DIAMOND v. DAVIS

• Citation: 671 A.2d 905
• Decision Date: 20 February 1996
• Docket Number: No. 93-CV-1246,93-CV-1246
• Parties: Patrick H. DIAMOND, Appellant, v. Carle E. DAVIS, et al., Appellees.
• Court: Court of Appeals of Columbia District

671 A.2d 905

Patrick H. DIAMOND, Appellant, v. Carle E. DAVIS, et al., Appellees.

No. 93-CV-1246.

District of Columbia Court of Appeals.

Argued January 4, 1995.

Decided February 20, 1996.

APPEAL FROM THE SUPERIOR COURT OF THE DISTRICT OF COLUMBIA; RICHARD A. LEVIE, RUFUS G. KING III, TRIAL JUDGES.

Patrick H. Diamond, pro se.

Paul E. Mirengoff, with whom Robert F. Brooks, Washington, DC, was on the brief, for appellees.

Before FERREN and RUIZ, Associate Judges, and KERN, Senior Judge.

PER CURIAM:

The judgment of the trial court is affirmed pursuant to Part II of Judge RUIZ's opinion, the concurring opinion of Judge KERN, and Part I of the opinion of Judge FERREN concurring in the judgment.

RUIZ, Associate Judge, concurring in part and dissenting in part:

This appeal presents the question whether the law imposes upon the plaintiff a different duty of care in discovering a cause of action involving fraud or fraudulent concealment on the part of a professional than in other cases where the discovery rule is applied — primarily causes of action for professional malpractice. We hold that in both kinds of cases the same standard of reasonable diligence under the circumstances applies. As in other cases where we apply the discovery rule, the inquiry is highly fact-bound. Thus, the character of material statements and nondisclosure by the defendant as well as the existence of a relationship of trust between the plaintiff and the defendant, which are usual in cases involving fraud or fraudulent concealment, are properly taken into account by the trier of fact in evaluating the reasonableness of plaintiff's diligence.

In September 1989, appellant, Patrick H. Diamond filed a complaint against his former attorneys, members of the firm of McGuire, Woods, Battle & Boothe,¹ asserting claims arising out of actions from April 1983 to April 1986 when the firm represented him in a dispute with the Internal Revenue Service regarding his 1980 and 1981 tax filings. The I.R.S. dispute and McGuire, Woods's representation ended with a final judgment of conviction against Diamond for federal criminal tax fraud. Diamond appeals the dismissal of his unfair trade practices claim² and theentry of summary judgment against him on McGuire, Woods's statute of limitations defense as to his claims for fraud, breach of professional and fiduciary duties, breach of contract, intentional infliction of emotional distress, and common-law conspiracy.³

The court affirms the judgment on the ground that, applying the discovery rule, the complaint was filed outside the three-year limitations period.⁴ I dissent from the affirmance because I believe there is on this record a genuine issue of material fact regarding whether Diamond discovered or, in the exercise of the requisite degree of diligence, should have discovered his cause of action more than three years before he filed his complaint.

I. Diamond's Claim and the Record

The gist of Diamond's allegations is that McGuire, Woods conspired with Judge Robert R. Merhige of the United States District Court for the Eastern District of Virginia to have Diamond convicted in the criminal prosecution for tax fraud. McGuire, Woods allegedly did that to aid its long-time clients, Reynolds Metals, Inc. and the Reynolds family. Judge Merhige was motivated, according to Diamond, by loyalty to the Reynolds family, who had supported his nomination to the federal bench by President Johnson and with whom Judge Merhige had business dealings. Judge Merhige and McGuire, Woods were connected by virtue of legal work that the firm had done over a number of years for Judge Merhige. The conviction could be expected to benefit Reynolds Metals because Diamond had sued Reynolds Metals in federal court, claiming that Reynolds Metals had wrongfully exercised control over Diamond's former employer, Robertshaw Controls Co., and caused him to be fired from his positions as vice president in charge of finance and director of Robertshaw. Pursuant to the Federal Rules of Evidence, the felony conviction in the criminal prosecution for tax fraud, in which McGuire, Woods allegedly conspired with Judge Merhige, could be used to impeach Diamond's credibility in the civil suit.

The factual issues in this case and the evidence bearing upon them may be placed in three categories. First, there are the largely uncontested facts concerning the timing of events in Diamond's civil and criminal matters. Second, there are the sharply disputed facts regarding when and how much information McGuire, Woods disclosed to Diamond concerning the firm's work for Reynolds Metals and members of the Reynolds family. Third, there are the closely related and equally disputed matters of how much Diamondknew about the work McGuire, Woods was doing for Reynolds Metals and the Reynolds family, and when he knew it, apart from whatever information McGuire, Woods may have disclosed.

