SAYLOR, District Judge
This is a claim for legal malpractice arising out of prior litigation in New Hampshire concerning the administration of family trusts. Plaintiff Elizabeth M. Tamposi brought claims in this Court against various attorneys and law firms that had represented her interests in the prior litigation, alleging legal malpractice, breach of fiduciary duty, and unjust enrichment. Three defendants — Butler, Rubin, Saltarelli & Boyd, LLP; Faegre Baker Daniels LLP (successor in interest to Baker & Daniels, LLP); and Julie Shelton (together, the "Shelton Parties") — filed counterclaims against Tamposi. All eight defendants filed cross-claims against multiple other defendants.
On December 23, 2014, the parties filed a joint stipulation dismissing all claims by
Four motions for summary judgment have been filed as to those cross-claims — one by Michael Weisman, Rebecca McIntyre, and Weisman & McIntyre, P.C. (together, the "W&M Parties"); one by McIntyre alone; one by Burke, Warren, MacKay, & Serritella, P.C., and Stephanie Denby (the "Denby Parties") as to the cross-claims of only Butler Rubin and Baker Daniels; and one by the Denby Parties as to the cross-claims of all of the Shelton Parties.
For the reasons set forth below, the motion of the Denby Parties for summary judgment as to the cross-claims of Butler Rubin and Baker Daniels will be granted, and all other motions will be denied.
The following facts are undisputed unless otherwise noted.
Samuel A. Tamposi, Sr. was a prominent and successful real estate developer in New Hampshire. (W&M SMF ¶ 3). In 1992, as part of his estate plan, he established the Samuel A. Tamposi, Sr. 1992 Trust (the "1992 Trust") and named himself as beneficiary during his life and his six children as beneficiaries after his death. (Id.). See Shelton v. Tamposi, 164 N.H. 490, 493, 62 A.3d 741, 744 (2013). He amended the trust four times prior to his death. Id.; (Dkt. No. 209, Ex. 6, at 31-45). In its final form, the trust provided that upon Samuel's death, the trust corpus was to be divided into twelve separate sub-trusts — six containing assets exempt from the federal generation-skipping transfer tax and six containing non-exempt assets. Shelton, 164 N.H. at 493, 62 A.3d at 744. As provided by the 1992 Trust, the twelve sub-trusts would be divided equally among Samuel's six children, with each of the six being named as the primary beneficiary of one "GST exempt" trust and one "non-exempt" trust. (Denby SMF ¶ 3); Shelton, 164 N.H. at 493, 62 A.3d at 744.
Article TENTH of the 1992 Trust provided that each of the twelve sub-trusts would constitute a separate and distinct trust, but that each could be combined with the other trusts in a common fund for the convenience of administration. (Id.). In that way, legal title to the trust property would be held in the name of the larger Samuel A. Tamposi, Sr. Trusts, while equitable title would rest with the twelve individual trusts. (Id.).
Article TENTH-B of the 1992 Trust, as amended, specified that two of Samuel's sons — Samuel Tamposi, Jr. ("Sam") and Stephen Tamposi ("Steve") — were to serve as "investment directors" for the entire trust property and for the twelve individual trusts. (Id. ¶ 4; Resp. to Denby SMF ¶ 4). The enumerated responsibilities and powers of the investment directors included, but were not limited to, "the management, control, handling, financing, refinancing and structuring of any and all real estate interests and other operating entities from time to time included in the trust property" and the "full power and authority
The 1992 Trust contained an in terrorem clause that provided, in relevant part:
(1992 Trust Art. FOURTEENTH).
Upon his death, Samuel's estate and trust property consisted of "various tenancies, business entities, limited partnerships, [and] corporations and numerous parcels of real estate in New Hampshire and Florida," and was valued at approximately $20.5 million. Order at 6, Shelton v. Tamposi, No. 316-2007-EQ-2109 (N.H. Probate Ct. Aug. 18, 2010).
Elizabeth ("Betty") M. Tamposi, the original plaintiff in this action, is one of Samuel's children. When Samuel died on May 25, 1995, Betty became the beneficiary of two of the twelve individual trusts that were sub-divided out of the 1992 Trust. (Denby SMF ¶ 1). Those two trusts, known as the Elizabeth M. Tamposi Trusts ("EMT Trusts"), also named Betty's children (the "Goodlander Children") as beneficiaries. (Id.).
In addition to her interests in the EMT Trusts, Betty also acquired minority interests in many Tamposi holdings in which the EMT Trusts owned no interest (the "Gifted Assets"). (Denby SMF ¶ 7; Steve Dep. at 16-17). Those included ownership interests in business entities known as Ballinger Properties LLC and Citrus Hills Holdings LLC. (Steve Dep. at 16-17).
After Samuel died in 1995 and Sam and Steve took over as investment directors, the Tamposi family experienced significant discord concerning the proper relationship between the investment directors and the trustee. (Denby SMF ¶ 13). In the summer of 1995, Steve and Betty discussed the possibility of a buyout of Betty's interest in the Trusts for approximately $500,000. (Id. ¶ 14). According to Steve, they discussed that possibility again some time in 1997, 1998, or 1999. (Steve Dep. at 88-89).
On January 26, 2000, Sam and Steve, together with trustee Gerald R. Prunier, filed an action in the Hillsborough County (N.H.) Probate Court seeking a declaratory judgment as to the division of fiduciary responsibilities between the investment directors and the trustee of the 1992 Trust. (Dkt. No. 182, Ex. 4). The petition alleged that Betty and her brother Nicholas Tamposi ("Nick") had expressed an interest in a separation or buyout of their beneficial interests in the trust property. (Id.).
On March 17, 2000, Betty and Nick filed an action for declaratory judgment against Sam and Steve. (Denby SMF ¶ 19; Dkt. No. 182, Ex. 17). Among other things, the action sought a declaratory judgment as to whether the in terrorem clause in the 1992 Trust would trigger a forfeiture if Betty and Nick responded to the declaratory-judgment action filed by Sam, Steve, and
On October 2, 2000, New Hampshire Probate Court Judge Raymond A. Cloutier ruled that Betty and Nick would not violate the in terrorem clause by seeking to uphold fiduciary standards under the trust and New Hampshire law, as long as they did "not challenge or attempt to challenge the validity of the trust or the authenticity of the [trust] documents or signatures." (Denby SMF ¶ 20; Dkt. No. 182, Ex. 19).
In September 2001, Betty filed another action against Sam, Steve, trustee Prunier, and trustee David Tully alleging breach of fiduciary duties. (Denby SMF ¶ 21; Dkt. No. 182, Ex. 20). Among other things, the 2001 lawsuit sought removal of Sam and Steve as investment directors and Prunier as trustee of the 1992 Trust "and the individual trusts established thereunder." (Denby SMF ¶ 21; Dkt. No. 182, Ex. 20, at 49). The complaint alleged that Prunier, Sam, and Steve had been using the in terrorem clause to "stifle dissent." (Denby SMF ¶ 21).
In late 2001, Betty and Nick withdrew their complaint for breach of fiduciary duty in order to engage in settlement discussions. (Denby SMF ¶ 22). Genus Resources, LLC was hired to mediate the dispute. (Id.). On May 2, 2002, Genus put out an Assessment Report that stated in part:
(Genus Assessment Rep. at 52-53). The mediation was ultimately unsuccessful. (Denby SMF ¶ 23). Betty's 2001 complaint was not reinstated after the failed mediation. (Id.).
On June 16, 2004, Betty sent a letter to Sam, Steve, and two of her other siblings requesting a buyout "instead of the settlement agreement that would have left [her] involved in family business affairs for the long run." (Dkt. No. 182, Ex. 22). The letter also requested that Sam and Steve resign as investment directors of the EMT Trusts. (Id.).
In July 2004, Betty and Nick agreed to sell their ownership interests in certain assets to Sam and Steve for $17 million, pursuant to a Letter of Intent that expressed that agreement in writing. (Denby SMF ¶ 25; Dkt. No. 182, Ex. 23).
On November 13, 2006, Betty and her siblings entered into a settlement agreement in which each signatory agreed to release all rights of action against one another that related to the September 2001 lawsuit and two other suits that had also been filed in New Hampshire probate court and later withdrawn. (W&M SMF ¶ 6; Settlement Agreement at 2-3). The terms of the settlement agreement included (but were not limited to) the following: (1) Sam and Steve would resign as investment directors of all assets of the EMT Trusts except for ten; (2) Betty would release any claim for breach of fiduciary duty against her siblings or trustees Prunier and Tully; (3) Prunier and Tully would resign as trustees of the EMT Trusts; (4) Betty would nominate Richard Couser as the successor trustee of the EMT Trusts; and (5) Betty would be responsible for her own legal fees, but could seek reimbursement
Shortly after the settlement agreement was signed, Couser became ill and became unable to serve as trustee. (Id. ¶ 7). He officially resigned on May 18, 2007, before taking possession of any of the trust assets from Prunier. (Id. ¶ 29).
As of November 19, 2006, Sam and Steve served as investment directors with respect to ten of the assets held in the EMT Trusts. (Denby SMF ¶ 6; Settlement Agreement at 4). They also remained as managers of all assets in the EMT Trusts and retained operating control over them. (Betty Dep. Apr. 8, 2014 at 435-36; Steve Dep. at 150-52). They also remained, and still remain, managers of Betty's Gifted Assets. (Denby SMF ¶ 6; Steve Dep. at 16-17).
One of the ten assets for which Sam and Steve remained investment directors after the settlement agreement was Tamposi, LLC. (Denby SMF ¶ 30). Tamposi, LLC owned 50 Class B Units of N.E.S.V.I., LLC, the entity that at the time owned the majority interest in the Boston Red Sox. (Id.). The company also was a party to an agreement under which it could require N.E.S.V.I., LLC to purchase all or some of the Class B Units it owned (the "Put Option"). (Id.; Dkt. No. 182, Ex. 27, ¶ 13). The Put Option provided that it could be exercised during the first 90 days of each calendar year beginning in 2004, with the final option period terminating in April 2008. (Dkt. No. 182, Ex. 27, ¶ 13).
Julie Shelton is a trial lawyer, licensed to practice law in Illinois, with approximately 30 years of litigation experience. (Id. ¶ 39; Denby SMF II ¶ 1; Denby Dep. at 217). Shelton and Betty Tamposi have known each other since 1973. (Id. ¶ 40). Shelton was aware in 2001 that Betty had sued her brothers about an issue related to her family trusts. (Id.).
Sometime in the spring of 2007, Betty contacted Shelton and requested help in finding a new trustee for the EMT Trusts to replace Richard Couser. (Id. ¶ 41; Shelton Dep. at 21-22). At that time, Shelton was a partner at Butler, Rubin in Chicago. (Denby SMF II, Dkt. No. 206, ¶ 1).
Shelton recommended an attorney named Stephanie Denby, referring to her in their conversation as "somebody who I respect highly as a trust and estates lawyer." (Shelton Dep. at 22). At the time, Denby was employed by the law firm of Burke, Warren, MacKay & Serritella, P.C. in Chicago.
On April 27, 2007, Shelton sent an e-mail to Denby with the subject, "Betty Tamposi." (Denby SMF ¶ 42). In the e-mail, Shelton suggested that she, Denby, and
On May 2, 2007, Shelton received a stack of materials from Betty, including the EMT Trusts, the 2001 complaint, the settlement agreement, and some financial documents. (Denby SMF ¶ 43; Dkt. No. 182, Ex. 44). She sent the originals to Denby, keeping copies of certain documents for herself. (Denby SMF ¶ 43; Dkt. No. 182, Ex. 44).
Shortly thereafter, Shelton, Betty, and Denby met at Denby's office in Chicago and spoke for several hours. (Denby SMF ¶ 42). Betty explained that she had concerns about the implications of the 2006 settlement agreement, including the level of power left to her trustee as compared to the investment directors. (Betty Dep. at 48-49). Denby shared her initial response to those concerns. (Denby SMF ¶ 42). After the meeting, Denby set up further meetings with multiple institutional trustees, including J.P. Morgan and Bank of America. (Id. ¶ 44). Shelton attended at least some of those meetings. (Id.). Ultimately, each potential institutional trustee declined to take on the trusteeship of the EMT Trusts. (Id.).
After the institutional trustees declined to become involved, Betty asked Denby if she would be willing to serve as her trustee. (Id. ¶ 46). Denby declined, explaining that she generally did not act as a trustee. (Id.; Denby Dep. at 130).
