Haney v. Kavoukjian
| Decision Date | 27 July 2021 |
| Docket Number | Civil Action 2:19-cv-2098-RMG |
| Court | U.S. District Court — District of South Carolina |
| Parties | Katherine St. John Haney and James Byrnes as Personal Representatives of the Estate of Muriel T. Farr Plaintiffs, v. Michael E. Kavoukjian, Esq., and White &Case, LLP Defendants. |
Before the Court is a partial motion for summary judgment and a motion to strike filed by Plaintiffs Katherine St. John Haney and James Byrnes as Personal Representatives of the Estate of Muriel T. Farr (Dkt. Nos. 78, 89), and a motion for summary judgment filed by Defendants Michael E. Kavoukjian, Esq. and White &Case, LLP. (Dkt. No. 79). For the reasons set forth below, Plaintiffs' partial motion for summary judgment is denied, Plaintiffs' motion to strike is granted in part, denied in part, and Defendants' motion for summary judgment is granted in part, denied in part.
This matter is a breach of fiduciary duty and professional negligence action. Plaintiffs, Katherine St. John Haney and James Byrnes are the children of Muriel T. Farr and now serve as the Personal Representatives of the Estate of Muriel T Farr (“the Estate”). Plaintiffs bring the instant action against Defendants Michael E. Kavoukjian, Esq. (“Mr. Kavoukjian”) and White &Case, LLP (“White &Case”). (Dkt. No. 1). Plaintiffs' claims against Defendants arise out of an underlying probate lawsuit and Defendants' joint representation of Sims C. Farr (“Sims”) and Muriel T. Farr (“Muriel”) for estate planning.[1]
Sims was an estates lawyer and partner at White & Case. (Dkt. Nos. 78 at 6; 79 at 2; 78-2). White & Case began providing estate planning services to Sims prior to 1990. (Dkt. No.79-20). In 1990, Sims (age 70) and Muriel (age 55) got married. (Dkt. Nos. 78 at 7; 79-1 at 8; 79-21 at 3, 78-11; 78-9). Sims and Muriel each had children from prior marriages. The children of Sims are: C. Sims Farr, Jr., John Farr, Randolph Farr, and Virginia Farr Ramsey (“the Farr Children”). The children of Muriel are: Plaintiff Katherine St. John Haney, Plaintiff James Byrnes, Michael Byrnes, and John Byrnes (“the Byrnes Children”). (Dkt. Nos. 78 at 6; 79 at 2). After Sims and Muriel were married, they were jointly represented by Defendants for estate planning purposes until April 2005. (Dkt. No. 79-2 at 3-4). While providing joint representation to Sims and Muriel, Defendants also took on representation of John Farr and his wife Olivia Farr. (Dkt. No. 78-7 at 17-19). Ultimately, Defendants' representation of Muriel and Sims ended in April 2005. The representation ended due to a potential conflict of interest between White & Case and its lawyers' representation of Muriel and Sims on the one hand and John Farr and Olivia Farr on the other hand. (Dkt. No. 79-7 at 7-8). In addition, the representation ended in part due to Mr. Kavoukjian's concerns of Sims being unwell at this point and potential issues of Muriel's undue influence over Sims. (Id.). In April 2005, Sims and Muriel obtained new estate planning counsel in South Carolina. (Dkt. No. 79-8 at 19-20, 23-25, 27-28).[2]
Sims and Muriel's estate plan included extensive planning around the allocation of Sims' IRA at his death. Defendants maintain the plan was for Sims to designate Muriel as the beneficiary of the IRA for her life for tax reasons with the understanding and agreement that after his death she would roll over the IRA into her name to allow additional tax-deferred growth; that she would only draw upon the IRA as required by law by taking out the required minimum distribution (“RMD”), or to ensure her basic needs were met; and that she would designate the Farr Children as the beneficiaries of the IRA at her death. (Dkt. No. 79-1 at 4). Plaintiffs maintain that Sims gifted the IRA outright to Muriel when he died, giving her “unfettered discretion” to do what she wanted with the IRA. Plaintiffs maintain that Sims hoped Muriel would give whatever remained in the IRA to the Farr Children upon Muriel's death. (Dkt. No. 78 at 4). Sims died in 2007, followed by Muriel in 2015. (Dkt. Nos. 78-2; 78-32). Muriel named the Farr children as the beneficiaries of the IRA that they were to inherit at her death.
