J. RANDAL HALL, District Judge.
Presently pending before the Court are Defendants' joint motion to strike the testimony and opinions of Plaintiff's Rule 26(a)(2) expert (doc. no. 32) and individual motions for summary judgment (doc. nos. 33, 37). For the reasons stated below, the motion to strike is
This legal malpractice and breach of fiduciary duty case arises out of the alleged representation of Plaintiff Sohail M. Abdulla by William J. Williams and Defendant Scott J. Klosinski. During all relevant times, Plaintiff owned and operated Sportsman's Link, Inc., a sporting and outdoor equipment store in Augusta, Georgia. (Abdulla Dep. at 19-21.) The facts construed in favor of Plaintiff, the non-moving party, are as follows.
Sometime in 2006, a dispute arose between Sportsman's Link and one of its wholesale vendors, Henry's Tackle, LLC, over a shipment of merchandise. (Abdulla Dep. at 64-66; see also doc. no. 37-3.) According to Plaintiff, Henry's Tackle delivered merchandise valued at approximately $460,650.00 prematurely and out of season. (Abdullah Dep. at 63-69.) The delivery maxed out Sportsman's Link's credit-line with Henry's Tackle, disabling it from purchasing desired seasonal merchandise. (Id. at 64; see also doc. no. 37-3.) Unable to sell the out-of-season merchandise and not wanting to retain it, Plaintiff came to an agreement with Henry's Tackle whereby Sportsman's Link would review its inventory and identify items to be returned for credit; at the same time, it would pay $75,000.00 each month to Henry's Tackle until its outstanding account balance was settled. (Doc. no. 37-5.) Sportsman's Link sent one payment of $75,000.00 to Henry's Tackle but stopped payment on the check because Henry's Tackle did not pick up any of the merchandise marked for credit. (Abdulla Dep. at 78-82.) None of the merchandise at issue was ever returned to Henry's Tackle. (Id. at 70.)
In December of 2006, Henry's Tackle sued Sportsman's Link and Plaintiff in the Superior Court of Richmond County to recover amounts owed on the unpaid merchandise, as well as incentives Plaintiff allegedly received for orders placed with Henry's Tackle. (Doc. no. 37-6.) Sportsman's Link and Plaintiff retained attorney William J. Williams, a partner with Defendant Johnston, Wilkins & Williams ("JWW"), to represent them in the case. (Abdullah Dep. at 84.) Williams had previously represented Sportsman's Link and Plaintiff in several other unrelated legal matters. (Id. at 35-38.)
Sportsman's Link's sales and profits dropped significantly in 2006, resulting in a net loss of over $200,000.00. (Doc. 37-7; see also Abdulla Dep. at 56.) As a result, Williams advised Plaintiff to consider the possibility of petitioning for Chapter 11 bankruptcy and directed him to Defendant
In June of 2007, Henry's Tackle filed an application for the appointment of a trustee to take over the property of Sportsman's Link and operate the business (the "Trustee Motion"). (Doc. no. 37-13.) According to the Trustee Motion, Plaintiff had used Sportsman's Link "as a sham to purchase and leverage his [individual] assets" by commingling personal and corporate funds and withdrawing corporate funds for his individual benefit and to the detriment of creditors. (Id.) The Trustee Motion sought the appointment of a trustee or, in the alternative, a lifting of the bankruptcy stay to allow for a suit to pierce the corporate veil and hold Plaintiff personally liable for Sportsman's Link's debts. (Id.) Plaintiff has admitted that he personally lent money to Sportsman's Link (Abdulla Dep. at 127) and used his personal credit card to make business purchases (doc. no. 37-11 at 77-79). Sportsman's Link, in return, made payments to Plaintiff. (Abdulla Dep. at 127.) Schedules attached to Sportsman's Link's bankruptcy petition indicate that the corporation paid Plaintiff over $440,000.00 within one year of commencement of the bankruptcy case (doc. no. 37-10 at 30), but Plaintiff and Sportsman's Link's accountant both attest that Plaintiff did not use business funds for his own personal benefit. (Abdulla Dep. at 127; Leonard Dep. at 35.)