On May 30, 2007, Betty and Denby executed a formal engagement letter. In the letter, Burke, Warren (through Denby) agreed to represent Betty "in conjunction with administration of your family trusts." (Dkt. No. 182, Ex. 47).
At some point in the summer of 2007, Betty asked Denby to find out whether Shelton would agree to serve as trustee of the EMT Trusts. (Denby SMF ¶ 52; W&M SMF ¶ 15). In late July or early August 2007, Denby approached Shelton and asked her if she would be willing to serve. (Denby SMF ¶ 52; Shelton Dep. at 25-26).
According to Shelton, she responded that she had "no idea how to be a trustee." (Shelton Dep. at 26). Shelton testified that Denby then reassured her and promised her that she would provide professional assistance. (Id.). Specifically, she testified: "And she [Denby] said a number of different things. I can't tell you the exact words, but basically, it was, `I will help you every step of the way, and Betty needs you. You don't need to worry about it. It will be fine. You can do this. I will help you, I will guide you and I will teach you.'" (Id.). On that representation, and specifically on the understanding that Denby would serve as trustee counsel, Shelton agreed to serve as trustee starting in August 2007. (Denby SMF ¶ 52).
At her deposition, Denby testified as follows:
(Denby Dep. at 380-81).
On August 16, 2007, Shelton began to bill Betty for her services as trustee. (Dkt. No. 193, Ex. 2, at 243). At all times while she remained trustee of the EMT Trusts, she sent invoices to Betty through her law firms — first Butler Rubin, and later Baker Daniels. (Saltarelli Aff. ¶ 2; Stanley Aff. ¶ 2).
From 2000 to 2006, Betty incurred approximately $900,000 in legal fees in connection with the initial litigation. The fees included charges by Richard Couser. (Betty Dep. Apr. 8, 2014 at 436).
In April 2005, then-trustee Prunier authorized a loan from the EMT Trusts to Betty of approximately $1.5 million to purchase a luxury home on Lake Winnipesaukee in New Hampshire. (Denby SMF ¶ 34; Betty Dep. at 508; Dkt. No. 182, Ex. 93, at 26). The purchase price of the property was approximately $1.7 million. (Betty Dep. at 526-27).
On January 26, 2007, Betty signed a contract with Cobb Hill Construction obligating herself to pay almost $1.5 million for home renovations. (Denby SMF ¶ 35; Dkt. No. 182, Ex. 30).
By mid-May 2007, Betty was experiencing a self-described "cash crunch." (Betty Dep. at 561). On May 22, 2007, she wrote an e-mail to Denby in which she requested her help in obtaining reimbursement for the attorneys' fees that she had incurred (approximately $900,000) as part of the prior litigation. (Id.; Dkt. No. 182, Ex. 28). After describing the scenario to Denby in the first portion of the e-mail, Betty wrote: "I don't know what you can do with all this but I'm hoping you can figure something out that will help me get the reimbursement in whole and not staggered or not anything even, depending on what their `mood' is. Ach!!" (Dkt. No. 182, Ex. 28).
On May 31, 2007, Betty sent an e-mail to Shelton in which she wrote: "This issue with ... Couser is heating up. Can you call me?" (Dkt. No. 182, Ex. 48). To the e-mail, she attached a letter from Couser that, among other things, sought payment of outstanding legal fees. (Id.; SMF ¶ 48).
On June 4, 2007, Betty was served with notice that her husband, Theodore Goodlander, had filed a petition for divorce. (Denby SMF ¶ 36; Dkt. No. 182, Exs. 31-32). In his petition, Ted requested an equitable division of his and Betty's assets as well as permanent spousal support. (Denby SMF ¶ 36; Dkt. No. 182, Ex. 31).
On June 7, 2007, Denby met with David Barradale and Pam Newkirk, two attorneys for Prunier, to address Betty's need for additional cash flow from the trusts. (Denby SMF ¶ 49; Denby Dep. at 364).
Also present at the June 7, 2007 meeting were CFO Jeff Knight of the Tamposi Company and Gene Van Loan, the attorney and trustee for Nick Tamposi. (Denby SMF ¶ 49; Denby Dep. at 364). Knight discussed the balance sheet and cash flow of the EMT Trusts, and explained that Sam and Steve, in their capacity as investment directors, would be distributing
On June 15, 2007, attorney Barradale sent a letter to Denby addressing the delay in finding a successor trustee to replace Couser. (Dkt. No. 182, Ex. 49). He noted that an initial target of July 1, 2007, had been set to name a successor trustee for both Betty's and Nick's subtrusts, and that that date remained the target in Nick's case. (Id. at 2-3). He then stated: "It is important to [Prunier] to have a target date of August 1, 2007 for the transition of trustee responsibilities for Betty's subtrusts.... It is unfair to the fiduciaries who have resigned for this issue to keep them in limbo and to otherwise hold up the transition of trustee responsibilities." (Id. at 3, 4).
In his letter, Barradale also stated that on the date of the transfer of trustee responsibilities, a closing would take place during which "[t]he [t]rustees who have resigned would receive releases for the period from the effective date of the Settlement Agreement through the closing date." (Id. at 2). He further stated: "I anticipate the [i]nvestment [d]irectors will also require a release." (Id.).
On June 22, 2007, in preparation for a meeting in New Hampshire with Betty's divorce attorney, Shelton met with Denby to discuss Betty's divorce case. (Denby SMF ¶ 53). On that same day, Denby sent Shelton a copy of Betty's 2001 complaint and the November 2006 settlement agreement. (Id.).
At some point, Shelton and Betty began to consider filing an action against Couser for legal malpractice. On June 25, 2007, Shelton sent Denby an e-mail informing her of a recommendation Shelton had received for an attorney to handle such a lawsuit. (Denby SMF ¶ 54; Dkt. No. 182, Ex. 56).
On June 28, 2007, Shelton and Denby attended a meeting with Betty's divorce attorney and a forensic accountant in New Hampshire. (Denby SMF ¶ 55). The meeting lasted about three hours. (Id.). Following the meeting, Shelton sent an e-mail to Betty telling her that she thought the meeting had gone well and asking to be kept "posted on how things go on Monday." (Id.; Dkt. No. 182, Ex. 57). Shelton testified (and both sides agree) that her e-mail referred to a divorce hearing that was set to take place the following Monday, July 2, 2007. (Denby SMF ¶ 55; Shelton Dep. at 275).
On August 20, 2007, Betty sent an e-mail to her brothers Sam and Steve in which she proposed dates for an in-person meeting involving the three of them, Shelton, and Denby. (Id. ¶ 58; Dkt. No. 182, Ex. 61). Sam responded with a list of dates on which he could meet, but Steve stated that he would prefer to participate by telephone. (Denby SMF ¶ 58; Dkt. No. 182, Ex. 61; Dkt. No. 182, Ex. 62). Betty forwarded Steve's e-mail to Shelton (but not Denby) and wrote: "what do you think we should do-he is resisting ... should we let him know about issues on the agenda? that we want to talk about the implications of the divorce and a buy out? ... that the red sox are an issue ... they are trying to force my hand with the agenda." (Dkt. No.
On August 29, 2007, Shelton sent a letter to Sam and Steve in which she introduced herself as the new trustee of the EMT Trusts and again attempted to schedule an in-person meeting. (Denby SMF ¶ 60; Dkt. No. 182, Ex. 65). She volunteered to travel from Chicago to New Hampshire in order to facilitate the meeting. (Dkt. No. 182, Ex. 65).
According to Shelton, Denby wrote the original draft of the letter. (Shelton Dep. at 396-97; Dkt. No. 182, Ex. 66). She testified that the letter was written with an eye toward potential litigation, and that she attempted to "soften" it with her edits. (Shelton Dep. at 397, 399). The letter stated that "Betty ha[d] significant cash flow issues" and that the group "need[ed] to discuss projected cash flows as well as how to address her current cash needs." (Id.). The cash-flow issues to which she referred at that time were caused by expenditures related to Betty's pending divorce and home renovations. (Shelton Dep. at 391-92).
Shelton knew that Betty was unable to meet her monthly obligations with the $22,000 monthly distribution she received from the trusts at that time. (Id. at 392). She testified that she did not consider herself Betty's lawyer at the time, but that she did consult with Betty and Denby as to possible strategies for increasing Betty's cash flow. (Id. at 253).
In September and October of 2007, Betty wrote personal checks totaling more than $38,500, including one in the amount of $7,150 for a down payment on a family weekend retreat and $6,780 to Harvard University for her own tuition. (Dkt. No. 182, Ex. 33; Trial Tr. at 1324-25, N.H. Litigation (Dec. 9, 2009)). She also donated $20,000 to Georgetown University in that same time frame. (Betty Dep. June 5, 2014 at 846-47). Shelton was unaware at the time that Betty had made those expenditures. (Shelton Dep. at 741).
At all times relevant to the complaint, Weisman & McIntyre, P.C. ("W&M") was a professional corporation organized under the laws of Massachusetts. (W&M SMF ¶ 1). The two members of W&M were defendants Michael D. Weisman and Rebecca ("Betsy") McIntyre. (Id.). Weisman owned two-thirds of the corporation's shares, and McIntyre owned the remaining third. (McIntyre SMF ¶ 1).
In August and early September 2007, Betty and Shelton interviewed at least three litigation attorneys, including Michael Weisman and Al Zabin, with a view toward filing a potential malpractice claim against Couser. (Denby SMF ¶ 68; W&M SMF ¶ 21; Shelton Dep. at 57-58, 65-66). Shelton was the "point person" on the search. (W&M SMF ¶ 21; Shelton Dep. at 325). She learned of Weisman through a recommendation from an attorney who in turn had been recommended to her by Fran Fox, a former colleague. (W&M SMF ¶ 21; Shelton Dep. at 57-58). She had asked Fox for "the names of some lawyers in Boston that [they] could talk to about a potential malpractice claim." (Shelton Dep. at 57-58). She asked for Boston lawyers because Betty had "suggested that [they] wouldn't want a New Hampshire lawyer."
On August 24, 2007, Betty and Shelton met with Weisman at the offices of W&M. (W&M SMF ¶ 22).
At some point in the next few weeks, the idea of initiating litigation against not only Couser (for malpractice), but also potentially against Sam and Steve (for breach of fiduciary duty), arose. (Betty Dep. at 634-36; Shelton Dep. at 66-67). From that point on, the search for a litigation attorney was conducted with both possibilities in mind. (Betty Dep. at 634-36; Shelton Dep. at 66-67).
On September 4, 2007, Shelton sent an e-mail to Betty and Denby updating them on the search for a litigation attorney. (Denby SMF ¶ 84; Dkt. No. 182, Ex. 80, at 2-3). In the e-mail, Shelton stated: "I think we need to do the following asap: ... Talk to [attorney] Zabin about the Red Sox angle and the goal of getting a buy out." (Denby SMF ¶ 84; Dkt. No. 182, Ex. 80, at 3).
By September 19, 2007, discussions with Weisman had progressed substantially. That day, Weisman sent a draft of a fee agreement to Shelton, who forwarded it along to Betty. (Dkt. No. 182, Ex. 81). The letter stated that W&M would provide representation in connection with two matters: any legal malpractice or other claims against Couser and any claims against any "appropriate individual or entity for breach of fiduciary duty or other legal claims respecting the management of assets in which you have a direct or indirect ownership interest, including, but not limited to, your ownership interest in the Boston Red Sox." (Id.).
Later that same day, Shelton sent an e-mail to Weisman about the proposed representation agreement with W&M. (Denby SMF ¶ 86; Dkt. No. 182, Ex. 82). That e-mail stated in part:
Betty and Shelton retained W&M on September 21, 2007. (W&M SMF ¶ 25; Crossclaims of Shelton Parties, ¶ 34; Weisman Dep. at 16-18). Betty signed a retainer agreement on September 22, 2007. (Dkt. No. 193, Ex. A, at 220-23).
(Id. at 220).
Betty and Shelton were the decision-makers in the determination to retain W&M, and they are the ones who negotiated the fee arrangement with Weisman. (Denby SMF ¶¶ 69, 87; Shelton Dep. at 531-32).
As of the time that Betty and Shelton retained W&M, McIntyre had never served as lead counsel in a trial. (McIntyre SMF ¶ 2). She and Weisman had tried several cases together, but Weisman had always served as lead counsel and McIntyre had always been the "second chair." (Id.).