Mr. Kavoukjian received a Draft 706 Form prepared by counsel for the Estate that purported to allocate all estate taxes to the IRA. (Dkt. Nos. 80-8; 80-7). On March 29, 2016, Mr. Kavoukjian filed a Statement of Creditor's Claim against the Estate and on behalf of the Farr Children in the Probate Court in Berkeley County, South Carolina. (Dkt. No. 79-15). The Statement of Creditor's Claim sought 3.6 million dollars from the Estate for assets allegedly converted and transferred due to the Estate's fraud and misrepresentation. (Id.). On July 28, 2016, the Estate filed a Notice of Disallowance of Claim. (Dkt. No. 80-22).[3] On August 29, 2016, the Farr Children filed a probate lawsuit (“Underlying Lawsuit”) against the Estate asserting claims for: (1) breach of fiduciary duty; (2) constructive trust; (3) money had and received; (4) fraud/constructive fraud; (5) conversion; (6) declaratory judgment; and (7) fraud under S.C. Code Ann. § 62-1-106. (Dkt. No. 80-23).[4] In the Underlying Lawsuit, the Farr Children claimed Muriel breached fiduciary duties by taking distributions exceeding the RMD from the IRA between 2008 until 2015, and by allocating all of the estate taxes on the Estate against the IRA. (Id.). On January 25, 2019, the Underlying Lawsuit settled. The Estate paid the Farr Children $600, 000.00 in full satisfaction of the creditor's claim filed against the Estate. (Dkt. No. 78-40). In addition, the Estate paid attorney's fees in the amount of $550, 000.00. (Dkt. No. 79-1 at 6).
On July 26, 2019, Plaintiffs filed the instant suit bringing claims against Defendants for (1) breach of fiduciary duties and (2) professional negligence. (Dkt. No. 1). Plaintiffs allege Defendants breached duties of confidentiality and loyalty among other professional duties owed to Muriel as a former client when Mr. Kavoukjian pursued claims against the Estate on behalf of the Farr Children. (Id. at ¶¶ 19, 50). Plaintiffs allege White & Case is vicariously and directly liable for Mr. Kavoukjian's actions as a lawyer at the law firm. (Id. at ¶¶32-35). Defendants deny Plaintiffs' allegations and raise several affirmative defenses including the claims are barred by the statute of limitations; there was no duty of confidentiality and loyalty owed to Muriel; lack of proximate cause; laches and estoppel. (Dkt. No. 7 at ¶¶ 34-37; 42, 46). The parties filed crossmotions for summary judgment (Dkt. Nos. 78; 79) and the motions are fully briefed. (Dkt. Nos. 88; 90; 96; 97). Plaintiffs filed a motion to strike testimony in support of Defendants' motion for summary judgment. (Dkt. No. 89). The motion is fully briefed. (Dkt. Nos. 100; 102). All three motions are ripe for the Court's review.
Summary judgment is appropriate if a party “shows that 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). In other words, the Court should grant summary judgment “only when it is clear that there is no dispute concerning either the facts of the controversy or the inferences to be drawn from those facts.” Pulliam Inv. Co. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir. 1987). “In determining whether a genuine issue has been raised, the court must construe all inferences and ambiguities in favor of the nonmoving party.” HealthSouth Rehab. Hosp. v. Am. Nat'l Red Cross, 101 F.3d 1005, 1008 (4th Cir. 1996). The party seeking summary judgment bears the initial burden of demonstrating to the Court that there is no genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has made this threshold demonstration, the non-moving party, to survive the motion for summary judgment, may not rest on the allegations averred in its pleadings. See id. at 324. Rather, the non-moving party must demonstrate that specific, material facts exist that give rise to a genuine issue. See id. Under this standard, “[c]onclusory or speculative allegations do not suffice, nor does a ‘mere scintilla of evidence'” in support of the non-moving party's case. Thompson v. Potomac Elec. Power Co., 312 F.3d 645, 649 (4th Cir. 2002) (quoting Phillips v. CSX Transp., Inc., 190 F.3d 285, 287 (4th Cir. 1999)).
The parties filed cross-motions for summary judgment. (Dkt. Nos. 78; 79). Plaintiffs move for partial summary judgment as to their breach of fiduciary duty claim related to Mr. Kavoukjian's filing of the Statement of Creditor's Claim. (Dkt. No. 78 at 1-2). Defendants move for summary judgment on several grounds. (Dkt. No. 79). The Court will discuss each issue on summary judgment in turn.
Defendants move for summary judgment on the ground Plaintiffs' claims for breach of fiduciary duty and professional negligence are barred by the applicable three-year statute of limitations period defined by South Carolina Code Annotated § 15-3-530. (Dkt. No. 79-1 at 1928). Defendants argue Plaintiffs filed the Complaint outside the statute of limitations period when Plaintiffs had inquiry notice and actual notice of Defendants' alleged wrongful conduct prior to March 26, 2016. (Dkt. No. 1). Plaintiffs argue their claims accrued at the earliest on April 14, 2016 as this was the date Plaintiffs could sustain a financial injury resulting from Defendants' wrongful conduct. (Dkt. No. 88 at 8-10). Plaintiffs argue that before a claim for legal malpractice may accrue and the limitations begins to run, the claimant...
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