Filed: Sep. 21, 2015
Latest Update: Mar. 02, 2020
Summary: NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _ No. 14-4693 _ RASHEENA PHINISEE, Individually and on behalf of A.P., a minor, as her parent and natural guardian, Appellant v. DEREK R. LAYSER, Esquire; GILBERT G. SPENCER, JR., Esquire; SPENCER & ASSOCIATES; LAYSER FREIWALD, P.C. _ On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 14-cv-3896) District Judge: Honorable Berle M. Schiller _ Submitted Under Third Circuit L.A.R. 3
Summary: NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _ No. 14-4693 _ RASHEENA PHINISEE, Individually and on behalf of A.P., a minor, as her parent and natural guardian, Appellant v. DEREK R. LAYSER, Esquire; GILBERT G. SPENCER, JR., Esquire; SPENCER & ASSOCIATES; LAYSER FREIWALD, P.C. _ On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 14-cv-3896) District Judge: Honorable Berle M. Schiller _ Submitted Under Third Circuit L.A.R. 34..
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 14-4693
_____________
RASHEENA PHINISEE,
Individually and on behalf of A.P., a minor, as her parent and natural guardian,
Appellant
v.
DEREK R. LAYSER, Esquire;
GILBERT G. SPENCER, JR., Esquire;
SPENCER & ASSOCIATES;
LAYSER FREIWALD, P.C.
_______________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 14-cv-3896)
District Judge: Honorable Berle M. Schiller
_______________
Submitted Under Third Circuit L.A.R. 34.1(a)
September 18, 2015
Before: FISHER, CHAGARES, and JORDAN, Circuit Judges.
(Filed: September 21, 2015)
_______________
OPINION
_______________
JORDAN, Circuit Judge.
This disposition is not an opinion of the full court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
Rasheena Phinisee, individually and on behalf of her minor daughter, A.P.,
appeals orders of the United States District Court for the Eastern District of Pennsylvania
dismissing her complaint, denying her motion to amend findings of fact, and denying her
motion for reconsideration. Because the District Court did not err with respect to any of
those orders, we will affirm.
I. Background
A. Factual Background1
Between July 2008 and April 2012, Phinisee, individually and on behalf of A.P.,
was represented by Derek Layser, Esq., and Gilbert Spencer, Jr., Esq., and their
respective law firms, Layser & Freiwald, P.C., and Spencer & Associates, in a medical
malpractice action against a federally-funded health care clinic. In that action, brought
against the United States under the Federal Tort Claims Act (“FTCA”), Phinisee alleged
that the clinic prescribed her the drug Microbid and that her daughter contracted a
disorder resulting in liver failure when she ingested the drug through Phinisee’s breast
milk.
Approximately two weeks before the action was set for trial, on April 19, 2012,
the parties attended a settlement conference before Magistrate Judge Thomas J. Rueter.
On the advice of her attorneys, Phinisee entered into a $1.2 million settlement agreement,
subject to approval by a designee of the Attorney General.
1
We recount the facts as alleged by the non-movant, Phinisee, accepting them as
true. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009).
2
The evening after the settlement conference, Phinisee came to understand through
online research that there was a Medicaid lien on the settlement funds.2 The next
morning, Phinisee informed Spencer that she wished to rescind the settlement agreement.
Over the next several days, Phinisee repeatedly emailed and called Spencer, restating her
desire to go to trial and alleging that he had misinformed her about the existence of the
Medicaid lien. On April 26, 2012, Phinisee, unsatisfied with her attorneys’ work, faxed a
pro se motion to reopen, and, the next day, filed a motion to terminate Spencer and
Layser as attorneys of record in the case.
The government responded with a motion to enforce the settlement, although the
Attorney General’s designee had not yet officially approved it. Spencer and Layser also
filed a motion to appoint a guardian ad litem for A.P. in order to complete the paperwork
on the terms agreed upon at the settlement conference. Shortly thereafter, the settlement
was officially approved, and, on June 6, 2012, an evidentiary hearing on the competing
motions to reopen and to enforce was held before Magistrate Judge Jacob Hart.3 By that
time, Phinisee had retained new counsel to represent her.
2
The Medicaid program, jointly funded by the federal government and the states,
pays for medical services to low-income persons pursuant to state plans approved by the
Secretary of the United States Department of Health and Human Services. 42 U.S.C.
§ 1396a(a)-(b). The Pennsylvania Department of Public Welfare administers Medicaid in
Pennsylvania and is authorized to recover the reasonable value of benefits provided under
the program from liable third parties. E.D.B. ex rel. D.B. v. Clair, 987 A.2d 681, 684 (Pa.
