Court Opinion

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Opinions of the United
1998 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

3-12-1998

Selko v. Home Ins Co
Precedential or Non-Precedential:

Docket 96-1702

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Recommended Citation
"Selko v. Home Ins Co" (1998). 1998 Decisions. Paper 44.
http://digitalcommons.law.villanova.edu/thirdcircuit_1998/44

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Filed March 12, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 96-1702

WILLIAM SELKO,
       Appellant

v.

HOME INSURANCE COMPANY,
       Appellee

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 95-cv-07653)

Argued May 5, 1997

BEFORE: STAPLETON, LEWIS and CAMPBELL*
Circuit Judges.

(Opinion Filed March 12, 1998)

Jeremy T. Ross (Argued)
Schiffman & Ross
1650 Market Street
50th Floor
Philadelphia, PA 19103-7301
Attorney for Appellant

_________________________________________________________________

*Honorable Levin H. Campbell, Senior United States Circuit Judge for
the First Circuit, sitting by designation.
       James W. Christie (Argued)
       Christie, Pabarue, Mortensen &
        Young
       1880 JFK Boulevard
       10th Floor
       Philadelphia, PA 19103
       Attorney for Appellee

OPINION OF THE COURT

CAMPBELL, Senior Circuit Judge.

William Selko ("Selko"), who is the assignee of his former
attorney's professional liability policy, appeals from the
district court's grant of summary judgment denying
recovery on this policy against Home Insurance Company
("Home").

I.

In 1982, at age 18, Selko was the passenger in a car that
struck a telephone pole. The accident rendered him a
quadriplegic. He and his father engaged Stephen R.
Signore, Jr., a Pennsylvania attorney, who has since been
disbarred, to represent him in obtaining compensation for
his injuries. Signore prepared and Selko executed a power
of attorney authorizing Signore to collect all sums due to
Selko arising from the accident and to deposit them in
banks and other depositories. Also included was an
investment clause, giving Signore the authority

       [t]o invest in my name, in any stock, shares, bonds,
       securities or other property, real or personal, and to
       vary such investments as he may, in his absolute
       discretion deem best, and to vote at meetings of any
       corporation or company and to execute any proxies or
       other instruments in connection therewith.

Signore stated in a deposition that he prepared the power
of attorney in light of his discussion with Selko's father,
during which Signore stated "that there were going to be a
lot of no-fault checks and people that had to be paid and

                                  2
checks were going to have to be signed and whatever . . . .
[The father replied] you know, well, why don't you take care
of all that?"

Between 1982 and 1991, Signore collected various sums
on Selko's behalf from settlements and insurance claims.
From these recoveries, Signore invested $300,000 without
Selko's prior knowledge or further approval in real estate
ventures of his own. Signore placed the collected sums in
the bank account of a shell company wholly owned by him
called Innovative Concepts, Inc. ("ICI"). He then caused ICI
to issue "participation bonds" in Selko's name for the stated
amounts as evidence of "loans" by Selko to ICI. The bonds,
at least those of record, called for repayment of the original
sum, together with accrued interest at ten percent per
annum, after five years. (These bonds were due,
respectively, in 1994, 1995, and 1996.) The monies for
which the bonds were issued, consisting of Selko's
$300,000 as well as sums from other purported lenders,
were then used to purchase interests in Signore's sole
name in real estate ventures. Selko's ICI participation
bonds were "secured" by Signore's personal pledges of his
real estate interests and by Signore's personal guarantees.
ICI and Signore later defaulted on the bonds when they
became due, beginning in 1994, and in 1995 Signorefiled
for bankruptcy.

According to Selko, he did not learn that his personal
injury proceeds were being utilized in this manner until he
made inquiry of Signore in 1991. After Signore responded
with some information, Selko wrote Signore on May 9,
1991, expressing concern about the investments'
"illiquidity." Selko's letter also stated that he believed he
should "diversify and reduce my 100 percent exposure to
the vagaries of the local real estate market." Without
replying right away, Signore continued to invest in the
fashion described above. After further inquiries, Signore
again responded to Selko on October 30, 1991. Reassuring
him about the investments, Signore said that, for the "long
term," they were sustaining a very fair return. Further
correspondence between Selko and Signore led to Signore's
assurances to work with Selko and "get for you some
liquidity as soon as possible." (A building sale or

                               3
replacement of Selko by another investor were mentioned
as possible ways to do this if the market improved.)