At some point in approximately September 2007, Betty asked her mother Barbara and her brother Nick for a loan. (Betty Dep. at 696). Nick provided her with a loan, but her mother declined, apparently on the advice of Sam. Betty, Shelton, and Denby all testified that Sam told Barbara that she should not provide Betty with any money, because there was "a huge backlog of funds" in the EMT Trusts. (Id.; Shelton Dep. at 426; Denby Dep. at 249-50).
On September 7, 2007, Betty's bookkeeper Sue Edwards sent Shelton and Denby documents related to tuition payments for Betty's children Maggie and John. (Denby SMF ¶ 62; Dkt. No. 182, Ex. 67). The documents had previously been sent by fax to the Tamposi Companies for payment. (Denby SMF ¶ 62; Dkt. No. 182, Ex. 67). Betty had been attempting to get Sam and Steve to pay the tuition for Maggie and John. (Denby SMF ¶ 62). She told Shelton "at some point, around [that] time"
In early September 2007, Betty, Shelton, and Denby held a conference call in which they discussed options for increasing Betty's cash flow. (Denby SMF ¶ 64; Shelton Dep. at 441). During the call, they agreed to request a $1.5 million cash distribution from Sam and Steve. (Shelton Dep. at 441). Shelton prepared a draft of a letter to be sent by her to Sam and Steve. The initial draft stated, in part: "I have determined that Betty is in immediate need of $1.5 million in order to maintain her health and reasonable comfort." (Dkt. No. 182, Ex. 68).
Shelton circulated the draft of the letter to Betty and Denby on September 7, 2007. (Dkt. No. 182, Exs. 68-69). Betty responded to Shelton and Denby later that day and wrote: "Let's round the number up to $1.8 million." (Dkt. No. 182, Ex. 69, at 5). She attached a spreadsheet entitled "Betty Bills Owed" that purported to outline her financial obligations, which totaled $1,781,238.07. (Denby SMF ¶ 65; Dkt. No. 182, Ex. 69, at 4). Denby responded and wrote: "As you are already at $1.7, do you ask for $2 million." (Denby SMF ¶ 65; Dkt. No. 182, Ex. 69, at 5). Betty then wrote back and agreed that they should ask for $2 million. (Denby SMF ¶ 65; Dkt. No. 182, Ex. 69, at 5).
Later that day, on September 7, 2007, Shelton mailed the final draft of the letter to Sam and Steve via FedEx. (Dkt. No. 182, Ex. 69, at 2; Denby SMF ¶ 67). The letter stated in part:
(Id.). Sheldon intended the letter not only to obtain cash to help Betty pay her bills, but also to initiate a dialogue with Sam and Steve. (Shelton Dep. at 348).
On September 13, 2007, attorney Robert Stein, acting as counsel for Sam and Steve in the role as investment directors, sent a letter to Shelton in response. (Denby SMF ¶ 71; Dkt. No. 182, Ex. 71). The letter stated in part:
(Denby SMF ¶ 71; Dkt. No. 182, Ex. 71).
Upon receiving the letter from Stein, Shelton forwarded it to Denby, Betty, and Weisman. (Denby SMF Denby ¶ 72; Shelton Dep. at 479). Shelton wrote an initial draft of a response, and Denby and Weisman provided edits. (Denby SMF ¶ 72; Dkt. No. 182, Ex. 72; Shelton Dep. at 492-93). Among other things, the response expressed a continuing desire by Betty and Shelton to arrange a meeting with Sam and Steve. (Denby SMF ¶ 72; Dkt. No. 182, Ex. 72). Shelton appears to have sent a final version of the letter to Stein by fax on September 14, 2007. (Denby SMF ¶ 74; Dkt. No. 182, Ex. 74).
On September 18, 2007, Betty sent an e-mail to Shelton that stated, in full: "Jules, okay ... now we need to whack really really hard to get their attention. Betty." (Dkt. No. 182, Ex. 86). In response, Shelton wrote: "So we file the complaint Weisman is drafting. He will have a draft to us later today." (Denby SMF ¶ 92; Dkt. No. 182, Ex. 86). Denby was not included in that e-mail exchange. (Denby SMF ¶ 92; Dkt. No. 182, Ex. 86).
On September 19, 2007, Sam wrote to Sue Edwards (Betty's bookkeeper) by fax and informed her that his mother Barbara would "not pay for John and [Maggie]'s tuition until all matters are formally resolved and signed relating to the Tamposi sibling settlement. [F]or example
On September 20, 2007, attorney Stein sent another letter to Shelton. (Denby SMF ¶ 74; Dkt. No. 182, Ex. 74). That letter stated in part:
(Denby SMF ¶ 74; Dkt. No. 182, Ex. 74).
On that same day, Betty sent an e-mail to Shelton and Denby in which she described a conversation she had had earlier that day with her mother Barbara about Sam's and Steve's desire for her to sign a release. (Denby SMF ¶ 75; Dkt. No. 182, Ex. 75). She concluded the email with the following language: "looking forward to getting a plan together and by a stroke of unbelivavble [sic] luck get a buy out." (Denby SMF ¶ 75; Dkt. No. 182, Ex. 75).
By September 2007, Betty and Shelton had begun to discuss the possibility of litigation against Sam and Steve. According to Shelton, Denby, Weisman, and McIntyre, the group had at least one discussion in which they reviewed their legal options. (Denby SMF ¶ 94). One of those options was to file a petition for instructions rather than a lawsuit. (Id.).
In connection with the anticipated litigation in New Hampshire, and on Weisman's recommendation, Betty and Shelton hired Steve Gordon and Arpiar (Arpie) Saunders of Shaheen & Gordon, P.A. as New Hampshire local counsel. (Denby SMF ¶ 78; Shelton Dep. at 609-10, 827-28). Shelton understood at that time that Saunders had more experience with probate litigation, and in New Hampshire courts, than did Weisman. (Shelton Dep. at 826-28).
In preparing for litigation, Denby reviewed a number of materials, including all of the trust documents; Judge Cloutier's decision from October 2000; some of the filings from that litigation; and some research into the application of the in terrorem clause that had previously been performed by Couser. (Denby Dep. at 29, 40-42, 65). She also testified: "I reviewed the UTC [Uniform Trust Code]. I reviewed the New Hampshire [C]ode. I looked at `Scotts on Trust.' I looked at `Bog[e]rt on Trust' to look and see what issues were relevant to New Hampshire and other issues and [the] in terrorem clause." (Id. at 67-68).
According to W&M's billing records, Weisman began to work on a complaint for Betty and Shelton on September 16, 2007. (Dkt. No. 193, Ex. 5, at 56). McIntyre began doing so on September 23, 2007. (Id. at 57). Weisman continued to work on one
On September 22, 2007, the W&M office prepared a memorandum that purported to provide summaries of seven New Hampshire cases and two New Hampshire statutes. (Dkt. No. 182, Ex. 85). The document was distributed to Denby shortly thereafter. (Denby Dep. at 83).
On September 25, 2007, McIntyre circulated a draft of the New Hampshire complaint to Betty, Denby, Shelton, and Weisman. (Denby SMF ¶ 79; Dkt. No. 182, Ex. 77). McIntyre testified that the information in the first draft of that complaint had been provided to her by Weisman, and that she thought at least some of it had originally come from Betty and Denby. (McIntyre Dep. at 22-23, 28-29).
Denby testified that "everybody" was involved in the discussions that led to the drafting of the complaint, including Shelton. (Denby Dep. at 166-67, 445-46).
(Denby Dep. at 166).
The New Hampshire complaint was edited to at least some degree by McIntyre, Denby, Weisman, Shelton, Gordon, and Saunders. (Denby SMF ¶ 79; Weisman Dep. at 69-76). Denby testified that she made "revisions to the prayers for relief." Specifically, she testified as follows:
(Denby Dep. at 443).
On September 28, 2007, Betty and Shelton filed a complaint in Massachusetts Superior
On October 1, 2007, Shelton sent an e-mail to McIntyre, Denby, and Betty in which she asked McIntyre to make sure she incorporated some particular changes that had been made by Denby into the New Hampshire complaint. (McIntyre SMF ¶ 40; Shelton Dep. at 92-94). On October 5, Denby circulated a new draft that incorporated her and Gordon's changes. (W&M SMF ¶ 31; Dkt. No. 193, Ex. 2, at 406). Later that day, Shelton e-mailed Denby and wrote: "Yes. Otherwise, I think the complaint looks great." (Shelton Dep. at 612). On October 8, Denby and Shelton exchanged e-mails about the draft. (Dkt. No. 193, Ex. 2, at 406).
Shelton agreed at her deposition that she "engaged in multiple long discussions with Stephanie and Michael Weisman and Betty concerning whether or not the lawsuit should be filed" and that she ultimately approved of its filing. (Shelton Dep. at 92-93, 506).
(Shelton Dep. at 615-16).
On October 9, 2007, Gordon e-mailed a proposed "final" draft of the New Hampshire complaint for review and requested approval to file it. (W&M SMF ¶ 31). Denby responded that Weisman and McIntyre
On October 12, 2007, Betty and Shelton (in her capacity as trustee) filed the complaint in Hillsborough County Probate Court in New Hampshire. The complaint alleged breaches of fiduciary duty by Sam and Steve. (Denby SMF ¶ 80; Dkt. No. 182, Ex. 1); Complaint, Shelton v. Tamposi, No. 316-2007-EQ-2109 (N.H. Probate Ct. October 12, 2007). The alleged breaches of fiduciary duty included the failure to address Betty's "immediate and pressing cash needs," Sam's misappropriation of the benefits associated with ownership of the Red Sox, and economic coercion. (N.H. Compl. at 4, 8, 10). The complaint requested the following relief:
(N.H. Compl. at 14-15).
When asked about the risk that the request in the New Hampshire complaint for an order liquidating the Tamposi Companies could trigger the in terrorem clause, Shelton testified as follows:
(Shelton Dep. at 99-101). When later asked if she was warned by counsel of such a risk, she testified:
(Id. at 201-02).
She also testified as follows as to the state of her knowledge on October 12, 2007, the date that the New Hampshire complaint was filed:
(Id. at 708-09, 788-89, 817).
On October 22, 2007, Shelton sent an e-mail to Betty and Weisman in which she stated, among other things: "Michael, ... Betty is looking for reassurance that you are going to lead the litigation and that you have a clear understanding of the facts and the strengths and weaknesses of her claims." (McIntyre SMF ¶ 52; Shelton Dep. at 658). In that same e-mail, Shelton wrote: "I do not need to participate and would just like to be updated in case there's something I need to know as trustee." (Shelton Dep. at 127).
(Shelton Dep. at 127-28).
On November 6, 2007, Shelton and Denby executed a formal engagement letter under which Denby and Burke, Warren agreed to provide Shelton with "services in advising you on Trust Administration matters for the [EMT] trusts." (Denby-Shelton Engagement Letter at 1). The engagement letter addressed services provided to Shelton individually, in her role as trustee; Butler Rubin was not named as the trustee nor mentioned in the letter in any other capacity. (Denby SMF II ¶ 4).
On January 2, 2008, Sam and Steve responded to the New Hampshire complaint with thirteen separate motions. (Denby SMF ¶ 101; Dkt. No. 182, Ex. 91). One of those motions sought an order that Betty had forfeited her beneficial interests in the EMT Trusts. (Denby SMF ¶ 101; Dkt. No. 182, Ex. 91).
On July 8, 2008, Shelton testified at a deposition in the Massachusetts litigation. In response to a question about Sam and Steve, she stated: "I have no basis to claim that they have mismanaged assets." (Shelton Dep., Mass. Litigation (July 8, 2008) at 148-49; Dkt. No. 182, Ex. 89, at 148-49).
On August 4, 2008, Denby sent a letter to both Betty and Shelton "formaliz[ing their] agreement that [Burke, Warren] represent[ed] Julie Shelton in her capacity as [t]rustee of the [EMT Trusts] and Elizabeth M. Tamposi, both individually, and as beneficiary of the [EMT] Trusts." (Waiver of Conflicts at 1). The letter stated in part:
(Id. at 1-2). Shelton signed the letter directly below a statement that read (in all capital letters): "I consent to the representation of both Elizabeth M. Tamposi and me in my capacity as trustee by Burke, Warren, MacKay & Serritella, P.C. in accordance with the foregoing." (Id. at 2).
On September 11, 2008, Sam and Steve filed an answer in the New Hampshire proceeding. (Dube Aff., Ex. 32). Among other things, the answer requested an award of "attorney's fees, experts' fees, and costs for the defense of th[e] action and the defense of all actual and/or threatened litigation before November 13, 2006." (Answer, N.H. Litigation, at 10).
