Fiorentino v. Rapoport

693 A.2d 208, 1997 Pa. Super. LEXIS 572, 1997 WL 126033
CourtSuperior Court of Pennsylvania
DecidedMarch 20, 1997
DocketNo. 00045
StatusPublished
Cited by40 cases

This text of 693 A.2d 208 (Fiorentino v. Rapoport) is published on Counsel Stack Legal Research, covering Superior Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fiorentino v. Rapoport, 693 A.2d 208, 1997 Pa. Super. LEXIS 572, 1997 WL 126033 (Pa. Ct. App. 1997).

Opinion

CERCONE, President Judge Emeritus:

This is a consolidated appeal and cross-appeal from the final judgment entered after the trial court denied post-trial relief to both the plaintiff and the defendants in a legal malpractice ease. Appellant Rocco J. Fior-entino instituted the suit underlying this appeal by filing a complaint against cross-appellants Frank Rapoport, Alan Gordon, and [210]*210the law firm of Saul, Ewing, Remiek & Saul. Thomas Rutter, Esquire, sitting as Judge Pro Tem, granted a compulsory nonsuit in favor of defendants and final judgment was entered on December 13, 1996. For the reasons that appear below, we reverse and' remand for a new trial.

The Honorable Frederica A. Massiah-Jaekson has aptly summarized the factual history of the case in the following manner:

In 1975; the plaintiff, Mr. Fiorentino, went into business with John Converse, establishing a company called J & R Equipment Services (“J & R”). At the time, Mr. Fiorentino was 19 years old, Mr. Converse was 29, and the two individuals knew each other, as Mr. Converse had been Mr. Fiorentino’s supervisor at another company. Mr. Fiorentino and Mr. Converse began J & R with approximately $300 each in startup capital, and the business specialized in servicing restaurant equipment, installing serviced equipment for manufacturers, selling equipment, leasing equipment and designing and drafting equipment.
In 1978, J & R incorporated, and Mr. Fiorentino and Mr. Converse were each issued 2,500 shares of stock in the company. By this time, J & R had established many national accounts, servicing such restaurants as Pizza Hut, Friendly’s and Mc-Donalds. During the ten years of J & R’s operation, the business yielded approximately $3.5 million in gross revenues.
In November, 1985, Mr. Fiorentino and Mr. Converse decided to terminate their business relationship. Pursuant to this decision, the plaintiff and Mr. Converse agreed between themselves that: (1) Mr. Fiorentino would receive the stock in Lea-somatic, a smaller company started by J & R; (2) Mr. Converse would keep J & R; and (3) Mr. Fiorentino would receive $1.1 million in payments over a ten year period, payable in monthly installments of $9,166.67 as J & R received 20-5/6 of the company’s shares belonging to Mr. Floren-tino on a monthly basis. Mr. Fiorentino and Mr. Converse then enlisted the services of Mr. Frank Rapoport (“Mr. Rapo-port”) and Mr. Allen Gordon (“Mr. Gordon”), partners at Saul, Ewing to put the terms of their mutual agreement in writing. [See ] Stock Purchase Agreement by and among John D. Converse, Rocco J. Fiorentino, J & R Equipment Service, Inc. and Leasomatic, Inc. (“Stock Purchase Agreement”). All parties met on at least two separate occasions during the course of memorializing the agreement.
At trial, Mr. Gordon described the details and the effect of the agreement and the transaction as follows:
(1) the money owed to Mr. Fiorentino was to be paid by J & R if it had the surplus to pay it; otherwise, it was to be paid by Mr. Converse;
(2) every month J & R would receive 20-5/6 shares of stock from Mr. Fiorentino;
(3) at the end of the transaction, Mr. Converse would own the 2500 outstanding shares of J & R, with Mr. Fiorentino’s stock becoming treasury stock;
(4) the stock to be returned monthly was to be held in escrow by Mr. Converse, thus giving him the power to vote all shares of stock;
(5) upon default, Mr. Converse would deliver to Mr. Fiorentino all shares held in escrow not redeemed by J & R and Mr. Fiorentino would become a 50-50 shareholder;
(6) Mr. Converse was able to vote the shares of J & R and vote the company out of business and into bankruptcy; and
(7) payments to Mr. Fiorentino depended on the net worth of J & R and if this was deficient, Mr. Converse became responsible for payments.

See Stock Purchase Agreement, ¶¶ 1-5.

During the meetings, there was no discussion relating to what would happen in the event that a default in payment occurred, nor was there discussion relating to potential conflicts of interest or the pursuit of independent counsel for each party to the agreement. Furthermore, the defendants never advised the parties about the possibilities and virtues of establishing [211]*211an independent escrow arrangement. Finally, there was no discussion of a provision to preclude Mr. Converse from establishing a corporation with transferred J & R assets that would be owned by his family members. The Stock Purchase Agreement was finalized and signed on January 2,1986.
For the first thirteen months after the finalization of the agreement, Mr. Fiorenti-no received $9,166.67 per month pursuant to the agreement’s terms. However, in February, 1987, Mr. Converse conveyed to Mr. Fiorentino that he could no longer make the full payments, and the two parties agreed to amend temporarily the Stock Purchase Agreement to reflect a reduction in the amount due and payable to Mr. Fiorentino. After an unsuccessful attempt to contact Mr. Gordon at [the] Saul, Ewing offices, Mr. Fiorentino contacted Mr. Bert Martin (“Mr. Martin”), a New Jersey attorney from the law firm Martin, Crawshaw & Mayfield, to draft an addendum to the Stock Purchase Agreement. Pursuant to the addendum, Mr. Fiorentino received $5,500 per month in payments from J & R.
Simultaneously, Mr. Rapoport, pursuant to Mr. Converse’s request, established and incorporated Ice Systems of New Jersey and Food Service Equipment Contractors (“Food Service”). These two corporations were not owned by Mr. Converse, but instead, Ice Systems was 65% owned by his wife and his son with 35% of it owned by the employees, and Food Service was 65% owned by his wife and daughter with the employees owning the rest. Mr. Converse served as president of both corporations. The $5,500 per month payments continued for the next twelve months, until Mr. Converse notified Mr. Fiorentino by letter dated February 8, 1988, that he would no longer make further payments under the agreement.
Thereafter, Mr. Converse voted the J & R stock and signed the authorization for the company to go into bankruptcy. On April 5, 1988, Mr. Converse filed a voluntary bankruptcy petition on behalf of J & R in the United States District Court of New Jersey.

Trial Court Opinion dated 12/5/95 at 5-9 (citations to notes of testimony and footnotes have been omitted).

Mr. Fiorentino initiated suit in the United States District Court for the Eastern District of Pennsylvania against John D. Converse, Kathleen Converse, John T. Converse, Maureen Converse, Rick Fargo, Cindy DiFazio, lee Systems of New Jersey, Inc., Food Service Equipment Contractors, Inc., Frank Ra-poport, Alan Gordon, and Saul, Ewing, Rem-ick & Saul.

However, the District Court dismissed the action on the grounds that the conduct alleged in the plaintiffs complaint did not constitute a pattern of racketeering activity under the RICO statute. See Fiorentino v. Converse, et al., 705 F.Supp. 253, 255 (E.D.Pa.1989), aff'd, 884 F.2d 1383 (3d Cm. 1989). See also Order for Civil Action No.

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Bluebook (online)
693 A.2d 208, 1997 Pa. Super. LEXIS 572, 1997 WL 126033, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fiorentino-v-rapoport-pasuperct-1997.