Appointment of a trustee would have ousted Plaintiff from control of Sportsman's Link's operations and could have resulted in liquidation of the corporation's assets. Hoping to avoid this result, Klosinski discussed with Louis Saul, counsel for Henry's Tackle, the possibility of having the Trustee Motion withdrawn. (Klosinski Dep. at 17, 148; Saul Dep. at 26-27.) Saul indicated that the Motion would be withdrawn if a series of conditions were met, including execution of a personal guaranty from Plaintiff. (Saul Dep. at 26.) Klosinski forwarded the conditions to Plaintiff and Williams for review. (Doc. 37-14.) Sometime during this period, Klosinski advised Plaintiff that if Chapter 11 reorganization was not successful, his commingling of personal and business accounts could be considered fraudulent conveyances and form the basis for personal liability on Sportsman's Link's debts under a piercing the corporate veil claim. (Klosinski Dep. at 36.) Williams, meanwhile, was initially reluctant to have Plaintiff obligate himself on the corporation's debt, but he eventually advised Plaintiff to execute the guaranty. (Abdulla Dep. at 171-72.)
On July 18, 2007, Plaintiff executed a personal guaranty of Sportsman's Link's debt in favor of Henry's Tackle in the amount of $547,219.49 (the "Guaranty").
In June of 2008, the United States Trustee moved to convert Sportsman's Link's bankruptcy case to a Chapter 7 proceeding pursuant to 11 U.S.C. § 1112(b), which provides that the Bankruptcy Court may effect a conversion if the movant establishes a "substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation." According to the Chapter 7 Motion, conversion was merited because Sportsman's Link's post-petition operations had significantly trended downward, resulting in a net loss and negative cash flow. (Doc. no. 37-17.) Moreover, inventory had dropped over twenty-five percent in value — evidence that the business was surviving through the cannibalization of inventory, a process that reduces the liquidation value of the estate to the prejudice of creditors. (Id.) In July of 2008, the Bankruptcy Court granted the Chapter 7 Motion (Coleman Dep. at 8), and as a result the Guaranty entered default. Plaintiff moved for reconsideration of the Chapter 7 conversion, even offering to transfer $1,000,000.00 of his personal assets to the corporation, but the motion was denied. (Doc. no. 34-1 at 50.)
A month later, in August of 2008, Henry's Tackle filed suit against Plaintiff in Superior Court
On August 20, 2008, Klosinski forwarded the complaint to Plaintiff by e-mail. (Doc. no. 37-21.) Attached to the complaint was a letter informing Plaintiff that KO would not be representing him in the case and advising him to contact a lawyer to defend himself "as soon as possible." (Doc. no. 37-22.) The letter further advised Plaintiff that he "should be personally served with the complaint, and ... will have thirty (30) days from the date of service to file an answer." (Id.) On or about August 21 or 22, 2008, Plaintiff received the e-mail from Klosinski. (Abdulla Dep. at 217.) Williams did not forward the complaint to Plaintiff. (Id. at 184.)
After receiving Klosinski's e-mail in August, Plaintiff had no further contact with Klosinski, Williams, or any other attorney regarding the second Henry's Tackle lawsuit
On November 4, 2008, Plaintiff's wife sent an e-mail to Williams stating that she and Plaintiff were sending a check for representation in the second Henry's Tackle lawsuit. (Doc. no. 37-27.) The retainer fee was sent to Williams between November 4 and 6. Within a week, Williams filed an answer and moved to set aside the default judgment. (Doc. nos. 37-28, 37-29.) Following a hearing, however, the state court denied the motion to set aside the default judgment and appointed a receiver to sell Plaintiff's property in satisfaction of the judgment. (Doc. no. 37-31.) Property seized by the receiver was sold at auction, netting proceeds of $412,707.24 for Henry's Tackle. (Doc. no. 37-32.)
On December 15, 2010, Plaintiff filed the instant action in this Court
With multiple motions pending, the first matter before the Court is decisional sequencing. In this regard, the Court notes: "To create an issue of fact concerning alleged legal malpractice, Georgia requires
Defendants have jointly moved to exclude all testimony or opinions by Plaintiff's expert, John Freeman. Freeman's opinions were first previewed by an affidavit attached to Plaintiff's complaint. Freeman later submitted a Rule 26(a)(2) report on June 14, 2011, the last day for filing per an amendment to the Court's scheduling order. The Court will refer to this report, which is attached to Defendants' motion to strike as Exhibit 2, as Freeman's "initial report." On August 14, 2011, Plaintiff filed Freeman's "supplemental report", which is attached to Defendants' motion to strike as Exhibit 7, after Defendants' experts had been deposed and eight days before the close of discovery. According to Defendants, Freeman's opinions should be excluded because his initial report is inadequate, and moreover, his supplemental report is merely a dilatory and impermissible effort to correct deficiencies in the original expert report.