The New Hampshire proceeding was assigned to Probate Court Judge Gary Cassavechia. On November 6, 2008, and November 14, 2008, Judge Cassavechia held a hearing on several pending motions. Order at 6-7, Shelton v. Tamposi, No. 316-2000-EQ-00178 (N.H. Probate Court Dec. 3, 2008).
On December 3, 2008, the court issued an order on the motions. (Denby SMF ¶ 103; Dkt. No. 182, Ex. 92). The order stated in part:
Order at 6-7, Shelton v. Tamposi, No. 316-2000-EQ-00178 (N.H. Probate Court Dec. 3, 2008); (Denby SMF ¶ 103; Dkt. No. 182, Ex. 92).
Shelton testified as follows about the order:
(Shelton Dep. at 683, 924-25).
Asked why she chose not to resign after the December 3, 2008 order, Shelton testified:
(Id. at 816-17).
On December 23, 2008, Betty and Shelton filed a motion for partial summary judgment in which they asked the court to rule that their initiating the New Hampshire litigation would not trigger the in terrorem clause of the 1992 Trust. (Denby SMF ¶ 104; Dkt. No. 182, Ex. 93).
Shelton's records reflect that she billed 54.5 hours for services rendered as trustee of the EMT Trusts in the month of January 2009. (Dkt. No. 193, Ex. 2, at 294-95). Those services included at least three litigation strategy meetings that included McIntyre, among others. (Id.).
On February 12, 2009, a hearing was held on Betty and Shelton's motion for partial summary judgment in the New Hampshire litigation. (Denby SMF ¶ 106; Dkt. No. 182, Ex. 95). During attorney Weisman's argument at the hearing, Judge Cassavechia stated:
(Tr. of Feb. 12, 2009 Hearing in N.H. Litigation, at 106-07). Both Betty and Weisman were present at the hearing; Shelton was not. (Denby SMF ¶ 106; Resp. to Denby ¶ 106).
After the hearing on the motion for partial summary judgment, Betty expressed concerns to Denby, Weisman, and Shelton about "[t]he fact that the judge was questioning one of the prayers for relief." (Betty Dep. at 797-99). As a result of those concerns, a decision was made to draft an amended complaint. (Weisman Dep. at 261-62).
On February 17, 2009, Denby wrote an e-mail to Weisman that stated in part:
(Dkt. No. 182, Ex. 96). Denby also sent the e-mail to Betty, Shelton, and McIntyre. (Id.).
Weisman performed additional work on the amended complaint in late February and early March 2009. (Dkt. No. 193, Ex. 5, at 127, 129). The billing records do not indicate that McIntyre spent any time working on it. (Id. at 125-27, 129). Asked whether she had "some involvement" in the preparation of the amended complaint, she testified: "I believe I did. But mostly in the role of scribe." (McIntyre Dep. at 62-63).
On March 2, 2009, Betty and Shelton filed an amended complaint in the New Hampshire litigation. (Denby SMF ¶ 108; Dkt. No. 182, Ex. 97). The prayers for relief in the amended complaint were the
(N.H. Litigation Am. Compl. at 17-18).
As to the mention of the Gifted Assets in the amended complaint, McIntyre testified:
(McIntyre Dep. at 37).
In early 2009, Betty and Shelton retained John Langbein, a professor at Yale Law School, as their trust expert in the New Hampshire litigation. (Weisman Dep. at 366; McIntyre Dep. at 63; Langbein Expert Rep. at 1). Among other things, Professor Langbein provided an opinion that (1) Shelton had a fiduciary obligation to file the New Hampshire complaint against Sam and Steve; (2) the filing of the breach of fiduciary duty claim was not a violation of the in terrorem clause; and (3) requesting the remedies listed in both the original and amended complaints did not violate the in terrorem clause. (Denby
On October 19, 2009, Denby sent a letter to Betty and Shelton that read:
(Dkt. No. 182, Ex. 99). Nonetheless, and as described below, Denby appeared to render advice, and record time, to a limited extent after her purported disengagement.
The New Hampshire trial began on November 30, 2009. (Denby SMF ¶ 111; Dkt. No. 182, Ex. 100). Weisman and McIntyre served as trial counsel for Betty and Shelton, with Weisman serving as the "first chair" attorney and McIntyre as the "second chair." (Denby SMF ¶ 111; Weisman Dep. at 133; McIntyre Dep. at 204; McIntyre SMF ¶ 63).
Betty was present for the entire trial, and Shelton was present for most of it. (Denby SMF ¶ 111). Denby was not physically present at the trial except to testify as a witness. (Id.).
Shelton testified that Denby "was occasionally receiving some reports as to what was happening during the trial" and that "we were calling her and asking her questions from time to time." (Shelton Dep. at 714). Shelton also testified that "Stephanie [Denby] was really directing a lot of the substance of the litigation throughout the entire time." (Shelton Dep. at 216). She further testified:
(Id. at 216-17).
Shelton testified as follows as to the extent of her involvement in the trial:
(Shelton Dep. at 844-46).
Denby testified at trial on December 2, 2009. (Trial Tr. at 388, 398, N.H. Litigation (Dec. 2, 2009)). During her testimony, she was asked to describe her role in the case. Id. at 400. After explaining that she was originally retained by Betty and had also served as a counsel for Shelton, she was asked the following question and gave the following response:
(Id.).
Betty testified over the course of several (apparently non-consecutive) days in late November and early December 2009. (W&M SMF ¶ 50). The remaining parties to this action appear to agree that certain facts came out on her cross-examination that "undercut [her] credibility." (Id. ¶ 49). Those included her "apparent untruthfulness about her father's intentions, about how much money she had been receiving from the EMT Trusts, and about how she answered certain questions on a loan application submitted to Sovereign Bank." (Id.).
At Weisman's deposition, he testified as follows:
(Weisman Dep. at 107-08, 355-56).
Shelton testified that during the trial she discussed the issue with Weisman:
(Shelton Dep. at 846-51).
On the same subject, McIntyre testified:
(McIntyre Dep. at 146-48).
Asked why he chose to try to rehabilitate Betty on redirect, Weisman testified: "We had a war room and Betty, Julie — well, for these purposes, Betsy, Julie, and I talked every day and felt that this was the right approach." (Weisman Dep. at 363). He also testified, on the same subject: "During trial I felt that the areas that Betty was impeached on were ones that we could rehabilitate her on, did not go to the heart of the case.... I thought that the areas where we could rehabilitate her did not go to the core of her testimony." (Id. at 109).
On December 9, 2009, the probate court heard testimony from Jody Wilbert, who had been appointed by the court as guardian ad litem representing the interests of the unborn beneficiaries of the EMT Trusts. (W&M SMF ¶ 60; Dkt. No. 193, Ex. 10, at 2-3; Trial Tr., N.H. Litigation (Dec. 9, 2009)). Wilbert testified, among other things, that the conflicts between the investment directors and the beneficiaries of the EMT Trusts were likely to continue and that there were "ways to minimize the costs of decoupling." (Trial Tr. at 1688, 1690, N.H. Litigation (Dec. 9, 2009)). She further testified: "With regard to how my charges would be best served, I think that — that the situation begs for resolution. And it — it begs for some kind of a dissolution of the situation." (Id. at 1693).
On December 13, 2009, Shelton sent an e-mail to Weisman (with a copy to McIntyre and a W&M paralegal) in which she suggested a number of questions for him to ask her on direct examination. Among those were, "Did you do a financial cost benefit analysis before filing case[?]" and "Have you been able to calculate the cost of a de coupling[?]" (Dkt. No. 193, Ex. 2, at 418).
During Shelton's direct examination at trial, Weisman asked her the following question and she gave the following response:
(Shelton Trial Testimony at 2089-91).
On cross-examination, Shelton was confronted with, among other things, the testimony she had given at the July 8, 2008 deposition in the Massachusetts litigation that she had "no basis to claim that [Sam and Steve] ha[d] mismanaged assets." (Denby SMF ¶ 100).
Professor Langbein, the trust expert, was cross-examined on the subject of a trustee's responsibility to conduct a cost-benefit analysis. (McIntyre SMF ¶ 73). He acknowledged that if Shelton failed to conduct such an analysis before bringing suit against the investment directors, that would have been a breach of her fiduciary duty. (Id.; Shelton Dep. at 900).
The New Hampshire trial ended on January 22, 2010. (Denby SMF ¶ 111; Dkt. No. 182, Ex. 100). In total, Betty and Shelton had called eleven witnesses in their case in chief. (McIntyre SMF ¶ 63). Weisman gave the opening statement; handled the direct examinations of ten of the eleven witnesses, including Betty and Shelton; conducted the cross-examination of eight of the eleven witnesses called by the respondents; and gave the closing argument. (Id. ¶¶ 63, 74).
Weisman had begun drafting various post-trial submissions by January 27, 2010. (Dkt. No. 193, Ex. 5, at 201). On January 28, 2010, McIntyre began drafting proposed findings of fact and conclusions of law. (Id. at 202). She continued work on the document encompassing those proposed findings and conclusions through February 8, 2010. (Id. at 202-03).
(Resp. and Intervenors' Mem., N.H. Litigation, at 53).
On the same day, Sam, Steve, and the intervenors filed a proposed order with the court. (Denby SMF ¶ 114; Dkt. No. 182, Ex. 104). That proposed order stated in part:
(Proposed Order, N.H. Litigation (Feb. 8, 2010), ¶ 5).
Also on February 8, 2010, Shelton sent a draft of the petitioners' proposed findings of fact and rulings of law (the document that McIntyre had begun drafting on January 28) to Weisman and McIntyre. (Denby SMF ¶ 115; Dkt. No. 182, Ex. 106). In the e-mail accompanying the draft, Shelton wrote: "The attached has changes from my most recent conversation with Betty. We won't have any more changes relating to this portion of the proposed findings." (Denby SMF ¶ 115; Dkt. No. 182, Ex. 106). After February 8, 2010, McIntyre did not record any further time working on matters for Betty or Shelton. (McIntyre SMF ¶ 76; Dkt. No. 193, Ex. 5, at 203-08).
At her deposition, Shelton was asked the following questions about that passage of the proposed findings of fact and rulings of law and gave the following responses:
(Shelton Dep. at 838-39).
At some point in the spring of 2010, after the trial but before the court had made its decision, Shelton approached Weisman and told him that she wanted to resign as trustee. (W&M SMF ¶ 67; Shelton Dep. at 813, 839-40). According to her deposition testimony, he responded by saying, "The judge likes you a lot better than Betty. You can't resign right now." (Shelton Dep. at 813). After that conversation, she spoke with Brian Burke, counsel to Baker Daniels at the time, who gave her independent advice as to the possibility of resignation. (Id. at 840-42). Shelton did not resign. (Id. at 842).
On August 18, 2010, Judge Cassavechia issued an order in the New Hampshire litigation. That order included the following statements, among others, that represented the court's findings and conclusions with respect to Shelton:
(Order at 12-16, 37, 45-47, 50, N.H. Litigation (Aug. 18, 2010) (citations and footnote omitted)).
In the conclusion to his August 18, 2010 order, Judge Cassavechia ordered that Shelton be removed as trustee of the EMT Trusts and that both Betty and Shelton were individually liable for the attorneys' fees and costs of Sam, Steve, and the intervenors. (Id. at 53; Denby SMF ¶ 117). He did not order a surcharge against Shelton. (Denby SMF ¶ 129; Order, N.H. Litigation (Aug. 18, 2010)).
As noted, Judge Cassavechia specifically found in his August 18, 2010 order that Shelton had acted in bad faith. The individual defendants — Shelton, Denby, Weisman, and McIntyre — all apparently agree that Shelton had not, in fact, acted in bad faith, and that the judge's conclusion was wrong. (Denby SMF ¶ 119; Shelton Dep. at 709, 803; Weisman Dep. at 376; McIntyre Dep. at 144-45).
After Shelton was removed as trustee, Thomas Jalkut took over as trustee of the EMT Trusts. (Denby SMF ¶ 129; Brief of Appellant Julie Shelton, Shelton v. Tamposi, 164 N.H. 490, 62 A.3d 741 (2013) (No. 2010-634)). He resigned on June 13, 2011, and was replaced by James R. DeGiacomo. (Id.). On June 22, 2011, DeGiacomo moved for a surcharge award of more than $3 million against Shelton. (Denby SMF ¶ 129; Dkt. No. 182, Ex. 110). In that motion, DeGiacomo contended that "a surcharge award should also include any other fees paid to Julie Shelton's law firms that make up any portion of her compensation as trustee." (Motion for Surcharge Award, Shelton v. Tamposi, No. 316-2007-EQ-02109 (2007)).
