J-A11041-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

SCF CONSULTING, LLC IN THE SUPERIOR COURT OF

PENNSYLVANIA

 Appellant

v.

BARRACK, RODOS & BACINE

No. 1413 EDA 2015

Appeal from the Order Entered April 24, 2015

in the Court of Common Pleas of Philadelphia County Civil Division

at No(s): February Term, 2015, No. 1613

BEFORE: SHOGAN, MUNDY, and FITZGERALD,*JJ.

MEMORANDUM BY FITZGERALD, J.: FILED JULY 08, 2016

Appellant, SCF Consulting, LLC, appeals from the order entered in the 

Philadelphia County Court of Common Pleas sustaining the preliminary 

objections of Appellee, Barrack, Rodos & Bacine. Appellant claims the court 

erred in sustaining the preliminary objections based upon its finding that the 

Compensation Plan at issue violated Pennsylvania Rule of Professional 

Conduct 5.4. We affirm. 

The trial court summarized the facts of this case as follows:

[Appellant], a non-lawyer, alleges it had an oral consulting 

contract with [Appellee] law firm “regarding [Appellee’s] 

representation of various institutional investors who sought 

to bring class actions alleging securities violations.” 

Pursuant to this contract, [Appellant] claims it was paid a 

yearly consulting fee, plus “a five percent (5%) share of 

the firm’s annual profits attributable to the cases 

 

*

Former Justice specially assigned to the Superior Court.
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originated and worked on by [Appellant] and 2.5% of 

cases originated by other members of the firm.”

“Based on [Appellee’s] promised compensation package, 

[Appellant] quickly became the face of [Appellee] and 

assisted [Appellee] in becoming legal counsel for the class 

representatives in virtually all of its cases.” . . . 

[Appellant] admits that [Appellee] paid [Appellant] its 

fixed annual consulting fee for each of the years it worked, 

but [Appellant] alleges [Appellee] failed to pay the share of 

profits due [Appellant] at the end of 2014.

Trial Ct. Op., 4/24/15, at 1-2 (footnotes omitted). 

Appellant filed a complaint asserting claims for breach of contract, 

unjust enrichment and breach of fiduciary duty.1 In the complaint, Appellant 

averred the following facts:

1. [Appellant] is a Pennsylvania limited liability company . . 

. . Scott C. Freda (“Freda”) was the sole member of 

[Appellant] who provided valuable consulting services to 

[Appellee]. 

2. [Appellee is] a Pennsylvania corporation and law firm . . 

. .

 * * *

7. In or about 2001, [Appellee] initially requested Mr. 

Freda to provide consulting services to [Appellee] 

 

1 We note that Count II of the complaint asserted a claim for violation of the 

Pennsylvania Wage Payment and Collection Law (“WPCL”). R.R. at 9a-10a. 

For convenience of the parties, we refer to the reproduced record where 

applicable. Appellant averred that “[p]ursuant to the WPCL, . . . Leonard 

Barrack, Esq., is individually liable for [Appellant’s] claims as he directed 

[Appellee] not to pay [Appellant] the wages due . . . .” Id. at 9a ¶ 34. The 

parties stipulated to withdraw Count II of the Complaint with prejudice and 

to remove Leonard Barrack, Esq. as a party to this action. See Stipulation, 

3/9/15, at 1 (unpaginated). 
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regarding its representation of various institutional 

investors who sought to bring class actions alleging 

securities violations.

8. Ultimately, Mr. Freda formed [Appellant] in 2006 and 

continued working with [Appellee] up through early 2014, 

when the facts giving rise to this lawsuit arose.

9. [Appellee] sought to enter into a long term consulting 

agreement with [Appellant] based upon, among other 

things, Mr. Freda’s excellent reputation and experience 

with securities class actions filed on behalf of various State 

and local governments and unions as clients.

 

10. [Appellee] induced [Appellant] to act exclusively on its 

behalf assisting with securities class actions filed on behalf 

of these entities in exchange for the promise of both a 

fixed annual consulting fee and an annual profit sharing 

plan at the firm that paid a five percent (5%) share of 

the firm’s annual profits attributable to the cases 

originated and worked on by Mr. Freda . . . .

 * * *

12. [Appellee] breached the parties’ agreement by 

refusing the make the promised profit share 

payments to [Appellant] for cases that had resolved 

and were both originated and worked on by Mr. 

Freda in breach of [Appellee’s] obligations to [Appellant].