Rule 26(a)(2) requires that a report, signed by the expert witness, must accompany the disclosure of each expert witness. This report must contain: (i) a complete statement of all opinions the witness will express and the basis and reasons for them; (ii) the data or other information considered by the witness in forming them; (iii) any exhibits that will be used to summarize or support them; (iv) the witness's qualifications, including a list of all publications authored in the previous 10 years; (v) a list of all other cases in which, during the previous 4 years, the witness testified as an expert at trial or by deposition; and (vi) a statement of the compensation to be paid for the study and testimony in the case. Fed.R.Civ.P. 26(a)(2)(B). A party must make these disclosures at the time and in the sequence that the court orders. Fed.R.Civ.P. 26(a)(2)(D).
Rule 37(c)(1) operates as an enforcement mechanism for Rule 26(a)(2), providing that when a "party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless." Fed.R.Civ.P. 37(c)(1). "The burden of establishing that a failure to disclose was substantially justified or harmless rests on the nondisclosing party." Mitchell v. Ford Motor Co., 318 Fed.Appx. 821, 824 (11th Cir.2009) (quoting Leathers v. Pfizer, Inc., 233 F.R.D. 687, 697 (N.D.Ga.2006)).
Upon review, the Court finds that Freeman's initial report comports with Rule 26(a)(2). An expert report is deemed adequate when it is "sufficiently complete, detailed and in compliance with the Rules so that surprise is eliminated, unnecessary depositions are avoided, and costs are reduced." Reed v. Binder, 165 F.R.D. 424, 429 (D.N.J.1996). The duty to disclose expert identities and opinions set out under Rule 26(a)(2) was implemented "to accelerate the exchange of basic information," specifically to provide "opposing parties [with] a reasonable opportunity to prepare for effective cross examination and perhaps arrange for expert testimony from other witnesses." Fed.R.Civ.P. 26 advisory committee's note (1993). The contours and demands of that duty must
Included with exhibits and documentation concerning Freeman's qualifications in his initial report is a three-page affidavit — the target of Defendants' motion — roughly one-and-a-half pages of which is devoted to articulating his opinions in the case.
Notwithstanding Defendants' charge, Freeman's initial report is distinguishable from reports found to be defective by other courts in this circuit. For example, the initial report is accompanied by documentation containing information required by Rule 26(a)(2)(B) — i.e., facts considered by the witness,
Moreover, any weaknesses in Freeman's initial report did not result in discernible harm to Defendants. "The district court has broad discretion in determining whether a violation is justified or harmless." Catalina Rental Apts., Inc. v. Pacific Ins. Co., No. 06-20532-CIV, 2007 WL 1050634, at *2 (S.D.Fla. Apr. 03, 2007). "[I]n exercising its broad discretion to determine whether a [Rule 26 violation] is substantially justified or harmless for purposes of a Rule 37(c)(1) exclusion analysis, a district court should be guided by the following factors: (1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the nondisclosing party's explanation for its failure to disclose the evidence." Two Men and a Truck Int'l, Inc. v. Res. & Commercial Trans. Co., No. 4:08-cv-067, 2008 WL 5235115, at *2 (N.D.Fla. Oct. 20, 2008) (quoting S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 597 (4th Cir.2003)).
Defendants contend that they were prejudiced because they were unable to sufficiently prepare for Freeman's deposition as a result of the deficiencies plaguing Freeman's initial report. It is harmful to deprive opposing counsel of an opportunity to prepare for the deposition of an expert. Goodbys Creek, LLC, 2009 WL 1139575, at *3 ("[F]urnishing [an opposing party] with a woefully inadequate report adversely impacts upon its ability to prepare for and conduct the deposition."). Defendants' charge is not, however, supported by the record. After Freeman's initial report was served, Defendants informed Plaintiff that they believed the report to be inadequate and requested a supplement prior to the deposition — a fact tending to support Defendants' argument. But Plaintiff did not provide any substantive supplement to the initial report prior to Freeman's deposition,
Moreover, a review of Freeman's deposition shows that Defendants were able to, and did, probe his qualifications, experience,
The bottom line is that Defendants were fairly apprised of Freeman's opinions by his initial Rule 26(a)(2) expert report. They thoroughly cross-examined him at his subsequent deposition and were able to provide expert reports of their own directly responding to his opinions. This was done prior to the close of discovery with only minimal objection from Defendants, and none filed with the Court. Defendants have presented no evidence of material harm nor requested re-deposition of Freeman — an option extended by Plaintiff.