2009). Because A.P.’s medical expenses were paid through Medicaid, the settlement
proceeds were subject to a lien held by the Department of Public Welfare.
3
Magistrate Judge Hart was, by consent, designated to conduct all proceedings in
the FTCA action and enter final judgment in accordance with 28 U.S.C. § 636(c) and
Federal Rule of Civil Procedure 73.
3
On August 6, 2012, Judge Hart granted the government’s motion to enforce the
settlement. Judge Hart concluded that Spencer and Layser had adequately explained the
Medicaid lien to Phinisee, and there was no question of fraud or duress which might
vitiate the settlement. Two days later, Spencer and Layser filed a minor’s compromise
petition on behalf of A.P. Phinisee did not respond to the petition, and Judge Hart
approved it. Noting that his order granting the minor’s compromise petition was the final
order in the case, Judge Hart dismissed as moot Phinisee’s motion to terminate Spencer
and Layser as the attorneys of record and Spencer’s and Layser’s motion for appointment
of a guardian ad litem.
Phinisee moved separately for reconsideration of the order granting enforcement
of the settlement and the order granting the minor’s compromise petition, both of which
were denied. Phinisee then timely appealed both of the underlying rulings and the denial
of her motions for reconsideration. On February 21, 2014, in a non-precedential opinion,
we affirmed Judge Hart’s orders in their entirety. A.P. ex rel. Phinisee v. United States,
556 F. App’x 132, 135 (3d Cir. 2014). In concluding that the motion to enforce was
properly granted, we noted that “[t]he record in this case is replete with evidence, which
the Magistrate Judge credited, that: the Assistant United States Attorneys offered to settle
the case for $1.2 million; Judge Rueter conveyed that offer to the plaintiffs’ then-counsel;
Phinisee instructed her counsel to accept the offer; and counsel did so.” Id. at 136
(footnote omitted). We also relied on Judge Hart’s finding – which we noted Phinisee
did not appeal – that Spencer and Layser “informed Phinisee about the existence and
significance of the Medicaid lien on the settlement proceeds.”
Id.
4
After exhausting her challenges to the validity of the settlement, Phinisee has now
sued Spencer and Layser for negligence, breach of fiduciary duty, fraudulent and
negligent misrepresentation, and breach of contract, alleging that her former attorneys
induced her to settle the medical malpractice lawsuit for significantly less than the value
of the claim. She claims that, during the settlement conference, Spencer and Layser
misrepresented to her that she did not have a right to assert a claim on her own behalf to
recover medical expenses incurred for the care of her daughter. She also claims that
Spencer and Layser failed to notify her that she was responsible for the costs of caring for
her daughter until her daughter reached the age of majority. Moreover, Phinisee alleges
that her attorneys withheld an expert report and deposition transcript, which she says
strongly supported her case. Finally, according to Phinisee, Spencer and Layser
convinced her that the negligence claim was “tenuous,” when, in fact, the evidence of
liability was “rock-solid, almost to the point of being overwhelming.” (App. at 37.)
Spencer and Layser moved to dismiss her complaint for failure to state a claim,
and the District Court granted that motion. The Court held that Phinisee’s negligence,
breach of fiduciary duty, negligent misrepresentation, and breach of contract claims were,
under the circumstances, barred by Pennsylvania law, and that her fraudulent
misrepresentation and concealment claim was barred by the doctrine of collateral
estoppel. Phinisee then filed a motion to amend the findings of fact and judgment, or, in
the alternative, a motion for reconsideration, which the District Court denied. In
response, Phinisee filed a motion for reconsideration of the denial of her motion to
amend, which the Court also denied. Phinisee now timely appeals those several rulings.
5
II. Discussion4
Phinisee contends that the District Court erred in applying Pennsylvania law to
foreclose relief on a number of her claims and in concluding that collateral estoppel
barred her remaining claim. Her arguments are unpersuasive.
A. The Non-Fraud Claims
In Muhammad v. Strassburger, McKenna, Messer, Shilobod & Gutnick, 587 A.2d
1346 (Pa. 1991), the Pennsylvania Supreme Court held that dissatisfied plaintiffs may not
sue their attorneys for negligence, breach of fiduciary duty, or breach of contract
following a settlement to which the plaintiffs agreed, absent proof of fraud. “Simply
stated,” the court said, “we will not permit a suit to be filed by a dissatisfied plaintiff
against his attorney following a settlement to which that plaintiff agreed, unless that
plaintiff can show he was fraudulently induced to settle the original action.”