Selko later sought and received guidance from a retired
attorney, Guy Gabrielson, who met with Signore in July of
1992. Gabrielson reported to Signore his understanding of
that meeting in a letter dated July 17, 1992. In the letter,
Gabrielson indicated the time was ripe to relieve Signore's
office of further responsibilities. Gabrielson also said he
believed Selko would like to divest himself as rapidly as
possible of the real estate investments so that he could
begin to diversify his investments under the guidance of an
investment advisor, and that Gabrielson would advise Selko
to do so. Signore testified in his deposition that he
understood at about this time that he was being relieved of
his representation of Selko.

Gabrielson's letter was quickly followed by a letter from
Selko to Signore dated July 20, 1992, requesting that Selko
receive "any part, or preferably all, of my interest payments
currently" from the ICI participation bonds, and stating
that he wished to divest himself of all bonds as rapidly as
possible beginning with the last to mature. Signore was
asked to make checks either for interest or principal
payable to Selko's order and send them to him, so that he
could begin the process of diversifying his portfolio into
investments other than real estate.

On July 20, 1992, Selko also revoked Signore's 1982
power of attorney, substituting in its place a far more
limited power of attorney. The new power contained no
investment authority but merely authorized Signore to
claim, demand and receive "any interest or principal
payments which may be due or payable to me in
investments heretofore made" under the old power of
attorney and, after deduction of sums needed to prosecute
the automobile accident claim, to remit the same to Selko.
Any further funds received on Selko's behalf were to be
deposited in a bank or other depository institution.

Signore neither acknowledged nor took any action to
comply with the Selko's requests of July 20, 1992. He
did not remit any interest nor did he take steps to
liquidate Selko's investments as requested. No further

                                4
communication occurred between Signore and Selko until
more than two years later, in September of 1994. In that
month, the earlier of Selko's ICI participation bonds became
due. A new attorney representing Selko made demands
upon Signore for payment. When no payment was
forthcoming, Selko commenced a legal action in the state
court against Signore, seeking damages for legal
malpractice and breach of fiduciary duty. This action was
settled on July 31, 1995. The settlement agreement
provided for entry of judgment against Signore for
$443,585.50. As part of the agreement, Signore assigned to
Selko all his rights against Home under a policy of
professional liability insurance he had purchased for his
law firm in April of 1994.

On October 12, 1994, a few days after Selko sued him,
Signore promptly notified Home of Selko's malpractice
action against him. Home refused to defend or indemnify
Signore under the policy, asserting, among other defenses,
that, when applying for the policy, Signore had known of
but had not disclosed the existence of Selko's potential
claim for breach of professional duty. Under the terms of
the policy, Home agreed to pay damages on behalf of the
insured for an act, error, or omission happening prior to
the effective date of the policy only if before such date "the
Insured had no basis to believe that the Insured had
breached a professional duty . . . ."1 In declining liability,
Home relied on this clause, and also on Signore's negative
answer to a question in the policy application asking,

       "11.d. does any lawyer named in (question) 5(a) know
       of any circumstances, acts, errors or omissions that
_________________________________________________________________

1. Signore's professional liability policy ran from April 20, 1994 through
April 20, 1995. Its Coverage section provided that to be covered, an act,
error, or omission had to occur

       "(aa) during the policy period or
       (bb) prior to the policy period provided that prior to the
effective date
       of this policy

* * *

the insured had no basis to believe that the insured had breached a
professional duty . . . ."

                               5
       could [emphasis added] result in a professional liability
       claim against any attorney of the firm, or its
       predecessor.

Home continued to deny coverage under the policy when
Selko, pursuant to the settlement with Signore and the
assignment of the policy, later sought indemnification for
the losses he had sustained because of Signore's
wrongdoing.2 Selko then brought the present diversity
action in the district court against Home. After discovery,
both Selko and Home moved for summary judgment, and
the court allowed Home's motion but denied Selko's. This
appeal followed.

II.

In granting summary judgment to Home, the district
court construed Signore's deposition testimony as admitting
that, when applying for the policy, Signore already knew he
had breached his professional duty to Selko. For this
reason, the policy's basis to believe exclusion was held to
bar recovery. The district court noted that Rule 1.8(a) of the
Pennsylvania Rules of Professional Conduct provided, in
essence, that a lawyer shall not enter into a business
transaction with a client or acquire an ownership interest
adverse to a client without full written disclosure of the
transaction and terms. Additionally, the client is to be
advised and given a reasonable opportunity to seek the
advice of independent counsel.