Additionally, Defendants contend that consideration of Freeman's supplemental report, filed after Defendants' own Rule 26(a)(2) expert reports were due and before the close of discovery, is inappropriate. Because the supplemental report includes responses to and rebuttals of facts and opinions presented during deposition testimony not available to Freeman at the time of his initial report, Defendant's argue that considering the supplemental report would, in effect, allow Plaintiff to skirt the Court's scheduling order. See Sommers, 2010 WL 3463608, at *2 ("[Supplementation] exists to impose a duty, not to grant any right to produce information in a belated fashion." (internal quotations and brackets omitted)). The Court will not, however, consider Freeman's supplemental report for purposes of reviewing Defendants' motions for summary judgment. The supplemental report is unsworn, and "[u]nsworn statements do not meet the requirements of [Federal Rule of Civil Procedure] 56(e) and cannot be considered by a district court in ruling on a summary judgment motion." Carr v. Tatangelo, 338 F.3d 1259, 1273 n. 26 (11th Cir.2003) (internal quotations omitted).
Based upon the foregoing, Defendants' motion to strike is
Summary judgment is appropriate only if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(a). Facts are "material" if they could affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must view the facts in the light most favorable to the non-moving
The moving party has the initial burden of showing the Court, by reference to materials on file, the basis for the motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). How to carry this burden depends on who bears the burden of proof at trial. Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir.1993). When the non-movant has the burden of proof at trial, the movant may carry the initial burden in one of two ways — by negating an essential element of the non-movant's case or by showing that there is no evidence to prove a fact necessary to the non-movant's case. See Clark v. Coats & Clark, Inc., 929 F.2d 604, 606-08 (11th Cir.1991) (explaining Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) and Celotex Corp., 477 U.S. 317, 106 S.Ct. 2548). Before the Court can evaluate the nonmovant's response in opposition, it must first consider whether the movant has met its initial burden of showing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Jones v. City of Columbus, 120 F.3d 248, 254 (11th Cir.1997) (per curiam). A mere conclusory statement that the nonmovant cannot meet the burden at trial is insufficient. Clark, 929 F.2d at 608.
If — and only if — the movant carries its initial burden, the non-movant may avoid summary judgment only by "demonstrat[ing] that there is indeed a material issue of fact that precludes summary judgment." Id. When the non-movant bears the burden of proof at trial, the non-movant must tailor its response to the method by which the movant carried its initial burden. If the movant presents evidence affirmatively negating a material fact, the non-movant "must respond with evidence sufficient to withstand a directed verdict motion at trial on the material fact sought to be negated." Fitzpatrick, 2 F.3d at 1116. If the movant shows an absence of evidence on a material fact, the non-movant must either show that the record contains evidence that was "overlooked or ignored" by the movant or "come forward with additional evidence sufficient to withstand a directed verdict motion at trial based on the alleged evidentiary deficiency." Id. at 1117. The non-movant cannot carry its burden by relying on the pleadings or by repeating conclusory allegations contained in the complaint. See Morris v. Ross, 663 F.2d 1032, 1033-34 (11th Cir. 1981). Rather, the non-movant must respond by affidavits or as otherwise provided by Federal Rule of Civil Procedure 56.
The clerk has given Plaintiff notice of the summary judgment motions and the summary judgment rules, of the right to file affidavits or other materials in opposition, and of the consequences of default. (Doc. nos. 38, 39.) Therefore, the notice requirements of Griffith v. Wainwright, 772 F.2d 822, 825 (11th Cir.1985) (per curiam), are satisfied. The time for filing materials in opposition has expired, and the motions are ready for consideration.
Plaintiff's Complaint sets out two counts: legal malpractice and breach of fiduciary duty. Though closely related, the two claims are not, as Defendants have urged, redundant. A legal malpractice claim arises out of the attorney-client contract of employment. Royal v. Harrington, 194 Ga.App. 457, 458, 390 S.E.2d 668 (1990). A breach of fiduciary claim, on the
According to Plaintiff, Defendants committed legal malpractice and breached their fiduciary duties when they advised him to sign the Guaranty. Before proceeding, the Court notes that because the offending conduct alleged by Plaintiff with respect to the Guaranty consists solely of the negligent performance of Defendants' professional services, the only claim stated in this regard is legal malpractice. See Walker v. Wallis, 289 Ga.App. 676, 678, 658 S.E.2d 217 (2008) ("[C]laims for breach of fiduciary duty ... are not based on negligence involving the performance of the professional's services."); Oehlerich v. Llewellyn, 285 Ga.App. 738, 741, 647 S.E.2d 399 (2007) (holding that when allegations of breach of fiduciary duty "clearly call into question the degree of professional skill exercised ... [they] are duplications of ... legal malpractice claim[s]." (internal quotation omitted)). It is undisputed that the outstanding debt claimed by Henry's Tackle was initially owed exclusively by Sportsman's Link, not Plaintiff. Plaintiff maintains that he would not have personally guaranteed that debt but for the advice of Defendants, advice that he contends fell below the standard of care. The conduct of Klosinski and Williams will be reviewed in turn.