Shelton appealed Judge Cassavechia's August 18, 2010 order to the New Hampshire Supreme Court. (Brief of Appellant Julie Shelton, Shelton v. Tamposi, 164 N.H. 490, 62 A.3d 741 (2013) (No. 2010-634)). Among other things, she appealed the finding of bad faith and the award of
(Id. at 46) (footnote omitted). Counsel for Shelton in her appeal were Robert Frank and Robert M. Buchanan, Jr.; those attorneys are also representing Shelton in this action. (Id. at 50; Shelton Dep. at 747). According to Buchanan's affidavit, the Shelton Parties incurred legal expenses of approximately $950,000 for services related to the appeal, plus approximately $1.25 million for services related to the post-trial proceedings in the Probate Court. (Buchanan Aff. ¶ 4).
Betty did not appeal the probate court's decision. Asked if she would have been receptive had Betty approached her to finance an appeal, Shelton stated: "No.... Because I want to be as far away from Betty as possible in every way." (Shelton Dep. at 896-97).
On August 21, 2012, the New Hampshire Supreme Court remanded the case for clarification in order to determine the basis of the Probate Court's fee award against Shelton. (Order, Shelton v. Tamposi, 164 N.H. 490, 62 A.3d 741 (Aug. 21, 2012) (No. 2010-634); Denby SMF ¶ 126).
On September 5, 2012, Judge Cassavechia issued a "Clarification of Order on Remand from Appeal." (Denby SMF ¶ 127; Dkt. No. 182, Ex. 108). In that document, the court stated that "[t]he award of fees was premised on both New Hampshire statutory and common laws" and cited N.H. Rev. Stat. Ann. § 564-B:10-1004 and the case of In re Mallett and Mallett, 163 N.H. 202, 211-12, 37 A.3d 333, 340 (2012) (citing Harkeem v. Adams, 117 N.H. 687, 691, 377 A.2d 617, 619 (1977)) in support. (Clarification of Order on Remand from Appeal at 2, N.H. Litigation (Sep. 5, 2012)).
On January 11, 2013, the New Hampshire Supreme Court affirmed Judge Cassavechia's award of fees against Shelton. The order stated in part:
Shelton, 164 N.H. at 503, 62 A.3d at 752 (2013).
On August 10, 2013, trustee DeGiacomo filed a complaint in New Hampshire Superior Court against Butler Rubin and Baker Daniels, seeking to hold them liable "[u]nder the doctrines of respondeat superior and vicarious liability" for the amounts owed by Shelton to the EMT Trusts. (Complaint ¶ 41, DeGiacomo v. Butler, Rubin, Saltarelli & Boyd, LLP, No. 1:13-cv-405-SM (D.N.H. 2013); Dkt. No. 209, Ex. 31, at 7-17). On September 12, 2013, defendants removed that case to the United States District Court for the District of New Hampshire. (Dkt. No. 209, Ex. 31, at 4). On October 16, 2013, the parties agreed to stay that case pending resolution of the underlying probate court matter. (Id. at 6). On March 27, 2015, the parties agreed to dismiss the action with prejudice. (Stipulation of Dismissal, DeGiacomo v. Butler, Rubin, Saltarelli & Boyd, LLP, No. 1:13-cv-405-SM (D.N.H. 2015)).
On December 31, 2010, Betty Tamposi filed a complaint in this Court against Denby; Burke, Warren; Weisman; McIntyre; W&M; Shelton; Butler Rubin; and Baker Daniels. (Dkt. No. 1). The complaint alleged legal malpractice, breach of fiduciary duty, and conflict of interest. (Id. at 13-20).
On February 19, 2013, the Shelton Parties (Shelton, Butler Rubin, and Baker Daniels) answered the complaint and filed crossclaims alleging legal malpractice on the part of the Denby Parties (Denby and Burke, Warren) and the W&M Parties (Weisman, McIntyre, and W&M) and seeking contribution and indemnification from all crossclaim-defendants. (Dkt. No. 53). They also filed a counterclaim against Betty Tamposi for misrepresentation and included separate counts for contribution and indemnification against her. (Id.).
Also on February 19, 2013, the W&M Parties filed crossclaims for contribution and indemnification against the Denby Parties and the Shelton Parties, and the Denby Parties filed crossclaims for contribution against the Shelton Parties and the W&M Parties. (Dkt. Nos. 52, 54).
On November 14, 2014, the parties filed five motions for summary judgment: (1) McIntyre moved for summary judgment as to the legal-malpractice crossclaim asserted against her in her individual capacity and as a member of W&M by the Shelton Parties; (2) the Denby Parties moved for summary judgment as to the crossclaims asserted against them by the Shelton Parties; (3) the Denby Parties moved separately for summary judgment as to the crossclaims asserted against them by Butler Rubin and Baker Daniels; (4) the Shelton Parties moved for summary judgment as to the claims of Betty Tamposi; and (5) the W&M Parties moved for summary judgment as to the crossclaims asserted against them by the Shelton Parties.
On December 23, 2014, the parties filed a stipulation of dismissal as to all claims other than those by the Shelton Parties for legal malpractice. For that reason, the motion by the Shelton Parties for summary judgment as to the claims of Betty Tamposi is now moot.
The role of summary judgment is to "pierce the pleadings and to assess the proof in order to see whether there is a
"[A]n action for legal malpractice may be framed conceptually either as a tort or a breach of contract." Wong v. Ekberg, 148 N.H. 369, 376, 807 A.2d 1266, 1272 (2002) (quoting Peters v. Simmons, 87 Wn.2d 400, 404, 552 P.2d 1053, 1055 (1976)).
To establish legal malpractice under New Hampshire law, under either a contract or tort theory, a plaintiff must prove (1) the existence of an attorney-client relationship, "which placed a duty upon the attorney to exercise reasonable professional care, skill and knowledge in providing legal services to that client;" (2) a breach of that duty; and (3) "resultant harm legally caused by that breach." Yager v. Clauson, 166 N.H. 570, 572-73, 101 A.3d 6, 9 (2014) (citing Estate of Sicotte v. Lubin & Meyer, P.C., 157 N.H. 670, 674, 959 A.2d 236, 240 (2008). "Whether [an] attorney has breached the applicable standard of care in representing the client is a question of fact to be determined through expert testimony and usually cannot be decided as a matter of law." McIntire v. Lee, 149 N.H. 160, 168, 816 A.2d 993, 1000 (2003) (quoting Cook v. Continental Cas. Co., 180 Wis.2d 237, 246, 509 N.W.2d 100, 103 (1993)). However, "if an attorney's actions could under no circumstances be held to be negligent, then a court may rule as a matter of law that there is no liability." Id. at 169, 816 A.2d at 1000-01 (quoting Sun Valley Potatoes, Inc. v. Rosholt, Robertson & Tucker, 133 Idaho 1, 5, 981 P.2d 236, 240 (1999)); Estate of Sicotte, 157 N.H. at 673-74, 959 A.2d at 239 ("Expert testimony is not required where the subject presented
Where a malpractice claim is based on an alleged failure to give adequate advice, "the failure to advise must have been necessary to produce the plaintiff's subsequent harm ... and the failure must have been a substantial factor, rather than a slight one, in producing it." North Bay Council v. Bruckner, 131 N.H. 538, 548, 563 A.2d 428, 434 (1989). "[P]roof of the causal link between negligent ... advice and subsequent damage require[s] evidence of the buyer's reliance upon the advice." Id. at 548, 563 A.2d at 434. "It is therefore through the medium of the plaintiff's reliance that the negligent advice must be shown to have been a substantial factor in the plaintiff's subjection to the undisclosed risk that later materialized." "[I]n most instances, expert testimony is required to prove causation in a legal malpractice action." Carbone v. Tierney, 151 N.H. 521, 528, 864 A.2d 308, 314-15 (2004).
The Denby Parties contend that summary judgment should enter as to the claims of Butler Rubin and Baker Daniels (the two law firms that employed Shelton during the relevant period) for two separate, but related, reasons. First, they point to the undisputed fact that neither firm was ever a client of the Denby Parties and contend that the Denby Parties accordingly did not owe them a duty of care. Second, they note that the probate court's decision applied only to Shelton and contend that it therefore created no liability (or other cognizable injury) on the part of her firms. Because the Court agrees with the Denby Parties that they owed no duty of care to Butler Rubin or Baker Daniels, only the first point is addressed below.
"Whether a duty exists in a particular case is a question of law." Walls v. Oxford Management Co., 137 N.H. 653, 656, 633 A.2d 103, 104 (1993); see Furbush v. McKittrick, 149 N.H. 426, 432, 821 A.2d 1126, 1131 (2003) (expressing the same rule for legal-malpractice cases). "As a general principle, `the concept of "duty"... arises out of a relation between the parties and the protection against reasonably foreseeable harm.'" Simpson v. Calivas, 139 N.H. 1, 4, 650 A.2d 318, 321 (1994) (quoting Morvay v. Hanover Ins. Co., 127 N.H. 723, 724, 506 A.2d 333, 334 (1986)). The existence of a contract may create a duty, but "[i]n general, `the scope of such a duty is limited to those in privity of contract with each other.'" Id. at 4, 650 A.2d at 321 (quoting Robinson v. Colebrook Sav. Bank, 109 N.H. 382, 385, 254 A.2d 837, 839 (1969). However, "[t]he privity rule is not ironclad," and New Hampshire courts have recognized some exceptions in the context of legal malpractice. Id. at 4, 650 A.2d at 321.
In Simpson, 139 N.H. at 3, 650 A.2d at 320, a client had asked his attorney to draft a will that left certain property rights to his wife and certain others to his son. The attorney drafted the will, but did so in such a manner that ultimately led the probate court (after the client's death) to construe it as leaving a smaller bundle of property rights to the son than the client had intended. Id. at 3, 650 A.2d at 320. The son sued the attorney for legal malpractice, seeking damages for the money he paid to acquire the property rights that his father had intended to devise to him. Id. at 3-4, 650 A.2d at 320-21. On appeal, the New Hampshire Supreme Court held that an attorney who drafts a will for a testator client owes a duty of care to the intended beneficiaries of that will, even where those beneficiaries were not themselves clients. The court explained that "although there is
Here, Butler Rubin and Baker Daniels contend that under the rule of Simpson, and because their alleged harm (the payment of fees on Shelton's behalf) was foreseeable, the Denby Parties owed them a duty of care in their representation of Shelton. See Iannelli v. Burger King Corp., 145 N.H. 190, 194, 761 A.2d 417, 420 (2000) ("If the risk of injury [i]s reasonably foreseeable, then a duty exist[s]."). Specifically, they contend that it "is not a novel concept" that a law firm would be liable for the conduct of its partners, and that the Denby Parties therefore should have foreseen that any harm they caused to Shelton would also afflict her firms.
That argument, however, appears to be foreclosed by a more recent New Hampshire case that clarified the Simpson rule. In MacMillan v. Scheffy, 147 N.H. 362, 363, 787 A.2d 867, 868 (2001), an attorney drafted a deed enacting the sale of land from one family (the Toys) to another family (the Dicksons). The attorney had represented the Toys for approximately six years before the date of the sale, and he continued to represent them thereafter. Id. at 365, 787 A.2d at 869. In drafting the deed, he neglected to note a restrictive covenant that encumbered the land, and instead included warranty covenants that conflicted with the restrictive covenant. Id. at 363, 787 A.2d at 868. Once the Dicksons learned of the restrictive covenant, they sued the attorney for legal malpractice. Id. at 363, 787 A.2d at 868.
After the trial court directed a verdict for the Dicksons, the New Hampshire Supreme Court reversed. Id. at 365, 787 A.2d at 870. The court held that even though the attorney admitted that he "understood that the intended beneficiaries of the deed ... were the Dicksons," he owed no duty of care to the Dicksons. Id. at 364-65, 787 A.2d at 869-70. It further stated that, as a general rule, "for a nonclient to succeed in a negligence action against an attorney, he must prove that the primary purpose and intent of the attorney-client relationship itself was to benefit or influence the third party." Id. at 364, 787 A.2d at 869. In other words, mere foreseeability of harm is not enough; an attorney has no duty to a third party unless benefitting or influencing that third party is "one of the motivating causes" in the formation of the attorney-client relationship. Id. at 364-65, 787 A.2d at 869.