A. The Facts Not Contested by the Parties

The following are the apparently undisputed facts concerning the timing of events in Diamond's civil and criminal matters: In April 1983, Diamond retained McGuire, Woods to represent him in a tax dispute with the Internal Revenue Service. He did so because his accountants had suggested the name of a McGuire, Woods partner, appellee Carle E. Davis. The tax controversy appears to have stemmed from Diamond's reporting of losses resulting from his trading of commodity futures and stock options in 1980 as ordinary business losses instead of capital losses, as he had for previous and subsequent years. United States v. Diamond, 788 F.2d 1025, 1026-27 (4th Cir. 1986). Diamond's principal defense, pressed unsuccessfully by his McGuire, Woods attorneys, was that Diamond lacked the requisite criminal intent in that he believed in good faith that because of the extent of his trading efforts in 1980, he was engaged in a business, notwithstanding the fact that his trades were entirely for his own account. Id. at 1028.

In May 1984, while the tax matter was pending, Diamond filed a suit in federal court in Wilmington against his former employer, Robertshaw, along with Reynolds Metals, David P. Reynolds, and Ralph S. Thomas. David Reynolds was chairman of the board and chief executive officer of Reynolds Metals and also chairman of the board of directors of Robertshaw. Ralph Thomas was a member of the board of directors of Reynolds Metals and president and chief executive officer of Robertshaw. In the suit, Diamond contended that Reynolds Metals, Reynolds and Thomas had conspired to acquire control of Robertshaw, while rebuffing other corporate suitors willing to pay a substantial premium over the price at which stock in Robertshaw ordinarily traded. As part of an effort to acquire and preserve control over Robertshaw, Diamond contended that the defendants in the civil suit caused Robertshaw to fire him in November 1983.

Meanwhile, Davis's efforts to resolve the tax matter without criminal charges were unsuccessful and a trial appeared likely. At a May 1, 1985 meeting, Davis introduced Diamond to the two McGuire, Woods attorneys who would handle the criminal trial, appellee J. Waller Harrison and Roger Frydrychowski. The case was ultimately assigned for trial to Judge Merhige. After receiving advice from his attorneys that a bench trial by Judge Merhige might be advantageous, Diamond waived his right to a jury. The case was tried to Judge Merhige, on September 27, 1985. Judge Merhige convicted Diamond of all the charges.

Diamond ultimately retained McGuire, Woods to handle the appeal as well. On March 6, 1986, Frydrychowski argued the appeal before the United States Court of Appeals for the Fourth Circuit. The court affirmed the conviction in a published opinion dated April 22, 1986. Diamond, supra. Diamond then served a sentence in a federal facility in Danbury, Connecticut, and was released January 22, 1987. On September 19, 1989, Diamond commenced this lawsuit in the Superior Court against defendants Davis, Harrison and several dozen other partners of McGuire, Woods, claiming that they conspired with each other and Judge Merhige to have Diamond convicted of tax fraud.

B. Who Told Diamond What and When?

Although the question of McGuire, Woods's disclosures to Diamond is sharply disputed, the fact of the firm's long-standing representation of Reynolds Metals and the Reynolds family is not. In their answer to Diamond's complaint, the appellees conceded that at the same time McGuire, Woods was representing Diamond in the tax matter, it also represented Reynolds Metals in "one or two" federal suits pending in Richmond. In a deposition, Davis testified that McGuire, Woods had been handling "special matters" for Reynolds Metals for many years before Diamond became a client. Harrison, a partnerat McGuire, Woods, testified that he learned of the firm's representation of Reynolds Metals within a year or two of starting work at the firm. Frydrychowski testified to working on a Reynolds Metals matter while working on Diamond's case. In an affidavit submitted in opposition to McGuire, Woods's summary judgment motion, Diamond avers that a report by Reynolds Metals' accountant shows that the company paid McGuire, Woods a million dollars while the firm was representing Diamond in his tax matter. The appellees have not produced any evidence controverting that figure.

Central to Diamond's claims, with respect to both the merits of his action and the time it accrued, is his contention that McGuire, Woods never informed him that it also represented Reynolds Metals. In a deposition, Diamond testified that in June 1984, Davis mentioned during a phone call that he had seen an article in the Wall Street Journal about Diamond's civil action against Reynolds Metals, David Reynolds, Thomas and Robertshaw. In that same deposition, Diamond testified that it was not until spring 1985 that Davis first told him that he had prepared some tax returns for David Reynolds....