsylvania in Seidner v. Finkelman, Nos. 716 EDA 2017, 808 EDA 2017, 2018 Pa. Super. Unpub. LEXIS 3249, at *11 (Pa. Super. 2018) weighed in on the gist of the action in legal malpractice claims (albeit in an unpublished opinion). Our courts have long recognized a legal malpractice action can sound in tort or contract. In the last several years Pennsylvania courts have not spilled a lot of ink on the distinction between the two causes of action. Federal courts in Pennsylvania have been much more active in discussing the distinction and its importance.

Legal malpractice actions often include a claim for breach of contract for no reason other than to increase the statute of limitations from two to four years. There are legal malpractice claims that can sound in contract, but not all do. Breach of contract claims which arise from breaches of the standard of care are tort concepts that should not be the basis for a plaintiffs' breach of contract claims. The Pennsylvania Supreme Court described generally how to determine whether a claim sounds in tort or contract: “The general governing principle which can be derived from our prior cases is that our court has consistently regarded the nature of the duty alleged to have been breached, as established by the underlying averments supporting the claim in a plaintiff's complaint, to be the critical determinative factor in determining whether the claim is truly one in tort, or for breach of contract.  In this regard, the substance of the allegations comprising a claim in a plaintiff's complaint are of paramount importance, and, thus, the mere labeling by the plaintiff of a claim as being in tort, e.g., for negligence, is not controlling.”

Bruno v. Erie Insurance, 106 A.3d 48, 69 (Pa. 2014).

There has been some analysis which suggests an ability to “read in” a standard of care analysis to a legal malpractice action in contract, despite the gist of the action doctrine. However, what is “read in” to a legal services agreement is an implied contractual term, as explained by the Supreme Court in Bailey v. Tucker, 621 A.2d 108, 115 (Pa. 1993): “An attorney who agrees for a fee to represent a client is by implication agreeing to provide that client with professional services consistent with those expected of the profession at large.”

Providing professional services consistent with those expected of the profession at large is not the same as exercising ordinary skill and knowledge expected of a lawyer in a specific area.  In Fiorentino v. Rapoport, 693 A.2d 208, 214 (Pa. Super 1997), the Superior Court acknowledged this distinction when it performed two different breach analyses for the two different claims.

The distinction between the two breaches is nuanced but exists. The Middle District of Pennsylvania, relying on Pennsylvania law, explained the distinction when applying the gist of the action doctrine:

In addition to the express provisions of an attorney-client agreement, “an attorney who agrees for a fee to represent a client is by implication agreeing to provide that client with professional services consistent with those expected of the profession at large,” see Bailey v. Tucker, 621 A.2d [108] at 115 [Pa. 1993]. Thus, absent allegations that the attorney failed to follow specific client instructions or breached a specific provision of their contract, a client's breach of contract claim against a lawyer “is not a true contract cause of action but sounds in negligence by alleging [that the attorney] failed to exercise the appropriate standard of care,” Storm [v. Golden], 371 Pa.Super. 368, 538 A.2d [61] at 65 [Pa. Super. 1988]; see also Edwards v. Thorpe, 876 F.Supp. 693, 694 (E.D. Pa. 1995) (“When a plaintiff's cause of action is based on the attorney's failure to exercise due care, it will sound in contract only if the attorney fails to follow the client's specific instructions or, by her negligence, breaches a specific provision of the contract.”), see New York Central Mutual Insurance v. Margolis Edelstein, No. 3:14-0829, 2015 WL 412519, at *17 (M.D. Pa. 2015) (quoting Frantz v. Fasullo, No. 3:13-CV-02345, 2014 WL 6066020, at *4 (M.D. Pa. Nov. 13, 2014)) (emphasis omitted).

In New York Central, the plaintiff sought legal advice regarding a potential bad faith claim arising out of the plaintiff's refusal to tender the full policy limits for physical injuries sustained in an automobile accident. In an engagement letter the defendant agreed to “provide NYCM with a legal opinion on the validity of any bad faith claim under the confines of Pennsylvania law.” The defendant advised the plaintiff he did not believe a potential bad faith claim arising out of the incident would be successful, and he reiterated this position in subsequent letter. A bad faith claim was brought against the plaintiff, and following a settlement for $2 million dollars, the plaintiff brought a legal malpractice action against the defendant more than two years after the letters were written.

The New York Central court examined the factual circumstances based on the Bruno court's reasoning and stated “there is no doubt that defendant had contractual obligations under the letter to perform legal research applicable to the facts of the underlying insurance claim, such as being 'completely thorough' and conferring with all counsel in Margolis Edelstein's Scranton office prior to providing his legal opinion to NYCM regarding its potential exposure to the bad faith claim.” However, the court noted “the gist of plaintiffs' complaint is [the attorney] … acted in a negligent manner” by not conducting thorough research on Pennsylvania law regarding bad faith claims and giving incorrect and erroneous legal advice as to the merits of the bad faith claim that was so misleading that it precluded the client from making an informed judgment about whether to settle. The court found the plaintiff's claim was a tort claim under the gist of the action doctrine. In holding the plaintiff's claim was a tort claim and not a contract claim, the New York Central court determined the language in the second amended complaint relied on tort-type language and did not allege the attorney failed to follow specific instructions or breached a specific provision of the contract.

Likewise, in Seidner, the court found plaintiff's claim sounded in tort rather than contract because “she did not argue that the appellees failed to fulfill the objectives, but only challenged the manner in which they achieved them, and whether the advice provided was within the standard of care.” The Superior Court agreed “the trial court properly found that, pursuant to the 'gist of the action' doctrine, the appellant's claim sounded in tort and that, therefore, it violated the two-year statute of limitations.” Pennsylvania courts may be moving to reestablish the distinction between legal malpractice actions sounding in tort and those sounding in breach of contract which has been blurred in recent years.

Josh J.T. Byrne, a partner in Swartz Campbell's professional liability group in the firm's Philadelphia office, is also co-chair of the Philadelphia Bar Association's professional guidance committee and the incoming chair of the Pennsylvania Bar Association's professional liability committee.