Here, the Denby Parties represented both Shelton (the trustee) and Betty (one of the beneficiaries). But there is no dispute that Butler Rubin and Baker Daniels were never clients of the Denby Parties, and no evidence suggests otherwise. Indeed, the November 6, 2007 engagement letter prepared by Denby and signed by Shelton makes no mention of the law firms. Nor was the primary purpose of the representation to benefit the law firms. Although Shelton billed the EMT Trusts
For those reasons, the Denby Parties did not owe a duty of care to Butler Rubin or Baker Daniels in their representation of Shelton. Accordingly, the motion by the Denby Parties for summary judgment as to the claims of those law firms will be granted.
The Denby Parties have separately moved for summary judgment as to the claims of all of the Shelton Parties. They contend (1) that Denby did not breach her duty of care to Shelton; (2) that Shelton has no standing to bring her claim, because she has not personally incurred any damages; and (3) that Shelton's claims are barred by the doctrine of in pari delicto, because she bore "at least substantially equal responsibility" for the negative outcomes in the New Hampshire litigation that led to her alleged damages. The Court will address the latter two points first.
"In evaluating whether a party has standing to sue, [th]e focus [is] on whether the party suffered a legal injury against which the law was designed to protect." Libertarian Party of New Hampshire v. Sec'y of State, 158 N.H. 194, 195, 965 A.2d 1078, 1080 (2008). Put another way, the party must "demonstrate harm to maintain a legal challenge." Id. at 195-96, 965 A.2d at 1080. Here the Denby Parties contend that Shelton cannot demonstrate harm, because her legal-malpractice insurance and her law firms have (concededly) combined to cover all of the fees and settlement costs for which she seeks reimbursement.
Under New Hampshire law, the fact that an alleged tort victim has received compensation from insurance (or other sources) does not normally prevent her from obtaining a full recovery from the tortfeasor. Carson v. Maurer, 120 N.H. 925, 939, 424 A.2d 825, 835 (1980), overruled on other grounds by Comm'y Resources for Justice, Inc. v. City of Manchester, 154 N.H. 748, 762, 917 A.2d 707, 721 (2007). That rule is known as the "collateral source rule." Id. at 939, 424 A.2d at 835; Law v. Griffith, 457 Mass. 349, 355, 930 N.E.2d 126 (2010). It "has been applied to benefits paid under an insurance policy" as well as "employment benefits[ and] gratuitous payments," among others. Moulton v. Groveton Papers Co., 114 N.H. 505, 509, 323 A.2d 906, 909 (1974).
The Denby Parties contend that the collateral source rule should not apply under these facts, because Shelton "has not paid a single penny in relation to any of her alleged damages." (Denby Rep. at 5). They cite to Ohio Cent. R.R. Sys. v. Mason Law Firm Co., L.P.A., 182 Ohio App.3d 814, 823, 915 N.E.2d 397, 404 (2009), a legal-malpractice case in which another state court held that "the collateral-source rule
If this case were governed by Ohio law, Shelton might not be able to recover for any fees that have been paid by her insurer. But there is no reason to believe that New Hampshire would adopt the same approach as Ohio, which does not appear to employ the collateral source rule. Indeed, the New Hampshire Supreme Court has struck down a statute that purported to abolish the collateral source rule in medical malpractice cases; the rule currently remains in full effect in all tort actions. Carson, 120 N.H. at 946, 424 A.2d at 839; see Cyr v. J.I. Case Co., 139 N.H. 193, 195, 652 A.2d 685, 688 (1994); Bryce Benjet, A Review of State Law Modifying the Collateral Source Rule: Seeking Greater Fairness in Economic Damages Awards, 76 DEF. COUNS. J. 210, 228 (2009).
Accordingly, the Court will not grant summary judgment on the ground that Shelton is without standing to sue.
The Denby Parties next contend that the combination of two doctrines — collateral estoppel and in pari delicto — bars Shelton from recovering based on any alleged negligence of Denby.
"For collateral estoppel to apply, three basic conditions must be satisfied: (1) the issue subject to estoppel must be identical in each action; (2) the first action must have resolved the issue finally on the merits; and (3) the party to be estopped must have appeared as a party in the first action, or have been in privity with someone who did so." Ojo v. Lorenzo, 164 N.H. 717, 725, 64 A.3d 974, 981 (2013) (quoting Stewart v. Bader, 154 N.H. 75, 80-81, 907 A.2d 931, 937 (2006)). Those conditions "must be understood, in turn, as particular elements of the more general requirement, that a party against whom collateral estoppel is pleaded must have had a full and fair opportunity to litigate the issue or fact in question." Stewart, 154 N.H. at 81, 907 A.2d at 937. The party asserting a defense of collateral estoppel need not have been a party in the prior action. Cutter v. Town of Durham, 120 N.H. 110, 111, 411 A.2d 1120, 1121 (1980) ("[U]nder the doctrine of collateral estoppel, it is not essential that there be mutuality of the parties. A party who, after full litigation, has lost on an issue is thereafter barred from litigating the issue with new parties." (citations omitted)).
The doctrine of in pari delicto (meaning "in equal fault") is aimed at "prohibit[ing] plaintiffs from recovering damages resulting from their own wrongdoing." Nisselson v. Lernout, 469 F.3d 143, 151 (1st Cir.2006). The doctrine applies where "(i) the plaintiff, as compared to the defendant, bears at least substantially equal responsibility for the wrong he seeks to redress and (ii) preclusion of the suit would not interfere with the purposes of the underlying law or otherwise contravene the public interest." Id. at 152 (citing Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 310-11, 105 S.Ct. 2622, 86 L.Ed.2d 215 (1985)).
Bateman, 472 U.S. at 307, 105 S.Ct. 2622 (internal citations and quotations omitted).
In Witte v. Desmarais, 136 N.H. 178, 187, 614 A.2d 116, 120 (1992), the New Hampshire Supreme Court considered the doctrine in the context of a legal-malpractice claim by a former client against an attorney. The client contended that the attorney had advised him not to mention (that is, to lie about) a $4,000 cashier's check during a divorce hearing; the attorney allegedly recanted his advice during the cross-examination of the client, to the client's disadvantage. 136 N.H. at 186, 614 A.2d at 119-20. In the subsequent malpractice suit, the attorney contended that the doctrine of in pari delicto prevented the client from recovering for any damages caused by the attorney's advice concerning the check, because if the client took the advice, he committed perjury and should not be permitted to benefit from his wrongdoing. Id. The court called the defense "persuasive" in that context, but declined to apply it at the motion to dismiss stage because "the pleadings d[id] not clearly establish that [the plaintiff] in fact committed perjury or intentionally misled the court." Id. at 187, 614 A.2d at 120. See also Pantely v. Garris, 180 Mich.App. 768, 773-78, 447 N.W.2d 864, 867-69 (1989) (applying the defense in claim for legal malpractice where the client admitted committing perjury); Evans v. Cameron, 121 Wis.2d 421, 360 N.W.2d 25 (1985) (same).
In Evans, the Wisconsin Supreme Court observed (albeit in dicta) that while the application of the doctrine might be clear in simple cases, such as perjury by the client, it might not be appropriate in all cases involving client wrongdoing:
121 Wis.2d at 428, 360 N.W.2d at 28-29. The Michigan Court of Appeals made a similar observation in Pantely:
180 Mich.App. at 776, 447 N.W.2d at 868.
Here, the Denby Parties contend that (1) because Shelton was found to have acted in bad faith, and (2) because that factual determination is deemed final by reason of collateral estoppel, then (3) her claims for legal malpractice are necessarily barred by the in pari delicto doctrine. But even accepting the first two premises, it is by no means clear that she should bear "substantially equal responsibility" to Denby (or any of her other counsel) for causing the probate court's adverse ruling in the New Hampshire litigation.
First, this matter is far from simple. Shelton was not counseled to, and did not, commit perjury. Nor did she embezzle client funds, commit fraud, or undertake any similar act of obvious moral turpitude. The wrongfulness of her conduct, even accepting the conclusions of the probate court, arose in the context of a complex legal matter, and is not apparent to any person who is not well-grounded in the facts and the applicable law of trusts and fiduciaries.
Furthermore, the essence of Shelton's claim is that the probate court's finding of bad faith was the direct product of the legal malpractice. According to Shelton, the substandard legal advice that she received put her in the dangerous position of serving as a trustee, and prosecuting litigation on behalf of a single beneficiary, without an appropriate understanding of her duties and obligations and without knowledge of the potential risks. She further contends that because of the conflicting loyalties of counsel, she could not effectively defend herself in the New Hampshire litigation.
Whether she can prove those claims or not, the relative culpability of Shelton and her attorney-advisors is far from clear. All parties seem to agree that the probate court's finding of bad faith and imposition of the surcharge was an unprecedented, indeed surprising, result. If nothing else, the wrongfulness of Shelton's conduct was not so "apparent" that her claims should be precluded as a matter of law. Cf. Evans, 121 Wis.2d at 428, 360 N.W.2d at 28-29 (finding that "the wrongfulness of lying under oath is apparent").
Under the circumstances, the Court cannot conclude, as a matter of summary judgment, that Shelton bore "substantially equal responsibility" to Denby or any other attorney. The Court will therefore deny the motion of the Denby Parties for summary judgment to the extent that they rely on the doctrine of in pari delicto.
The Shelton Parties contend that Denby breached her duty of care to Shelton by (1) failing to warn her of the extent to which serving as Betty's trustee, and specifically pursuing an aggressive course of litigation on Betty's behalf, could expose her to personal liability, and (2) failing to recognize and advise her that a potential conflict between her interests and Betty's interests might arise (or had arisen) and that she
The parties appear to agree that the outcome of the New Hampshire litigation represented a worst-case scenario for Betty and Shelton. Not only was the in terrorem clause enforced against Betty, costing her millions of dollars as a beneficiary of the EMT Trusts, but the probate court also held Shelton personally liable for the respondents' attorneys' fees and costs. The court expressly based the order against Shelton on its finding that she had acted in bad faith in connection with her "actions and conduct in relation to the[] endeavor to sever Betty and her progenies' beneficial interests from those of her siblings and their issue in contradiction of what her father envisioned and implemented for them." (Clarification of Order on Remand from Appeal at 2, N.H. Litigation (Sep. 5, 2012)). As a consequence of the probate court's rulings, the Shelton Parties have paid $1.5 million to settle their exposure for legal fees in the New Hampshire litigation, $750,000 to settle Shelton's surcharge liability, and $2.15 million in direct attorneys' fees in connection with the appeal of the probate court's ruling and the defense of Betty's claims in this court.
The claims of the Shelton Parties for failure to warn of her exposure to personal liability and for failure to warn her of a conflict of interest are necessarily intertwined, particularly as to issues of causation and injury. Nonetheless, for analytical purposes, the Court will consider the breach of duty claims separately.
A threshold issue that must be addressed before considering the question of breach of duty is whether Denby's representation of Shelton terminated before the trial. There does not appear to be any dispute that Denby and Shelton were in an attorney-client relationship from 2007 onward. Nonetheless, there is a dispute as to when that relationship ended. Denby purportedly withdrew from the representation of both Betty and Shelton before the trial testimony, citing unpaid legal bills totaling $187,997.85. She sent a letter to Betty and Shelton to that effect on October 19, 2009. (Dkt. No. 182, Ex. 99). The New Hampshire trial began on November 30, 2009. On that basis, the Denby Parties contend that Denby cannot be held liable for any conduct or omissions that took place after October 19, 2009, as the attorney-client relationship with Shelton no longer existed.
It is true that the letter purported to end the relationship. Nonetheless, there is evidence that Denby continued to serve as counsel to Betty and Shelton. For example, Shelton testified that Denby "occasionally" received "reports as to what was happening during the trial" and responded to questions. (Shelton Dep. at 714). She also testified that Denby was "really directing a lot of the substance of the litigation," including during the trial. (Id. at 216-17). When Denby testified at the trial on December 2, 2009, she was asked by McIntyre: "And have you played a role in this litigation?" (Trial Tr. at 388, 398, N.H. Litigation (Dec. 2, 2009)). Denby responded in the present tense: "I act as fiduciary counsel to assist the litigation team, and also to assist the trustee." Id.
For the month of December 2009, Burke, Warren billed 52.55 hours to the matter of Betty's trust administration, of which 41.75 hours were incurred by Denby.
Denby's participation was clearly limited. The billing records reflect that she spent less than four hours discussing litigation-related matters with Shelton in December 2009.