Id. at 1348.
The Muhammad court explained that the “primary reason” for its decision was that
allowing such suits would “create chaos in our civil litigation system.”
Id. at 1349.
According to the court, “[l]awyers would be reluctant to settle a case for fear some
enterprising attorney representing a disgruntled client will find a way to sue them for
something that could have been done, but was not.”
Id. (internal quotation marks
omitted). The court thus “refuse[d] to endorse a rule that will discourage settlements and
increase substantially the number of legal malpractice cases.”
Id.
4
The District Court had jurisdiction pursuant to 28 U.S.C. § 1332 and we have
appellate jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review over a
district court’s dismissal of a complaint under Rule 12(b)(6) of the Federal Rules of Civil
Procedure. Grier v. Klem,
591 F.3d 672, 676 (3d Cir. 2010).
6
Applying Muhammad, the District Court concluded that Phinisee’s claims, other
than those alleging fraud, were barred as a matter of law. Phinisee makes no attempt to
distinguish Muhammad or show why that decision is inapplicable. Instead, she relies on
McMahon v. Shea, 688 A.2d 1179 (Pa. 1997), a subsequent plurality decision of the
Pennsylvania Supreme Court which arguably narrowed the holding of Muhammad.
In McMahon, the plaintiff’s attorney failed to advise him of the consequences of
not merging a prior alimony agreement into his final divorce decree. Id. at 1180. The
Pennsylvania Supreme Court ruled that the plaintiff could maintain a malpractice suit
against his attorney to recover damages incurred from his obligation to pay alimony to his
remarried wife.
Id. at 1182. The McMahon court emphasized that the plaintiff was “not
attempting to gain additional monies by attacking the value that his attorneys placed on
his case,” but instead was “contending that his counsel failed to advise him as to the
possible consequences of entering into a legal agreement” and thus that Muhammad did
not apply.
Id. As the District Court noted, McMahon merely clarified that there was a
distinction between “lawsuits alleging a failure to inform a client of the legal
ramifications of a settlement agreement and lawsuits second-guessing an attorney’s
professional judgment in evaluating the value of a claim.” Phinisee v. Layser, No. Civ.
A. 14-3896,
2014 WL 5780935, at *1 (E.D. Pa. Nov. 5, 2014). Muhammad applies in the
latter category of cases, while McMahon applies in the former.
This case fits squarely within the latter category. At its core, this malpractice
claim is an attempt by Phinisee to recover a greater amount than the $1.2 million
settlement to which she agreed after having been fully advised of the legal consequences
7
of entering into the settlement agreement. In her amended complaint, Phinisee twice
alleges that she suffered damages because she “settled the lawsuit for value significantly
less tha[n] the value of the case.” (App. at 41.) Unlike the plaintiff in McMahon – who
was forced to pay alimony to his former spouse after her remarriage by virtue of the
failure to merge the alimony agreement with the divorce decree – Phinisee suffered no
new financial obligations or additional damages as a result of signing the settlement
agreement. Her purported damages, premised on her own subjective assessment of the
likelihood of success at trial, are purely speculative.
In her earlier suit before Judge Hart, Phinisee argued that she was not informed
prior to agreeing to settle that the proceeds of the settlement award were subject to a
Medicaid lien. She does not appear to be making that argument now. But even if she
were alleging malpractice due to her attorneys’ failure to inform her about the Medicaid
lien, that argument would fail because Judge Hart found that, in fact, Phinisee was
informed about the lien before she agreed to the settlement. Moreover, Phinisee did not
challenge that finding on appeal from the grant of the motion to enforce the settlement.
Phinisee, 556 F. App’x at 136 (“The Magistrate Judge also found – and the plaintiffs do
not challenge on appeal – that the plaintiffs’ counsel informed Phinisee about the
existence and significance of the Medicaid lien on the settlement proceeds.”).
Instead, she claims that her attorneys misrepresented to her that she did not have a
right to assert a claim on her own behalf. But Judge Hart, in concluding that the
settlement was enforceable, specifically addressed that allegation and found that it
constituted nothing more than “second thoughts as to the wisdom of her attorney’s
8
advice.” (Supp. App. at 71.) He further noted that “the advantage Ms. Phinisee seems to
think she would have obtained by bringing a claim in her own name to recover for
medical expenses is illusory” because Medicaid paid all of A.P.’s medical expenses, so
even if Phinisee did recover anything, Medicaid would then collect from her. (Id.)