Prerequisite to any legal malpractice claim is the existence of an attorney-client relationship. Crane v. Albertelli, 264 Ga.App. 910, 910, 592 S.E.2d 684 (2003). Plaintiff's claims against Klosinski fail on this account. Plaintiff does not contend that an express contract was formed between Klosinski and himself, arguing instead that the relationship may be inferred from the parties' conduct. See Huddleston v. State, 259 Ga. 45, 45, 376 S.E.2d 683 (1989) ("The relationship of attorney-client may be expressly created by written contract, or may be inferred from the conduct of the parties."). This argument, however, reads more from the facts than is reasonably permitted. "[T]he basic question in regard to formation of an attorney-client relationship is whether it has been established that advice or assistance is both sought and received in matters pertinent to his profession." Id. at 46-47, 376 S.E.2d 683. Klosinski represented Sportsman's Link, that much is settled. But the record shows that Plaintiff's claim premised upon an individual attorney-client relationship with Klosinski fails on both ends — that is, Plaintiff neither sought personal legal advice concerning the Guaranty from Klosinski nor received any. Nor was any fee paid for individual representation. See Mays v. Askin, 262 Ga.App. 417, 419, 585 S.E.2d 735 (2003) ("Generally, the payment of a fee is an important factor in determining the existence of
Plaintiff cites a number of items from which he contends a personal attorney-client relationship may be drawn but to no avail. First is a retainer agreement signed by Plaintiff to employ KO, among others, as legal counsel for both he and Sportsman's Link in a tenancy dispute separate and apart from the bankruptcy case. (Doc. no. 56-7.) "The scope of an attorney's authority when retained to prosecute or defend a pending case is determined by the terms of his contract of employment...." Dean v. Jackson, 219 Ga. 552, 552, 134 S.E.2d 601 (1964). Here, the retainer cited by Plaintiff belies his allegation for it specifically provides that representation shall be for "the case of Sportsman's Link, Inc. (Sohail Abdulla) vs. U.S. Properties Group (and/or affiliated entities), Walmart, Sam's Club, or under such other name as this cause of action may become known." (Doc. no. 56-7.) The retainer expressly delimited representation, and it therefore offers no aid to Plaintiff's claim. See Jerry Lipps, Inc. v. Postell, 139 Ga.App. 595, 595, 229 S.E.2d 78 (1976) ("The relationship of attorney and client is fiduciary in character, but this does not extend beyond the subject matter for which the services of the lawyer have been retained."). Next, Plaintiff points to references evidently made by Klosinski to opposing counsel on two occasions indicating that Plaintiff was his client. But the formation of an attorney-client relationship turns on "a `reasonable belief' on the part of the would-be client," Calhoun v. Tapley, 196 Ga.App. 318, 319, 395 S.E.2d 848 (1990) (emphasis added), not the representations of a lawyer to third parties.
Plaintiff next relies on Klosinski's role in the negotiation of the Guaranty for undergirding. After the Trustee Motion was filed, Klosinski engaged in preliminary negotiations with Louis Saul (Klosinski Dep. at 17, 31), the attorney for Henry's Tackle, and forwarded the terms of Saul's demand for a personal guaranty to Plaintiff (doc. no. 34-1). This conduct is not inconsistent, however, with Klosinski's undisputed role as counsel for Sportsman's Link. The Trustee Motion was filed in Sportsman's Link's Chapter 11 bankruptcy case and sought to either appoint a trustee to assume control of the corporation's assets and operation or to lift the bankruptcy stay to pursue a claim against it. It is only natural, then, that Klosinski, as the corporation's attorney, would discuss the possibility of withdrawing the Trustee Motion with counsel for the moving party. But after forwarding Saul's proposed terms of withdrawal to Plaintiff, including the demand for a personal guaranty, the evidence shows that Klosinski had no further involvement in the Guaranty negotiations (Saul Dep. at 35; Klosinski Dep. at 20-21), and by Plaintiff's own admission, Klosinski offered no advice regarding its execution (Abdulla Dep. at 278-79).