The court determined that Signore's investment of Selko's
funds in his personal real estate ventures clearly violated
Rule 1.8(a). Signore did not advise Selko for two years
where his money was invested and of Signore's personal
financial involvement. Signore, moreover, did not honor his
client's wishes, expressed in May 1991, to diversify, but
instead increased the investment. The court found the
investment authorization in the 1982 power of attorney fell
short of being adequate written disclosure under Rule
1.8(a). The court concluded that when Signore applied for
malpractice insurance in April of 1994, "he clearly had a
_________________________________________________________________

2. Signore filed for bankruptcy in 1995 and was disbarred by consent.

                               6
basis to believe that a claim of malpractice could be
brought against him."

In reaching this conclusion, the district court relied
particularly upon a Wisconsin case, Logan v. Northwestern
Nat'l Cas. Co., 424 N.W.2d 179 (Wis. 1988). As the district
court explained, the Logan court "held that determining
whether an insured had a `basis to believe' must be tested
by whether the insured knew or believed that he had
committed a breach of his professional duty.' " Selko v.
Home Ins. Co., No. 95-7653, 1996 WL 397483, at *3 (E.D.
Pa. July 10, 1996) (citing Logan, 424 N.W.2d at 186). The
district court went on to say,

       "In adopting this standard, the Logan court rejected an
       objective standard, i.e. `knew or should have known,'
       because it potentially gives insurers a windfall to deny
       coverage in many cases and ultimately defeats the
       purpose of the contract."

Id. The district court determined, on the basis of Signore's
deposition testimony, that there was no genuine issue of
fact over whether Signore had a basis to believe he had
breached his professional duty owed to Signore.

III.

On appeal, Selko accepts the Logan standard adopted by
the district court, which tests whether an insurance
applicant had a "basis to believe" he had breached a
professional duty by whether he knew or believed he had
done so. However, Selko argues that "[n]otwithstanding the
district court's avowed acceptance of this standard, it
wholly failed to apply it in practice."

According to Selko, Home failed to meet its affirmative
burden of proving that Signore had a "basis to believe" that
he had breached a professional duty. Viewing the evidence
most favorably to himself, Selko contends that, at very
least, a genuine issue of fact exists as to whether Signore
knew or believed he had committed a breach of any
professional duty when he applied for the policy.

Selko insists, moreover, that the court erred infinding
that Signore made additional investments of Selko's money

                                7
after receiving Selko's letter dated May 9, 1991. Selko
points to portions of Signore's deposition indicating that
Selko's monies were invested in real estate as early as the
mid-1980's and that later participation bonds were
replacements of former ones that cannot be found. By the
time Selko complained of "illiquidity" in 1991, it was
supposedly beyond Signore's power to do more than
continue the earlier investments.

Selko further complains that Signore never conceded in
his deposition that he had actual knowledge of
Pennsylvania's Professional Rule of Responsibility 1.8.
According to Selko, Signore believed that the power of
attorney, with its broad investment provision, empowered
him to make the real estate investments in question. Selko
concludes that the evidence is, at best, conflicting whether
Signore ever subjectively knew he had violated any ethical
duty to Selko.

By the same token, Selko denies that Signore knew of
any potential malpractice claim against him. He argues that
by granting him another, albeit more limited, power of
attorney in 1992, Selko showed that he harbored no
thoughts of a claim against him. Selko also cites to a case
from the Eastern District of Missouri indicating that
evidence "clearly reflect[ing] dissatisfaction" is a necessary
prelude to invocation of the "basis to believe" exclusion.
General Accident Ins. Co. v. Trefys, 657 F. Supp. 164, 167
(E.D. Mo. 1987). Selko further argues that, if Signore had
any inkling of a pending claim, he would not -- as he did
-- have switched malpractice carriers in April of 1994. In
the years previous, Signore had continuously obtained
malpractice insurance from another company, Selko says.
Presumably, the "basis to believe" exclusion (or comparable
proviso) would not have been a defense available to his
earlier carrier, since the clause would only bar claims
based on conduct prior to the issuance of a policy.

IV.

Perhaps the crucial issue in this appeal is the proper
construction of the clause in the Home policy "that prior to
the effective date of this policy . . . (2) the Insured had no

                               8
basis to believe that the Insured had breached a
professional duty . . . ." We turn to that first. Because
Pennsylvania law governs, we ask how the Pennsylvania
courts would read that clause; but as there is no applicable
Pennsylvania precedent we must construe the clause
without direct guidance, looking at its language, the
decisions from other courts to the extent helpful, and
Pennsylvania's rules of construction.