Nonetheless, there is a dispute of fact as to whether Denby and Shelton continued to have an attorney-client relationship that continued at least during the period of Betty's trial testimony in late November and early December 2009, and in the days and weeks immediately following that testimony. (Shelton Dep. at 846-48). Furthermore, and in any event, the trial was simply the culmination of events that had been set in motion more than two years earlier — specifically, the filing of the complaint in October 2007 and the conduct of the litigation from that point forward. For those reasons, to the extent that claims of malpractice against Denby are based in part on events occurring after October 19, 2009, they will not be dismissed on summary judgment.
The Shelton Parties contend that Denby negligently failed to warn Shelton that by pursuing an aggressive course of litigation on behalf of Betty, she risked personal liability, principally in the form of a surcharge and an award of attorneys' fees. In order to prevail on that claim, they must prove both (1) that Denby's alleged failure to warn was a breach of her duty of care and (2) that the breach "legally caused" her harm. See Yager, 166 N.H. at 572-73, 101 A.3d at 9. Conversely, in order to succeed in their motion for summary judgment, the Denby Parties must demonstrate that the Shelton Parties have put forth insufficient evidence to create a material question of fact on either the breach issue or the causation issue.
The Shelton Parties have submitted an affidavit and expert report of Keith Bradoc Gallant. (Dkt. No. 208). According to his affidavit, Gallant has been a Fellow of the American College of Trust and Estate Counsel ("ACTEC") since 1993 and is currently a member of its Fiduciary Litigation Committee and its Elder Law Committee. (Gallant Rep. ¶ 4). He is also the former president of the Connecticut Bar Association
In his report, Gallant states: "From the beginning of her joint representation of [Betty Tamposi and Shelton], Attorney Denby showed virtually no concern about the inherent potential conflicts of interest between her two clients." (Id. ¶ 17).
(Id. ¶ 20). He similarly states that "from her earliest interactions with Julie Shelton as a client and a Trustee[,] Stephanie Denby failed to apprise Shelton of the true nature of the path upon which Shelton, at Denby's urging, had embarked." (Id. ¶ 22).
Gallant also concludes that Denby breached her duty to Shelton by "failing to explain to her fiduciary client the significance of rejecting th[e] alternative" of filing a petition for instructions instead of initiating litigation. (Id. ¶ 23). He states:
(Id.).
Gallant goes on to state:
(Id. ¶ 24).
Gallant further concludes that, for Denby, "[a]t each stage of the litigation and the preceding events it [wa]s [Betty]'s goals that were the driving force, always without regard to the potential consequences to Shelton." (Id. ¶ 25).
Gallant specifically addresses Denby's failure to advise Shelton of the possibility of a surcharge (Id. ¶¶ 14, 26) and the imposition of attorney's fees (Id. ¶¶ 13, 26). He states:
(Id. ¶ 26) (footnotes and citations omitted).
His report concludes: "Having failed to secure a corporate fiduciary for her beneficiary client Elizabeth Tamposi, Denby secured the services of an individual fiduciary who, although an attorney, was known to be a complete novice in the field of trusts. Denby then sent her fiduciary client into what any experienced trust lawyer would know were going to be extremely adversarial, high risk proceedings, effectively without representation of Julie Shelton's separate personal and fiduciary interests." (Id. ¶ 27).
For the reasons set forth below, a reasonable jury could credit the conclusions of Gallant that Denby's specific failures to advise Shelton of the possibility of a surcharge or attorney's fees constituted a breach of duty. More generally, the jury would be entitled to credit Gallant's opinion that Denby should have educated Shelton about the "personal risks" she would incur "just by serving" as a trustee, even if the specific source or nature of any particular risk may have been somewhat unclear at the beginning of the representation. (See Gallant Rep. ¶¶ 20, 27).
Gallant addresses the specific issue of surcharge liability as follows:
(Id. ¶ 14).
There is no evidence that Shelton was warned of the possibility of surcharge liability before the issuance of the probate court's December 2008 order. That order stated, among other things, that the trial court "has equitable power to surcharge the trustee if there is a later determination that she has acted improperly in the prosecution of this litigation or in making disbursements." Order at 6-7, N.H. Litigation (Dec. 3, 2008). Shelton testified at her deposition
Shelton further testified that after reading the December 2008 order she spoke to her counsel, including Denby. According to Shelton, they "were very reassuring about the fact that a surcharge was not going to happen because everything was appropriate and proper." (Shelton Dep. at 816). The Denby Parties contend that, even accepting that description of Denby's conduct, it could not constitute a breach of her duty to Shelton, because it represented only the expression of her genuine assessment of the case. In other words, according to the Denby Parties, because Denby reasonably believed that none of Shelton's conduct was improper, her advice fairly informed Shelton of the level of risk as she perceived it.
In his expert report, Gallant states that the likelihood of a surcharge "significantly increased" as a result of the probate court's 2008 order. (Gallant Rep. ¶ 20). He further states that the order "ma[de] clear that the [c]ourt was prepared to take draconian steps" and that "[t]he [j]udge was quite clearly issuing a warning that he would not tolerate a perceived abuse of fiduciary discretion." (Id. ¶ 26). He then suggests (although does not state directly) that Denby breached her duty to Shelton by failing to inform her of the increased risk. (Id.).
In general, "[i]t is neither fair, practical, nor legally appropriate to benchmark an attorney against a standard of prescience." Sierra Fria Corp. v. Donald J. Evans, P.C., 127 F.3d 175, 182 (1st Cir.1997) (applying Massachusetts law). "[A]n attorney is not liable for an error in judgment concerning a proposition of law that is debatable, uncertain, unsettled, or tactical." RONALD E. MALLEN & ALLISON MARTIN RHODES, 4 LEGAL MALPRACTICE § 33:15 (2015).
Nonetheless, taken as a whole, the evidence is sufficient to support a finding that Denby breached her duty of care by failing to warn of the potential for a surcharge. Gallant has provided an expert opinion that Shelton should have been warned about the possibility of personal liability before undertaking any litigation at all, much less aggressive litigation. And he has opined that the December 2008 order signaled a shift in the probate court's thinking and "significantly increased" the risk of surcharge. (Gallant Rep. ¶ 20). Although it would not have to do so, a jury would be permitted to credit that testimony. A jury would likewise be entitled to credit Shelton's testimony that she did not "understand what could be encompassed within a surcharge" even after talking to Denby. (Shelton Dep. at 924). A reasonable jury could thus permissibly find that Denby breached her duty of care with respect to her advice on the issue of surcharge.
The fee-shifting statute, N.H. Rev. Stat. Ann. § 564-B:10-1004, was enacted by the New Hampshire legislature in 2004 as part of the adoption of the Uniform Trust Code. According to Gallant, it was therefore "quite recent legislation." (Gallant Rep. ¶ 13). He states that it is "essential for all counsel representing a fiduciary in the type of litigation presented by Shelton" to consider "what novel issues might arise," including the possibility of "new, and very real, risks for parties in
The Denby Parties contend that no reasonable jury could find that Denby breached her duty of care with respect to the issue of attorneys' fees, because the risk to Shelton in her personal capacity was too remote to require any warning beyond that which Denby gave. They note that the statute had never previously been interpreted or applied by any New Hampshire court and that it did not clearly state that a trustee could be held personally liable.
It is undisputed that Judge Cassavechia's order finding that Shelton acted in bad faith and holding her personally liable came as a surprise to all parties in this action. Shelton herself argued on appeal that there was "no precedent for holding a trustee personally liable to pay attorneys' fees in a situation where ... she sued only in her capacity as [t]rustee, ... the principal trust beneficiary joined as a petitioner in the suit," and all other beneficiaries (plus a guardian ad litem representing the unborn beneficiaries) supported the suit. (Appellant Br. at 45-46, Shelton v. Tamposi, 164 N.H. 490, 62 A.3d 741 (2013) (No. 2010-634)). Although that argument was rejected, the New Hampshire Supreme Court confirmed in its decision that the probate court's decision lacked at least appellate precedent. Shelton v. Tamposi, 164 N.H. at 501, 62 A.3d at 751 (2007) ("We have not yet construed the specific language of [N.H. Rev. Stat. Ann. §] 564-B:10-1004."). Thus, given the legal landscape at the time, and the belief of the parties that Shelton had not acted in bad faith, the Denby Parties argue that her failure to mention the New Hampshire fee-shifting statute could not have constituted malpractice.
However, it is not the Court's role on summary judgment to assess the relative credibility of expert testimony. Gallant has stated that the risk that the statute would be applied was foreseeable. In fact, he further stated that the lack of precedent relating to the statute actually increased the risk to Shelton, because the range of possible interpretations was greater than it otherwise would be. (Gallant Rep. ¶ 13 ("When statutes have been construed and applied by [c]ourts in a given jurisdiction over a period of decades the results are far more predictable than when they are relatively recently enacted. The latter situation creates the opportunity for precisely what occurred in [this case].")). A jury could reasonably credit that testimony, and on that basis could find that Denby breached her duty of care to Shelton by failing to advise her of the existence of the fee-shifting statute and the risk it could pose to her.
The Court further notes that the jury would be entitled to credit Gallant's more general opinion that Denby had an obligation to advise Shelton of the "personal risks she would incur just by serving as [t]rustee." (Gallant Rep. ¶ 20). Those personal risks derived from a variety of sources, including the possibility of a surcharge or application of the fee-shifting
The Shelton Parties also contend that Denby committed malpractice by failing, at various points, to advise Shelton of the desirability of obtaining independent counsel. In his report, Gallant states:
(Gallant Rep. ¶¶ 16, 24). Gallant also opines that Denby's failure to recommend separate counsel while pursuing an aggressive litigation strategy was "problematic." (Id. ¶ 23). Thus, in substance, Gallant states that the joint representation should have been undertaken "reluctant[ly]" in the first instance; had become "problematic" by the time the original New Hampshire complaint was filed in October 2007; had become "exceedingly problematic" after the probate court order in December 2008; and was "clearly impossible" after Betty's testimony in November and December 2009.
Gallant cites Rule 1.7 of the Model Rules of Professional Conduct for the proposition that where a potential joint representation would present "a significant risk" to the representation of either client, a lawyer should only take on that joint representation if she "reasonably believes" that she "will be able to provide competent and diligent representation to each affected client" and "each affected client gives informed consent, confirmed in writing." (Id. ¶ 19).
Gallant also states that the joint representation had become "even more problematic" by the time of the filing of the Massachusetts lawsuit (in September 2007) and the New Hampshire lawsuit (in October 2007).
(Gallant Rep. ¶ 23). Gallant thus describes not only how Denby breached her duty (by failing to recommend that Shelton obtain or consider obtaining separate counsel notwithstanding the "fundamental and irrevocable conflict"), but also what she should have done to fulfill that duty (tell her that "acquiescing in [Betty]'s demand for a far more aggressive approach to, and a higher risk in, the litigation would increase the level of potential personal liability" for her.
Gallant further states that Denby's joint representation of Betty and Shelton "became exceedingly problematic after Judge Cassavechia's [o]rder of December 3, 2008." (Id. ¶ 16). He noted: "The [j]udge was quite clearly issuing a warning that he would not tolerate a perceived abuse of fiduciary discretion. However, Denby advised Shelton that she did not need to be concerned about a surcharge risk, and instead encouraged Shelton to continue presenting herself as wholly in support of [Betty]." (Id. ¶ 26). Finally, Gallant states that the joint representation had become "clearly impossible" after Betty's trial testimony. (Gallant Rep. ¶ 16). According to the Shelton Parties, that testimony left Betty "exposed as a liar." (Shelton Opp. at 20).
In order to prevail, the Shelton Parties must also prove that any alleged breach was the proximate or legal cause of her injury. See Yager, 166 N.H. at 572-73, 101 A.3d at 9. More specifically, "the failure to advise must have been necessary to produce the plaintiff's subsequent harm, without which the harm would not have occurred, and the failure must have been a substantial factor, rather than a slight one, in producing it." Bruckner, 131 N.H. at 548, 563 A.2d at 434.
As noted, under New Hampshire law, "in most instances, expert testimony is required to prove causation in a legal malpractice action." Carbone v. Tierney, 151 N.H. 521, 528, 864 A.2d 308, 315 (2004); see Yager, 166 N.H. at 570, 101 A.3d at 9; Estate of Sicotte v. Lubin & Meyer, 157 N.H. 670, 674, 959 A.2d 236, 240 (2008). "Unless the causal link is obvious or can be established by other evidence, expert testimony may be essential to prove what the lawyer should have done." Carbone, 151 N.H. at 528, 864 A.2d at 315 (quotation and citation omitted). "[E]xpert testimony on proximate cause is required in cases where determination of that issue is not one that lay people would ordinarily be competent to make." Id. "[T]he trier of fact must be able to determine what result would have occurred if the attorney had not been negligent." Id.