Lastly, Plaintiff points to statements made by Klosinski regarding the advisability of filing a Chapter 11 bankruptcy for Sportsman's Link and the possibility that Plaintiff might be vulnerable to personal liability for fraudulent conveyances in the event such bankruptcy proved unsuccessful. Plaintiff enlisted Klosinski's services on behalf of Sportsman's Link to represent the corporation in
There being insufficient evidence to support a finding that Klosinski represented Plaintiff in his individual capacity when the Guaranty was signed, Klosinski and KO's motion for summary judgment on Plaintiff's legal malpractice claim as to the Guaranty is
Unlike Klosinski, JWW does not dispute that Williams personally represented Plaintiff when he signed the Guaranty. Instead, JWW contends that Williams's advice did not fall outside the bounds of ordinary prudence. The Court agrees.
It is uncontested that Williams did in fact advise Plaintiff to execute the Guaranty. The question is whether a reasonable juror could find that Williams breached the standard of ordinary care in doing so. The dictates of this duty "are not authoritatively formulated anywhere as though they were prescriptions in a pharmacopoeia." Malinski v. New York, 324 U.S. 401, 417, 65 S.Ct. 781, 89 L.Ed. 1029 (1945) (Frankfurter, J., concurring). They are instead tailored to setting. An attorney must act as a reasonably prudent attorney would under the same circumstances, and such action must be judged against those circumstances rather than its results. See Hill Aircraft & Leasing Corp. v. Tyler, 161 Ga.App. 267, 273, 291 S.E.2d 6 (1982) ("The operative question on the issue of the required degree of care and skill of the attorney is whether or not such attorney exercised a reasonable degree of care and skill under the circumstances.").
The polished lens of hindsight makes easy play of counterfactuals so caution must be taken to guard against its prejudices. This precept animates the doctrine of judgmental immunity, adopted by Georgia courts and explained in the following terms:
Mosera v. Davis, 306 Ga.App. 226, 232, 701 S.E.2d 864 (2010).
The doctrine was instructively applied in Mosera, a case bearing many similarities to the instant action. The plaintiff in Mosera filed a notice of lis pendens against property involved in an underlying real estate action. He later settled with the opposing parties in that action, agreeing in part to release the lis pendens in exchange for a deed to secure debt on the property. He further agreed, however, not to file the deed unless the settlement was breached without cure. The property was later encumbered by another lien and, following default of the settlement and foreclosure
No conflict of interest is alleged here, and, as shown by Mosera, courts are otherwise loathe to pierce the honest judgment of an attorney made during negotiations. There is no evidence germane to the Guaranty showing misrepresentation, procedural missteps, or plain legal error. Rather Plaintiff, a sophisticated businessman with prior bankruptcy and guaranty experience,
In an effort to demonstrate the errancy of Williams's advice, Plaintiff contends that the piercing the corporate veil action by which Henry's Tackle sought to hold Plaintiff personally liable could not have succeeded because Sportsman's Link was not insolvent. Plaintiff therefore faced zero prospect of personal liability outside of the personal Guaranty, the argument continues, and Williams's advice to execute the Guaranty is irrational in that light. It is true that in Georgia, "as a precondition to a plaintiff's piercing the corporate veil and holding individual shareholders liable on a corporate claim,... there [must] be insolvency on the part of the corporation." Johnson v. Lipton,
Attorneys are not insurers of their clients' fortunes. Williams advised Plaintiff to execute the Guaranty, but "an attorney [is] not liable for a mere error of judgment, when he consults his client, and the latter, after being informed of the legal status of the case, approves the course the attorney proposes to pursue." Leighton v. New York, S. & W.R. Co., 303 F.Supp. 599, 618 (S.D.N.Y.1969). The Trustee Motion presented Plaintiff with the risks of losing operational control of Sportsman's Link and personal liability, and those risks were not merely fanciful, as Plaintiff's history of financial commingling and the Bankruptcy Court's eventual conversion to Chapter 7 demonstrate. Like the plaintiff in Mosera, Plaintiff is an experienced businessman who read the terms of the Guaranty, and his initial reluctance to sign it shows that he understood the personal obligation it entailed. Ultimately, "when determining whether to settle a dispute, it is the client, not the attorney, who bears the risk. Because the client bears the risk, it is the client who should assess whether the risk is acceptable, not the attorney." Wood v. McGrath, North, Mullin & Kratz, P.C., 256 Neb. 109, 117, 589 N.W.2d 103 (1999) (citing 2 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 17.15 (4th ed.1996)). With all of this as backdrop, no reasonable person could conclude that Williams's advice to sign the Guaranty breached the duty of ordinary care.