13. Just prior to his departure, Mr. Freda also reminded 

Mr. [Leonard] Barrack that two large cases that he had 

both originated and worked on were close to resolving so 

he expected his five percent (5%) of the firm’s profits at 

the end of the calendar year. These cases were the State 

of Michigan v. AIG and the PA Retirement System v. 

BOA class actions. . . .

 * * *

19. In 2014, Mr. Freda provided substantial assistance to 

[Appellees] in prevailing on a very substantial case 

involving the Chicago Police Department and Apollo . . . .
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 * * *

21. Much to Mr. Freda’s surprise when he met with Mr. 

Barrack in December of 2014, he was told that [Appellant] 

was not going to be paid its percentage of profits 

previously agreed to . . . . 

R.R. at 3a-5a, 7a-8a (emphases added). Appellant avers in the complaint 

that he was paid his retainer fee of $210,000.00 per month in the year 

2014. R.R. at 5a. Appellee filed preliminary objections, which the trial court 

granted. This timely appeal followed. Appellant was not ordered to file a 

Pa.R.A.P. 1925(b) statement of errors complained of on appeal. 

Appellant raises the following issues for our review.

a. Whether the [t]rial [c]ourt erred in sustaining 

Appellee[’s] demurrer to all [c]ounts of Appellant[’s 

complaint] on the basis that the Compensation Plan 

entered into by [Appellees] and [Appellant] was against 

public policy for violation of Rule of Professional Conduct 

5.4, where the [t]rial [c]ourt failed to apply the wellsettled standard for resolving preliminary objections and 

accept as true the well-pleaded factual averments of the 

[c]omplaint that the Compensation Plan was an express 

exception to R.P.C. 5.4?

b. Whether the [t]rial [c]ourt erred in sustaining 

[Appellees’] demurrer to all [c]ounts of [Appellant’s 

c]omplaint on the basis that the Compensation Plan was 

against public policy, where any determination that the 

Compensation Plan was in violation of R.P.C. 5.4 is a factintensive inquiry and requires a full development of the 

record, as demonstrated by Wishnefsky v. Riley & 

Fanelli, [799 A.2d 827 (Pa. Super. 2002),] and where the 

[t]rial [c]ourt failed to allow a full development of the 
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record, including discovery, prior to dismissing the 

[c]omplaint?[2]

c. Whether the [t]rial [c]ourt erred in sustaining 

[Appellees’] demurrer to all [c]ounts of [Appellant’s 

 

2 Given our resolution of the first issue, see infra, we need not reach this 

issue. However, we note that Appellant’s argument is meritless. Appellant 

avers that

[t]he [t]rial [c]ourt and [Appellees] both cite Wishnefsky 

v. Riley & Fanelli, [799 A.2d 827 (Pa. Super. 2002),] for 

the proposition that where a compensation plan is violative 

of Rule 5.4, a court cannot enforce such a contract. 

However there is an important procedural distinction 

between Wishnefsky and the instant matter─in 

Wishnefsky the court granted summary judgment for 

the defendant after a full development of the record. Id.

at 828. Accordingly, Wishnefsky compels a very different 

conclusion than that drawn by the [t]rial [c]ourt─it 

requires that even where the facts egregiously show on 

their face that a non-attorney is complicit in the flouting of 

the ethical rules regarding fee-splitting, the [c]ourt is 

compelled to allow the full-development of the facts, 

including discovery, before dismissing those claims. The 

[t]rial [c]ourt erred by dismissing [Appellant’s c]omplaint 

prior to that full-development of the facts. For that reason 

alone, the [t]rial [c]ourt’s dismissal of [Appellant’s c] 

omplaint must be reversed.

Appellant’s Brief at 19-20 (some emphasis added). The Court in 

Wishnefsky referenced discovery in the context of the procedural posture 

of the case. This Court stated: 

Appellee filed preliminary objections to Appellant’s 

complaints and to each of three amendments, then 

unsuccessfully sought judgment on the pleadings. When 

discovery was completed, both parties moved for the entry 

of summary judgment. The trial court granted Appellee’s 

motion, and this appeal followed.

Wishnefsky, 799 A.2d at 828. 
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c]omplaint on the basis that the Compensation Plan was 

against public policy, where, even assuming arguendo that 

the Compensation Plan was in violation of R.P.C. 5.4, 

Pennsylvania public policy has found that such an 

agreement shall be enforced on the basis that an attorney 

occupies a legally superior position to a non-attorney, and 

therefore may not be financially rewarded for entering into 

a fee-sharing agreement that is in violation of R.P.C. 5.4. 