As noted, Selko points to language in Logan, supra,
suggesting the "basis to believe" provision should be read
subjectively. So read, Selko contends, the record fails to
support Home's burden of proving beyond genuine dispute
that Signore actually knew or believed when he applied for
professional responsibility coverage in April of 1994 that he
had breached a professional duty.

Home disagrees that Signore's subjective belief is key. It
argues that Logan does not dictate an exclusively subjective
interpretation, and that, in any case, a correct
understanding of the "basis to believe" clause is to be found
in recent federal district court decisions from the Western
and Eastern Districts of Pennsylvania. These decisions
held, in essence, that the "basis to believe" clause requires
a determination of whether the insured was subjectively
aware of facts that would have led a reasonable attorney to
believe that he had breached a professional duty. We agree
with this "mixed" formulation and hold that, however Logan
is understood, the district court cases have correctly
tracked the meaning of the language.

The first of these decisions was Home Ins. Co. v.
Stegenga, No. 90-275 (W.D. Pa. July 3, 1991), aff'd (3d Cir.
Feb. 3, 1992). There an attorney neglected to bring a
lawsuit before the statute of limitations had expired, having
misled his client into thinking that he was diligently
pursuing the matter. The district court said, inter alia,

       Stegenga argues that he did not know, subjectively,
       that his actions might give rise to liability. The
       insurance contract, he argues, disallows coverage only
       if he was actually aware of the legal consequences of
       his actions. Such an interpretation is manifestly
       inconsistent with the plain language of the policy.

                               9
        True, the condition, set forth in the policy-- that the
       Insured "have no basis to believe" -- disallows coverage
       where the insured is subjectively aware of certain facts.
       There is no language, however, indicating that the
       insured must have been subjectively aware that these
       facts might give rise to liability. As long as the insured
       is subjectively aware of facts that, under an objective
       "reasonable person" standard would be seen as
       possibly giving rise to liability, he will not be covered
       for liability resulting from those incidents [citing
       Logan].

       * * *

       This, of course, makes perfect sense because
       otherwise, one would only need to [ ] make certain he
       was ignorant of his duties in order to be insured for
       violating them. No-one, not the insurer and not the
       insured, knows ahead of time what facts will give rise
       to liability. In order to properly allocate the risk, the
       policy sensibly puts the burden on the insured to
       disclose those facts known only to him, so that the
       costs of the risk can be evaluated with all the relevant
       information accessible to all parties.

Id. at 4-6 (emphasis in original). The analysis in Stegenga
was endorsed in Home Ins. Co. v. Thorp, No. 95-951 (W.D.
Pa. July 17, 1992), aff'd, 993 F.2d 877 (3d Cir. 1993), and
in Home Ins. Co. v. Powell, No. 95-6305, 1996 WL 269496
(E.D. Pa. May 20, 1996). Most recently, Judge Cohill of the
Western District of Pennsylvania wrote comprehensively to
the same effect, specifically rejecting the district court's
view in this case that a purely subjective measure applies.
Mt. Airy Ins. Co. v. Thomas, 954 F. Supp. 1073, 1079 (W.D.
Pa. 1997).

The above cases, decided in federal courts in
Pennsylvania by judges familiar with that state's law, are of
course neither binding on the Pennsylvania courts nor
upon ourselves. We find their reading of the disputed policy
language, however, to be persuasive and to comport with
our understanding of its plain meaning. See Bateman v.
Motorists Mut. Ins. Co., 527 Pa. 241 (1991) (language of
contract is primary consideration in interpreting an

                               10
insurance contract); O'Brien Energy Sys. v. American
Employers' Ins. Co., 427 Pa. Super. 456, 491 (1993), appeal
denied, 537 Pa. 633 (1994) (policy language should be
construed in accordance with plain and ordinary meaning).

Selko would construe the language "provided . . . the
insured had no basis to believe that the insured had
breached a professional duty" as if it were written,
"provided . . . the insured neither knew nor believed that
the insured had breached a professional duty." There is,
however, a significant difference in meaning between these
two formulations. The latter wording, had it been
incorporated into the policy, would, indeed, have indicated
that the insured's own knowledge and belief were the
touchstones. But the actual policy language is different. Its
phraseology -- that "the insured had [no basis to believe]"
-- refers, it is true, to the factual predicate possessed by
the insured. But it measures that predicate by the
impersonal standard of a "basis to believe," not by what the
insured knew or believed. Had the provision been meant to
stand or fall on the individual insured's subjective
assessment of the known facts, it could easily have used
the words "knew" or "believed," as indicated above. Instead,
by using the words "basis to believe," the policy pointed to
an objective criterion.