Although it is undisputed that Williams represented Plaintiff individually and advised him to sign the Guaranty, the record does not support an inference that Williams's exercise of good faith judgment violated his duty of ordinary care under the circumstances. JWW's motion for summary judgment as to the Guaranty claim is
Moving on from Plaintiff's claims relating to the Guaranty, Plaintiff also asserts that Defendants breached their obligations with respect to the second Henry's Tackle lawsuit filed in August 2008. Plaintiff maintains that both Williams and Klosinski represented him at the time of service and therefore had a duty to consult with him and file an answer in the case on his behalf. Alternatively, Plaintiff has alleged that Defendants breached their fiduciary duties as registered service agents.
"A claim for legal malpractice is sui generis insofar as the plaintiff's proof of damages effectively requires proof that he would have prevailed in the original litigation but for the act of the attorney charged with malpractice." Paul v. Smith, Gambrell & Russell, 283 Ga.App. 584, 587, 642 S.E.2d 217 (2007). Plaintiff's claims relating to the second Henry's Tackle lawsuit arise out of enforcement of the Guaranty against him; therefore, the viability of his claims at bar turns on the defenses he could have raised against enforcement. The Guaranty contains a waiver-of-defenses clause which provides, in relevant part: "this Guaranty is valid and binding according to its terms, subject to no defense, counterclaim, set-off or objection of any kind...." (Doc. no. 37-16 § 8.) By its plain terms, the clause precludes any defense that Plaintiff could have mustered to avoid successful enforcement of the Guaranty against him. Plaintiff nevertheless maintains that several defenses were available and could have, if timely invoked, prevailed against enforcement of the Guaranty — namely, lack of consideration, duress, and unconscionability. Upon review, the Court concludes that each fails as a matter of law.
Plaintiff's first asserted defense to the Guaranty's enforcement is lack of consideration. The bargain embodied in the Guaranty consists of Plaintiff's having personally guaranteed Sportsman's Link's debt in exchange for withdrawal of the Trustee Motion. According to Plaintiff, withdrawal of the Trustee Motion does not qualify as consideration because the Motion was not made in good faith; moreover, the benefits of withdrawal accrued solely to Sportsman's Link, not to Plaintiff personally, and it therefore cannot be enforced against him. These contentions are meritless.
Forbearance and compromise qualify as consideration. O.C.G.A. § 13-3-42(c)(2). "Not only forbearance to litigate, but also the relinquishment of any other right, or forbearance to do any act which one has a legal right to do, is consideration where such forbearance is requested as consideration. In short, forbearance to do something which one is legally entitled to do, of almost any character, will be sufficient...." 3 Williston on Contracts § 7:45 (4th ed.); see also Wolfe v. Breman, 69 Ga.App. 813, 26 S.E.2d 633 (1943) ("Forbearance to prosecute a legal claim, and the compromise of a doubtful right, are both sufficient considerations to support a contract." (quoted source omitted)). That said, "while the law recognizes that the compromise of a doubtful claim will support a[n] agreement, that claim must be asserted in good faith." Matrix Fin.
The circumstances surrounding the Trustee Motion have already been discussed at length; suffice it to say at this point that the Trustee Motion sought, among other things, the appointment of a trustee to assume control of Sportsman's Link under 11 U.S.C. § 1104(a). This statute provides for the appointment of a trustee "for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor ...;" or alternatively, "if such appointment is in the interests of creditors...." Id. § 1104(a)(1)-(2). The catalogue of Plaintiff's personal transfers in and out of the corporation is long, and the corporation's financial situation was quickly deteriorating when the Trustee Motion was filed. These constitute "reasonable grounds" to assert a motion for appointment under the plain terms of § 1104(a)(1)-(2). Finally, the fact that withdrawal of the Trustee Motion did not directly benefit Plaintiff personally as he was not a party to the bankruptcy action provides no rescue to his argument. It is axiomatic that "[c]onsideration need not be a benefit accruing to the promisor, but may be a benefit accruing to another." Fisher v. Toombs Cnty. Nursing Home, 223 Ga.App. 842, 845, 479 S.E.2d 180 (1996); see also O.C.G.A. § 13-3-42(d). Based on the above, the Guaranty represented a well-considered bargain, and Plaintiff's defense to the contrary is misguided.