Similarly, Phinisee’s claim that her attorneys failed to use favorable expert testimony to
increase the settlement amount is merely another attack on the value of the settlement to
which she agreed.
Finally, Phinisee’s claim that Spencer and Layser convinced her that the
negligence claim was weak, when, according to her, the evidence of liability was “rock-
solid, almost to the point of being overwhelming” is also without merit. (App. at 37.)
That argument plainly falls into the category of claims that Muhammad bars – that an
attorney underestimated the value of a potential claim. Moreover, Judge Hart specifically
assessed the strength of Phinisee’s negligence claim and, like her attorneys at the time,
found it lacking. As Judge Hart noted, the government “posted a serious challenge to the
liability aspect” of the case by presenting medical experts who testified that Macrobid
had never been linked to bilary artesia, the disease contracted by A.P. (Supp. App. at 61.)
A panel of our Court credited that finding on appeal. Phinisee, 556 F. App’x at 138. In
concluding that the settlement was enforceable, Judge Hart further reasoned that “the
amount the [g]overnment was willing to offer in settlement was limited in accordance
with the weakness in Phinisee’s evidence on liability.” (Supp. App. at 71.) Although, in
light of Muhammad, we need not assess the wisdom of the advice regarding the strength
9
of Phinisee’s claims, it bears mention that her attorneys’ advice was not without ample
support in the record.5
Because Phinisee’s non-fraud claims are nothing more than an expression of
dissatisfaction with the amount of money that she agreed to and received in the
settlement, they are barred by Muhammad.
B. The Fraud Claim
The District Court held that Phinisee’s fraudulent misrepresentation and
concealment claim was barred by the doctrine of collateral estoppel. Under Pennsylvania
law, collateral estoppel bars litigation if: (1) an identical issue has been decided in a prior
action; (2) there has been a final judgment on the merits; (3) the party against whom
estoppel is asserted was a party, or in privity with a party, to the prior litigation; and
(4) the party against whom estoppel is asserted had a full and fair opportunity to litigate
the issue in question. Aetna Life & Cas. Corp. v. Maravich, 824 F.2d 266, 268 (3d Cir.
1987). A litigant who was not a party to a prior judgment may use a prior judgment
5
Phinisee also says, with little argument or support, that Spencer and Layser
engaged in representation against her and her daughter’s best interests when they filed the
minor’s compromise petition. Phinisee made the same argument before Judge Hart in her
motion for reconsideration of the order granting the minor’s compromise petition and
before us on appeal from that ruling. We conclude now, as we did then, that her
argument is without merit. In our opinion affirming Judge Hart’s rulings, we noted that,
although the petition was filed by the Phinisee’s former counsel, “the filing was
appropriate because the same attorneys had obtained the settlement.” Phinisee, 556 F.
App’x at 137. Moreover, we emphasized that the petition was served upon Phinisee’s
new counsel and that she had ample opportunity to respond. Because she failed to do so,
we concluded that Phinisee had ratified her former attorneys’ actions and could not
challenge their authority to file the petition. Id. at 137-38 (noting that “[u]nder
Pennsylvania law, ‘a client ratifies her attorney’s act if she does not repudiate it promptly
upon receiving knowledge that the attorney has exceeded his authority’”) (brackets
omitted) (quoting Yarnall v. Yorkshire Worsted Mills,
87 A.2d 192, 193 (Pa. 1952)).
10
“offensively” to estop an opposing party from relitigating issues that were decided in the
previous proceeding. Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 326, 331
(1979).
Phinisee appears only to challenge the first prong of the collateral estoppel
analysis. She claims that the issue here is one of attorney malpractice and was not
previously decided, but she is incorrect. The issue here is of fraudulent misrepresentation
and concealment; she is alleging that her attorneys “made false representations of
material facts at the time of the settlement conference and intentionally concealed
material facts” from her. (App. at 41.) That issue was addressed and decided by Judge
Hart. In concluding that the settlement agreement was valid and enforceable, he
determined that “there is no question of fraud or duress here, which would vitiate
Phinisee’s consent.” (Supp. App. at 67.) Upholding that ruling, we explicitly noted that
there was “no evidence of either fraud or mistake” associated with the settlement.
Phinisee, 556 F. App’x at 137. Because the issue of fraud was previously litigated,
Phinisee is estopped from relitigating it, and the fraud claim was properly dismissed. For
the same reason, Phinisee’s motion to amend findings of fact and judgment and her
motion for reconsideration were also properly denied.
III. Conclusion
For the foregoing reasons, we will affirm the District Court’s orders.
11