Hence, we agree with Stegenga that the plain language of
the exclusion calls for a two-stage analysis. First, it must
be shown that the insured knew of certain facts. Second, in
order to determine whether the knowledge actually
possessed by the insured was sufficient to create a "basis
to believe," it must be determined that a reasonable lawyer
in possession of such facts would have had a basis to
believe that the insured had breached a professional duty.3
_________________________________________________________________

3. We recognize that, in Pennsylvania as well as elsewhere, exclusions
are strictly construed against the insurer, as are ambiguities in the
policy. Standard Venetian Blind Co. v. American Empire Ins. Co., 469
A.2d 563, 566 (Pa. 1983); First Pa. Bank v. Nat'l Union Fire Ins. Co., 580
A.2d 799, 802 (Pa. Super. Ct. 1990). Clear policy language, however, is
to be given effect, Standard Venetian Blind Co., 469 A.2d at 566; and
courts should not "torture the language to create" ambiguities but
should read policy provisions to avoid it, Niagara Fire Ins. Co. v.
Pepicelli,

                               11
That the insured denies recognizing such a basis on
grounds of ignorance of the law, oversight, psychological
difficulties, or other personal reasons is immaterial.

This construction does not relieve the insurer of its
burden to prove that the necessary underlying facts were
actually known to the insured. But the insured may not
successfully defend on the ground that he was uniquely
unaware of ethical and fiduciary principles that all lawyers
would know or that he did not understand the implications
of conduct and events that any reasonable lawyer would
have grasped.

Selko argues that to interpret the provision in this
manner is unfair to a victimized client such as himself who
has no other redress but his defalcating attorney's
professional liability insurance. However, the exclusionary
clause in question addresses only misconduct during the
period prior to the effective date of the policy. It is
reasonable for the insurer to refuse coverage for claims
based on preexisting but undisclosed misconduct by an
insured attorney. Nor is it unreasonable to tie such an
exclusion to an even-handed "reasonable attorney"
assessment, rather than to speculation concerning the
individual attorney's subjective understanding. The latter
approach, by rewarding the attorney who is ignorant of the
law, or by encouraging disingenuous, after-the-fact
justifications, could result in totally capricious and
unpredictable outcomes. Under the mixed standard we
believe the Pennsylvania court would adopt, coverage does
not turn on psychoanalysis, yet the attorney is not made
accountable for matters he did not know about, nor for
known matters that would not cause a reasonable attorney
to foresee a claim.

A case such as this is painful, in that it may leave a
malpractice victim without an effective remedy. But courts
_________________________________________________________________

Pepicelli, Watts and Youngs, P.C., 821 F.2d 216, 220 (3d Cir. 1987)
(quoting St. Paul Fire & Marine Ins. Co. v. United States Fire Ins. Co.,
655
F.2d 521, 524 (3d Cir. 1981)). The mixed standard we adopt is not
merely one of several possible interpretations but is, in our view, the
interpretation plainly signaled by the contract language.

                               12
cannot conscientiously rewrite an insurance contract
between a defalcating attorney and his insurer in order to
furnish coverage for the wronged assignee. Where states
have decided, on policy grounds, to guarantee insurance
coverage, e.g. for motor vehicle injuries, they have done so
by comprehensive legislation requiring specific kinds of
insurance as a condition to licensure and by regulating
policy language. No such legislation applies here.

V.

Applying the above interpretation of the Home policy, we
hold that the only reasonable interpretation of this record
is that a reasonable attorney in Signore's shoes would have
realized in April 1994, when Signore applied for the
insurance, that he had a basis to believe that he had
breached a professional duty to Selko. Selko, we note,
concedes in his appellate brief that Signore breached his
common law fiduciary and professional duties under the
1982 power of attorney and the lawyer-client relationships
by making unsuitable real estate investments and by failing
to give Selko the necessary information to make any
informed decision in the matter. The facts underlying the
breach were all fully known to Signore when he applied to
Home for professional responsibility insurance. The facts
known to Signore would, additionally, have caused a
reasonable attorney to answer "yes" rather than "no" to the
question in the insurance application asking if the
applicant knew "of any circumstances, acts, errors, or
omissions that could result in a professional liability claim
against any attorney of the firm." [Emphasis supplied.]