See John Grigsby v. Rania M. Major and Mark B. 

Frost, Esquire. 1994 WL 1251205 (Phila. Com. Pl. 

1994).[3]

 

3 Although we do not address this issue given our resolution of the first issue 

raised on appeal, we note that the claim was rejected by this Court in 

Wishnefsky. This Court opined:

Assuming, without deciding, that [Appellant] is correct in 

[his] contention that the mere difference in the status of 

the parties suffices to establish that they were not in pari 

delicto, we do not believe that the public interest will be 

served by accepting [his] argument and enforcing the 

contract. Under [Appellant’s] theory, every fee-sharing 

agreement between an attorney and a nonattorney which 

violates [the fee-splitting prohibition] would be enforceable 

by the lay party since, by definition, such agreements will 

always involve an attorney and a nonattorney. Although 

consistent enforcement of such contracts against breaching 

attorneys might deter attorneys from entering fee-sharing 

agreements, presumably most lawyers are already 

deterred from such conduct by the existence of [the 

disciplinary rule] and by the possibility of sanctions that its 

violation carries. By refusing in every case to assist the 

lay party, the courts may deter laypersons as well as 

attorneys from attempting such agreements. We believe 

that, in this way the public will be protected more 

effectively from the potential harms posed by fee-sharing 

agreements. 

Wishnefsky, 799 A.2d at 830 (citation omitted and emphasis added).
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Appellant’s Brief at 4-5.4

First, Appellant contends the trial court erred in sustaining Appellee’s 

preliminary objections in the nature of a demurrer to the complaint because 

it “included well-pled allegations that the Compensation Plan at issue was an 

express exception to Rule of Professional Conduct 5.4.” Id. at 15. Appellant 

avers that it has “sufficiently pled that [Appellees] induced him to enter into 

a Compensation Plan that included a profit-sharing component.” Id. at 18. 

Our review is governed by the following principles:

As a trial court’s decision to grant or deny a demurrer 

involves a matter of law, our standard for reviewing that 

decision is plenary. Preliminary objections in the nature of 

demurrers are proper when the law is clear that a plaintiff 

is not entitled to recovery based on the facts alleged in 

the complaint. Moreover, when considering a motion for 

a demurrer, the trial court must accept as true all wellpleaded material facts set forth in the complaint and all 

inferences fairly deducible from those facts.

 * * *

Our standard of review of an order of the trial court 

overruling or granting preliminary objections is to 

determine whether the trial court committed an error of 

law. When considering the appropriateness of a ruling on 

preliminary objections, the appellate court must apply the 

same standard as the trial court.

Preliminary objections in the nature of a demurrer test the 

legal sufficiency of the complaint. . . . Preliminary 

 

4 Appellant does not raise any issue regarding his unjust enrichment claim in 

Count III of the complaint. Thus, we do not address the unjust enrichment 

count. “It is not the obligation of [an appellate court] to formulate 

[a]ppellant’s arguments for him.” Wirth v. Commonwealth, 95 A.3d 822, 

837 (Pa. 2014) (citation omitted).
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objections which seek the dismissal of a cause of action 

should be sustained only in cases in which it is clear and 

free from doubt that the pleader will be unable to prove 

facts legally sufficient to establish the right to relief. If any 

doubt exists as to whether a demurrer should be 

sustained, it should be resolved in favor of overruling the 

preliminary objections.

Bargo v. Kuhns, 98 A.3d 686, 689 (Pa. Super. 2014) (emphasis added and 

citations omitted). “A demurrer does not, however, admit the pleader’s 

conclusions of law.” Hoffman v. Misericordia Hosp. of Phila., 267 A.2d 

867, 868 (Pa. 1970). 

Rule of Professional Conduct 5.4 provides as follows.

(a) A lawyer or law firm shall not share legal fees with a 

nonlawyer, except that:

(1) an agreement by a lawyer with the lawyer’s firm, 

partner, or associate may provide for the payment of 

money, over a reasonable period of time after the 

lawyer’s death, to the lawyer’s estate or to one or more 

specified persons;

(2) a lawyer who undertakes to complete unfinished 

legal business of a deceased lawyer may pay to the 

estate of the deceased lawyer that portion of the total 

compensation which fairly represents the services 

rendered by the deceased lawyer;

(3) a lawyer or law firm may include nonlawyer 

employees in a compensation or retirement plan, even 

though the plan is based in whole or in part on a profitsharing arrangement;

(4) a lawyer or law firm may purchase the practice of 

another lawyer or law firm from an estate or other 

eligible person or entity consistent with Rule 1.17; and
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(5) a lawyer may share court-awarded legal fees with a 

nonprofit organization that employed, retained or 

recommended employment of the lawyer in the matter.