Plaintiff's second proffered defense is that the Guaranty is void due to duress. "Since the free assent of the parties is essential to a valid contract, duress, either by imprisonment, threats, or other acts, by which the free will of the party is restrained and his consent induced, renders the contract voidable at the election of the injured party." O.C.G.A. § 13-5-6. The defense of duress sets a very high hurdle for those seeking its refuge — it requires no less than a showing of conduct "amounting to coercion, or tending to coerce the will of another, and actually inducing him to do an act contrary to his freewill." Mallen v. Mallen, 280 Ga. 43, 46, 622 S.E.2d 812 (2005).
The duress in this case does not concern any physical harm or threats, consisting instead of what is commonly referred to as "economic duress." "Business compulsion or economic duress involves the taking of undue or unjust advantage of a person's economic necessity or distress to coerce him into making a contract...." Hampton Island, LLC v. HAOP, LLC, 306 Ga.App. 542, 544, 702 S.E.2d 770 (2010). Though recognized as a valid defense, "Georgia courts are reluctant to void contracts, and [there is] no Georgia decision voiding a contract on the theory of economic duress." Id. at 545, 702 S.E.2d 770. "[H]ard bargaining, by itself, cannot support a duress defense. One may not void a contract on the grounds of duress merely because he entered into it with reluctance, the contract was very disadvantageous to him, the bargaining power of the parties was unequal, or there was some unfairness in the negotiations preceding the agreement." Id. at
With his third and final proposed defense to the Guaranty, Plaintiff resorts to equity, arguing that the terms of the Guaranty are unconscionable. "An unconscionable contract is one abhorrent to good morals and conscience ... where one of the parties takes a fraudulent advantage of another[,] an agreement that no sane person not acting under a delusion would make and that no honest person would take advantage of." Mallen, 280 Ga. at 47, 622 S.E.2d 812 (internal quotations omitted). "If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract...." O.C.G.A. § 11-2-302(1),
The Guaranty went through several iterations (Abdulla Dep. at 187), Plaintiff read its final terms (id. at 189), and discussed it with counsel. "Competent parties are free to choose, insert, and agree to whatever provisions they desire in a contract ... unless prohibited by statute or public policy." Brookside Communities, LLC v. Lake Dow N. Corp., 268 Ga.App. 785, 786, 603 S.E.2d 31 (2004). Plaintiff cites no relevant statute to bar the Guaranty's enforcement nor does public policy in Georgia void it. To the contrary, a limitation of remedies is not considered unconscionable. Hall v. Fruehauf Corp., 179 Ga.App. 362, 362, 346 S.E.2d 582 (1986). Indeed, waiver-of-defenses clauses similar to that present in this case have been repeatedly enforced in Georgia. See, e.g., Brookside Communities, LLC, 268 Ga.App. at 786, 603 S.E.2d 31; Ramirez v. Golden, 223 Ga.App. 610, 611, 478 S.E.2d 430 (1996). "[A] guarantor may consent in advance to a course of conduct which would otherwise result in his discharge ... [and] this includes waiving defenses which otherwise would be available to a guarantor." Ramirez, 223 Ga.App. at 611, 478 S.E.2d 430 (citation omitted). One-sided though the Guaranty may appear now, with Plaintiff seeking to avoid over $600,000.00 in personal liability imposed thereunder, its terms do not range past the broad bounds of sane judgment. From Plaintiff's standpoint the terms are severe, yes; unwise, perhaps; unconscionable, no.
In sum, Plaintiff's claims relating to the second Henry's Tackle lawsuit lack a basis to infer proximately caused damages. Plaintiff signed the Guaranty and thereby personally obligated himself on Sportsman's Link's corporate debt and, at the same time, waived all defenses to the Guaranty's enforcement. Plaintiff now regrets that decision, but the defenses he raises to personal liability are meritless.
In his complaint, Plaintiff prayed for punitive damages and attorneys' fees. Neither may be granted, however, in the absence of a valid claim. Dowdell v. Krystal Co., 291 Ga.App. 469, 473, 662 S.E.2d 150 (2008). In any event, Plaintiff has withdrawn his request (doc. no. 34-1 at 63-64), and thus Defendants' motions for summary judgment as to these additional damages are
Based upon the foregoing, Defendants' joint motion to strike (doc. no. 32) is