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The Corporate Client and Legal Malpractice.

Doebler v. Arensberg, 2010 WL 3940305, (Pa. Com. Pl. 2010) is a Lycoming,Pennsylvania case which analyzes several familiar aspects of legal malpractice. There are several conclusions to be taken away from the case. Primarily, the case concludes that even when an individual is a substantial shareholder of a corporation, they corporate entity should be the party instituting the cause of action. The second point is that the statute of limitations inPennsylvania is a strictly enforced doctrine, with a limited exception. Finally, the case stands for the proposition that allegations of damages should be pled with as much particularity as possible to avoid the label of speculative. 

The legal malpractice action arose based on the representation of Taylor Doebler, and Doebler seeds LLC, by attorney Tucker Arensberg. Underlying the representation was an issue concerning Doebler's separation from DPH Inc. and subsequent competition with DPH Inc. Doebler alleged losses based on legal fees, loss of value of DPH stock, and losses from a preliminary injunction. In response, Arensberg, sought summary judgment based on lack of standing, violation of statute of limitations, presence of a settlement, and finally the speculative nature of damages.

The first argument the court assessed regarded standing. Throughout the decision, the court notes that Doebler itemized his various damages as being a cost born by him personally. However, under examination during depositions, Doebler admitted that the damage assessment was actually money paid by Doebler Seeds, the company he started. The importance of this evidence is primarily that inPennsylvania, a corporate identity, even one wholly owned by one person, is distinct form the individual. Unless there is an otherwise exceptional circumstance, the corporate identity should be upheld and recognized. The court noted that in the action, Doebler was seeking to recover personal damages, based on corporate outlays. In other words, his actions could be characterized as an attempt to "disregard [corporate form] because it suited his interests at the time." Because of this flaw in the complaint by Doebler, the court struck all damages alleged that could be traced to the corporate entity. After substantial removal of damages, Doebler was left only with one claim of damages that was not imputed to the corporate entity.

The court next tackled an issue which has been discussed often inPennsylvanialegal malpractice cases; the statute of limitations. All legal malpractice actions inPennsylvania, which sound in negligence, must allege employment of the defendant attorney or another basis for duty, failure of the attorney to exercise ordinary care or skill, and that such failure proximately caused damages to the plaintiff. In negligence actions, the statute of limitations is 2 years. The trigger for accrual of a malpractice action in negligence is that the occurrence of a breach of duty begins to toll the statute. This means a client who believes they suffered legal malpractice has 2 years from the date of the breach to file a lawsuit. The only exception to this is the discovery rule, which allows a plaintiff who exercises due diligence is unable to know of or discover the injury. In this case, Doebler had asked for litigation advice in January, 2003. In reliance on advice of Arensberg, Doebler then sold stock. In June of 2003, the plaintiff, Doebler was sued by the company he was leaving. The problem with Doebler's argument that the statute did not run was that Arensberg provided a letter outlining the risks of litigation from opposing counsel in April of 2003. According to the court, receiving the letter should have put Doebler on notice concerning imminent litigation. Furthermore, the June 2003 initiation of litigation also provided notice. An injunction was then issued against Doebler on July 24, 2003. While the court did not calculate the dates, even if they were conservative in assuming the discovery of breach should properly have been tolled to July 24, which means Doebler was required to initiate the lawsuit by July 24, 2005. He did not file until September, 2005. BecausePennsylvanialaw is strictly applied on this point, the statute of limitations was enforced. In this action, Doebler's case alleging negligence was not heard on the merits, due to about 8 weeks.

Under the settlement prong, the court dismissed the claims as duplicative. Doebler was trying to recover damages from Arensberg that had been subject to a counterclaim in an underlying action.Pennsylvaniacourts do not allow for a person to have more than one satisfaction of damages. Because Doebler had settled the underlying suit, and thus satisfied damages, he could not then claim the same damages against Arensberg. Even if the damages were properly attributed to Arensberg, because they were duplicative, it would have resulted in unjust enrichment. The sorts of damages alleged were also attributable to the corporation. Doebler's damages complaint had multiple flaws, according to the court.

Finally, the court addressed the charges of speculative damages. At this point in the litigation the court had dismissed all but one claim, thus they could only consider damages as it related to the diminution of share-price related to shares of the former company, held by Doebler. The problem with the claim however, was that the sale of stock leading to the complaint did not involve Arensberg. In fact, the deposition testimony showed that there was no work done by the Arensberg in advising. In order to prove causation with respect to any claims, Doebler had to prove "but for" Tucker Arensberg's failures, he would have prevailed. The court analyzed the deposition testimony, and because it did not show any undertaking by the law firm in relation to the damages, allowing a jury to hear the cause would be allowing speculative damages.

This case is not groundbreaking, but provides a corporate glimpse of legal malpractice. A corporate client like Doebler was unsuccessful because he attempted to shove off the corporate mask, to wear the person mask so to speak. Once the court recognized the claim was by an individual for corporate losses, the tone of the opinion became much more adversarial. Additionally, courts will often do what seems objectively fair. This is why statute of limitations rules exist, and why damages may not be alleged multiple times once paid. Accordingly, the court in this case found against Doebler on his claims.

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