The expert testimony here as to causation is thin at best. The only direct statement in Gallant's report concerning causation as to Denby is that "[a]s a result of Denby's conduct in this regard the [j]udge concluded that Shelton's acts were willful and collusive." (Gallant Rep. ¶ 26). Beyond that conclusory assertion, there is little explanation as to how Denby's alleged malpractice (her failure to provide appropriate advice) was the proximate cause of Shelton's injuries (the imposition of personal liability).
Nonetheless, that is not necessarily fatal to the malpractice claim against Denby. To the extent there are gaps in Gallant's report, they may be filled to some extent by Shelton's testimony and by reasonable inferences that lay jurors would be competent to make.
For example, Gallant opines that Denby had "overcome Shelton's initial refusal to serve as trustee" by making "quite extravagant promises" that "could not be, and were not fulfilled" given the joint representation. (Gallant Rep. ¶ 18). He further opines that "a clearly reluctant Julie Shelton would almost certainly not have agreed to a joint representation with Elizabeth Tamposi if Stephanie Denby had provided her with the information and knowledge necessary to give `informed consent.'" (Id. ¶ 20) (footnote omitted). That advice, according to Gallant, should have included a discussion of the risk of personal liability. At her deposition, Shelton testified that "I think if I had understood what the risks were to me personally, I would never have become trustee." (Shelton Dep. at 832). Obviously, if Shelton had never accepted the position of trustee in the first instance, she would have suffered no damages; a jury could readily infer that conclusion.
There are, however, inferences as to which expert testimony seems to be lacking, and that a lay person may not be competent to make. For example, the Shelton Parties argue in substance that (1) if Denby had rendered appropriate advice, then (2) Shelton might have resigned as a trustee or sought to distance herself from Betty once it appeared that the litigation was not going well, (3) and therefore the probate court would not have imposed personal liability against Shelton. That may well be true, but the only expert testimony on point is conclusory.
Indeed, Gallant seems to assume that if Shelton had received independent legal advice after the December 2008 order, or after Betty's trial testimony in November and December 2009, she could have extricated herself from the situation and avoided personal liability. The reality is
Although it is certainly possible that the probate court might have viewed Shelton more favorably if she had distanced herself from Betty, Gallant does not address either the specific steps Shelton should have taken (other than resignation) or what the likely consequences might have been. Obviously, no expert could testify as to the thought processes of a judge, and no expert could precisely predict an outcome based on a counterfactual scenario. But expert testimony could have elucidated what Shelton might have done to "distance" herself or otherwise to limit the potential damage, and the likelihood that those steps would have had the desired effect. It is true that Gallant opines that had she received proper advice, Shelton at the very least could have made an "informed decision as to the proper course of action for herself." (Gallant Rep. ¶ 36). Whether that is sufficient under the circumstances to establish a causal link between the breach and the injury is unclear.
There may, accordingly, be certain arguments that are foreclosed to the Shelton Parties. That is not, however, a reason to grant summary judgment for the Denby Parties as to the malpractice claim. Taken as a whole, the evidence is sufficient to establish a causal link between at least some portion of the alleged malpractice and the alleged injury, and summary judgment for the Denby Parties will therefore be denied.
The Shelton Parties contend that the W&M Parties breached their duty to Shelton in multiple ways: (1) by failing to alert Shelton that she could be held personally liable in connection with the New Hampshire litigation; (2) by filing the complaint in the New Hampshire litigation; (3) by failing to protect Shelton's personal interests after Betty was impeached on cross-examination; and (4) by dissuading her from resigning as trustee in the spring of 2010.
Gallant's expert report states: "As with Denby's joint representation of her two clients, Weisman and McIntyre subsumed the representation of Shelton in that of [Betty] and failed to satisfy the standard of care they owed to Shelton as their fiduciary client." (Id. ¶ 29). He opines that Weisman failed "to alert Shelton to the personal risk she was incurring as a result of the filing of the complaint rather than a petition for instructions, as well as the potentially increased risk from the aggressive nature of the prayers for relief." (Gallant Rep. ¶ 30). He cites to the deposition testimony of Weisman for the proposition that Shelton's interests were not considered at various stages in the New Hampshire and Massachusetts litigation. (Id. ¶¶ 30-31). He further states:
(Id. ¶ 32). As noted above, Gallant further states that after Betty's testimony,
(Gallant Rep. ¶ 33).
Gallant concludes that, like Denby,
(Id. ¶ 36).
The claims against Weisman thus largely parallel the claims against Denby. They are, however, arguably materially different in two respects: first, Weisman was trial counsel, not an expert on the law of trusts; and second, the time frame of Weisman's representation does not align exactly with that of Denby, and therefore his involvement with Shelton's representation was slightly different.
It is undisputed that Denby was understood by all parties to be Shelton's trust counsel. Weisman, by contrast, had (and was known by Shelton to have) little or no experience with trusts, and did not hold himself out as an expert in the duties and obligations of trustees or the administration of trusts. He was not part of the initial discussions between Denby and Shelton, and did not render advice as to the possible pitfalls of becoming a trustee. To the extent, therefore, that the alleged malpractice concerned Shelton's decision to become
The filing of the New Hampshire complaint, however, is a different story. The Shelton Parties contend that Weisman "put [] Shelton in harm's way by filing the New Hampshire [litigation]." (Shelton Parties Opp. at 19). They point to the probate court's statement in its August 18, 2010 order that Shelton had acted in bad faith "in bringing and prosecuting th[e New Hampshire] litigation" as well as the court's specific references in the order to certain remedies sought by the pleadings. (Order, N.H. Litigation (Aug. 18, 2010), at 47 ("The remedies sought by petitioners, including the removal of the investment directors and the `decoupling' (or buyout) of the EMT Trusts from the other trust assets, are yet other manifestation of their wish to challenge provisions of the SAT, Sr. Trust.")). They conclude that Weisman necessarily breached his duty to Shelton, because some of the actions that she was held to have taken in bad faith (filing the complaint and including certain requests for relief) were actions that he in fact took as her attorney.
Again, it is true that Weisman was not an expert in the field of trusts. Nonetheless, as lead counsel in the litigation, he had an obligation to ensure that the claims asserted in the complaint were properly supported in law and fact, and that his client was properly informed of the risks of litigation. The probate court found that the filing of the complaint itself was an act of bad faith, as was its prosecution. As lead litigation counsel, Weisman bears substantial responsibility for the content of the complaint.
Furthermore, Weisman specifically acknowledged that he deferred entirely to Betty when she emphatically rejected the possibility of filing a petition for instructions, and insisted on filing the complaint. (Weisman Dep. at 34-36, 47). Gallant opines that Weisman had a duty to alert Shelton to the personal risk she was incurring by filing a complaint rather than a petition for instructions, "as well as the potentially increased risk from the aggressive nature of the prayers for relief," and failed to do so. (Gallant Rep. ¶ 30). Under the circumstances, a reasonable jury could find that Weisman breached his duty of care and that the breach caused injury to Shelton by the filing and prosecution of the complaint.
The remaining claims against Weisman are similar to the claims against Shelton, with at least one addition: the Shelton Parties contend that Weisman breached his duty to Shelton by expressly dissuading her from resigning in 2010, and that some portion of her harm may have been avoided if she had resigned at that time.
McIntyre seeks summary judgment as to her individual liability on the ground that her conduct did not cause any of the injuries to the Shelton Parties as a matter of law. She contends that she played a relatively minor role in the representation of Shelton and that Shelton did not rely on any of her advice or judgment. Based on that premise, she concludes that nothing she said or failed to say was a "substantial factor ... in producing" any harm to the Shelton Parties. See Bruckner, 131 N.H. at 548, 563 A.2d at 434.
In general, Gallant treats Weisman and McIntyre the same when discussing their breaches of duty. (See, e.g., Gallant Rep. ¶¶ 28, 29, 36, 37). He further opines that, in his view, "[a]lthough Attorney McIntyre's involvement ... was less extensive than that of Attorney Weisman, she nevertheless played an important role [in the litigation]" and therefore "owed her client Julie Shelton the benefit of advice regarding the legal options open to her, individually, and not merely as a part of [Betty]'s case." (Id. ¶¶ 34, 37).
McIntyre contends that the record makes clear that Shelton principally relied on Weisman and Denby for advice relating to the New Hampshire litigation, and that there is no evidence to support the inference that differing advice from McIntyre would have had a meaningful impact on Shelton's conduct.
First, she notes that the engagement letter between Shelton and W&M explicitly incorporated the terms under which W&M agreed to represent Betty, including the statements that Weisman would be "principally responsible" for her representation, and that he "may assign projects relating to the case to other lawyers or other personnel at WM under [his] supervision" while "continu[ing] to be responsible to [Betty and Shelton] for the entire assignment."
Second, McIntyre points to various statements made by Shelton at her deposition that, she contends, indicate that Shelton was relying on Weisman and Denby for advice rather than McIntyre. Those include her statement that when consulting with W&M about whether to file the New Hampshire litigation, "it was only Michael at that point"; her statement that McIntyre "wasn't really very involved" as of October 22, 2007 (after the filing of both the New Hampshire and Massachusetts lawsuits); and her statement that "Michael made the trial lawyer decisions at trial." (Shelton Dep. at 112, 127-28, 217).
Third, McIntyre cites to Shelton's explanation at her deposition that, after reading Judge Cassavechia's December 2008 order, she chose not to resign as trustee because "neither of [her] counsel advised [her] that [she] should consider resigning." (Shelton Dep. at 816). According to McIntyre, the use of the word "neither," rather than "none," clearly indicates that Shelton was contemplating only two attorneys — Denby and Weisman.
Finally, McIntyre cites to the portion of Shelton's deposition where she was asked about her discussions with counsel after Betty's damaging trial testimony. Shelton testified:
(Shelton Dep. at 846). McIntyre thus contends that because Shelton could not even remember discussing the testimony with her, any advice she gave or did not give could not have been relevant to her decisions or actions in response to the testimony.
In sum, McIntyre contends that she played a relatively minor role, and that the record is devoid of any evidence that Shelton ever relied on her advice. That argument has a certain degree of force, and the Court is not blind to the realities facing lawyers who are (or are perceived to be) secondary members of a litigation team. However, McIntyre was no mere junior associate; she was Weisman's partner. She played a role in drafting the complaint, the filing of which was a substantial basis for the finding of bad faith by the probate court. Moreover, the Shelton Parties are not asserting liability against her on the basis of affirmatively mistaken advice upon which Shelton allegedly relied to her detriment; rather, they contend that McIntyre negligently failed to advise Shelton on important matters (including on the desirability of independent counsel after Betty's testimony) and that Shelton would have relied on McIntyre's advice if she had provided it. Although McIntyre has adduced evidence tending to prove that Shelton would not have done so, ultimately the Court cannot conclude, as a matter of law, that Shelton would not have listened to or relied on McIntyre's advice. That determination is properly for the jury.
Accordingly, McIntyre's individual motion for summary judgment will be denied.
For the reasons set forth above:
(Shelton Dep. at 256).
At Betty's deposition, she was asked why an agreement was not reached with any of the professional trustees; she responded: "Stephanie Denby had told me that the trustees had declined to consider the role of trustee because of the contentiousness between the beneficiaries, my brother Nick and myself and the investment advisors." (Betty Dep. at 60).
(McIntyre Dep. at 17-18; McIntyre SMF ¶ 27).
(Denby Dep. at 445-46).
(Shelton Dep. at 557).
(Shelton Dep. at 923).
(Weisman Dep. at 270-71).
(Id. at 147).
(Shelton Dep. at 900). McIntyre helped Langbein prepare his expert report and was involved in his preparation for his deposition and for trial. (McIntyre Dep. at 63-64; see, e.g., Dkt. No. 193, Ex. 5, at 135, 178, 184). Notwithstanding Shelton's deposition testimony, the parties appear to agree that Weisman handled his direct examination and defended his cross-examination. (McIntyre SMF ¶ 74).
(Gallant Rep. ¶¶ 32-33) (citation omitted). Gallant apparently intends that analysis to apply to Denby, as well. (See Gallant Rep. Fn. 18).