42 Pa.C.S. § 5.4(a)(1)-(5).

In Office of Disciplinary Counsel v. Jackson, 637 A.2d 615 (Pa. 

1994), the Pennsylvania Supreme Court stated:

Disciplinary Rule 3-102(A) and Rule of Professional 

Conduct 5.4 prohibit the sharing or splitting of fees 

between a lawyer and a non-lawyer. There can be 

no question but that Jackson, as a suspended 

lawyer, is a “non-lawyer” within the meaning of the 

rules. The purpose of this legal mandate is to 

maintain a lawyer’s independent professional 

judgment, unhampered by monetary obligation to a 

party other than his client. In addition, the purpose 

is to protect the Bar against the unauthorized 

practice of law by persons the system does not 

recognize as presently licensed to practice. The only 

exception to the rule prohibiting sharing fees with 

non-lawyers is the payment by a law firm into a 

profit-sharing plan in which non-lawyer employees of 

the firm share in the profits earned by the lawyers, 

obviously from fees. The exception is sustainable 

because there is no direct link between a specific fee 

and a specific payment to a non-lawyer. In this 

case, that very evil is present.

Report and Recommendations of the Disciplinary Board of 

the Supreme Court of Pennsylvania, page 17.

Id. at 620. 

In Wishnefsky, the non-lawyer appellant contended he had an oral 

contract with the appellee law firm 

governing a fee-splitting arrangement. In his Complaint, 

[the a]ppellant contends that [the a]ppellee agreed to pay 

him a forwarding fee of one third of the compensation 

received from cases he referred, but ceased to do so after 
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recovering $150,000 in fees from damages in a product 

liability matter. 

Wishnefsky, 799 A.2d at 828 (footnote omitted). 

The appellant in Wishnefsky argued that his claim fell within the 

exception to fee splitting found in Rule 5.4(a)(3). Id. at 830. This Court 

rejected this contention and opined that 

[w]hat is clearly contemplated by the exception is a 

formalized program to benefit employees based on the 

profitability of the firm. In [Jackson, supra,] our 

Supreme Court explained that the exception, which 

permits payment of profits earned by lawyers from fees, 

“is sustainable because there is no direct link between 

a specific fee and a specific payment to a nonlawyer.” Id. The Jackson Court noted that the 

exception did not apply because there, “that very evil,” the 

direct link, “is present.” Id. The same may be said of this 

case.

Id. at 830-31 (emphases added); accord Epstein v. Saul Ewing, LLP, 7 

A.3d 303, 312-13 (Pa. Super. 2010).

In the case sub judice, the trial court opined: 

[Appellant] attempts to cast itself as a beneficiary of 

the exception to Rule 5.4(a), which allows law firms to 

have employee profit sharing plans. However, [Appellant] 

was not an individual employee of [Appellee’s] law firm.

 * * *

Since the arrangement [Appellant] claims existed 

between the parties violates public policy, all of 

[Appellant’s] legal claims based on that arrangement fail . 

. . .

Trial Ct. Op. at 3. 

Appellant’s argument that his claim fell within the exception to fee 

splitting found in Rule 5.4(a)(3) is unsupported by the facts as averred in 

the complaint. See Wishnefsky, 799 A.2d at 830-31. As the trial court 
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accurately noted, Appellant was not an employee of the firm participating in 

a formalized program benefiting employees based upon the profitability of 

the firm. See id. Therefore, the exception in Rule 5.4(a)(3) is 

unsustainable in the instant case because there is a direct link between the 

specific fees and specific payment to Appellant, a non-lawyer. See 

Jackson, 637 A.2d at 620; Wishnefsky, 799 A.2d at 830-31. Based upon 

the facts alleged in the complaint, we discern no error of law in the trial 

court’s decision to grant the preliminary objections. See Bargo, 98 A.3d at 

689.

Order affirmed.

Shogan, J. joins the memorandum.

Mundy, J. notes her dissent.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 7/8/2016