We disagree with appellant's suggestions that Signore's
misconduct was merely marginal. To the contrary, it was
egregious. Without meaningful explanation to and approval
from his injured, youthful client, he loaned his client's
monies to himself (ICI being wholly owned by him), using
the funds to buy for himself partnership positions in
various real estate ventures. These unauthorized loans were
evidenced by five year bonds bearing ten percent interest
that was not, however, payable until the bonds' maturity.
As events were to prove, the bonds were risky in the
extreme; they were unsecured by mortgages or meaningful

                               13
collateral. As Signore conceded, he did not disclose these
transactions in writing to his client prior to receiving
inquiry from Selko in 1991 nor does it appear that he made
any adequate disclosure of any type. By this time, because
of a falling market, Signore would not or could not disinvest
although Selko asked him to do so. In his verified
complaint against Signore, Selko properly described the
investments, inter alia, as insecure and unsuitable for one
in Selko's quadriplegic condition.

In utilizing Selko's funds in this way, Signore clearly
subordinated his client's interests to his own greed. Had
Signore's real estate ventures succeeded, Signore would
have profited while Selko would, at best, have recovered his
money after five years with accrued interest at ten percent
per annum -- a rate little higher than conventional, safe
investments would have paid on an annual basis. In a
nutshell, without consultation and informed approval,
Signore used his client's money to finance his own losing
gamble in the real estate market.

Signore's contention that he was authorized to do this by
the broad general investment clause in the power of
attorney is obviously without merit. The chief purpose of
the power, as Signore's own deposition attested, was to
enable Signore to collect and administer Selko's multi-
sourced recoveries. The investment clause cannot be read
to authorize Signore to gamble with his client's money or
utilize the money in ways that put his own interests ahead
of Selko's. The district court, moreover, correctly took
account of Signore's violation of Rule 1.8(a) of the
Pennsylvania Rules of Professional conduct disallowing
business transactions between lawyer and client without
full written disclosure. See Rizzo v. Haines, 555 A.2d 58, 67
(Pa. 1989).

It is true that, in Signore's deposition testimony, he said
he had discussed the real estate investments in the 1980's
with Selko or Selko's father, and they appeared satisfied.
Signore conceded, however, that these discussions were
after the fact of the investments. Moreover, his recollection
of what was said, and when, was so conclusory, blurred,
and inconsistent as to render the testimony virtually
meaningless. In his own deposition, Selko flatly denied that

                               14
Signore ever told him of the real estate investments prior to
1991, and even Signore admitted that he never provided
written information until after the monies were locked into
the "participation bonds" and so beyond withdrawal.

There is nothing, moreover, to the argument that Signore
could not be expected to have known of Selko's
dissatisfaction. When seeking insurance in April of 1994,
Signore was well aware of facts that would have strongly
indicated to a reasonable attorney that Selko was unhappy
-- and would soon be even more unhappy. Selko had
consulted another lawyer in 1992, had criticized the
investments, had relieved Signore, had eliminated Signore's
investment authority, and had specifically asked him to
return his money. Almost two years had then elapsed
without response and without return of any money. Signore
stated in a subsequent letter that, during this period, the
real estate market had "slowed to a crawl" and values were
either "down or . . . stagnant." It was plainly apparent by
April of 1994 that Selko's entire $300,000 was in imminent
peril. Signore and ICI in fact defaulted on the bonds only
four months later. In these circumstances, a reasonable
attorney in Signore's shoes would have realized that he had
a dissatisfied client who would undoubtedly take further
legal action absent a miraculous and unlikely turnaround
in the real estate market.

Since this case arises on summary judgment, the
ultimate question boils down to whether, viewing the record
most favorably to plaintiff, a reasonable fact finder might
find that, seen through the lens of what a reasonable
lawyer would have believed, Signore was without basis to
believe that he had breached a professional duty.

To state this question is to answer it. We do not see how
it could reasonably be found on this record, even when
viewed most favorably to plaintiff, that a reasonable lawyer
would have had no "basis to believe" that a breach of
professional duty had occurred.

There is no need to proceed further. We affirm the
judgment below. See Central Penn. Teamsters Fund v. Peat
Marwick Main S. Co., 85 F.3d 1098, 1107 (3d Cir. 1996)

                               15
(court of appeals may affirm on any ground supported by
record).

So ordered.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

                               16