Hopper v. Frank

• Decision Date: 15 March 1994
• Docket Number: No. 93-7483,93-7483
• Citation: 16 F.3d 92
• Parties: Lewis C. HOPPER, Individually and as General Partner of Gulf Coast Television, Ltd., and Joe Sanderson, Plaintiffs-Appellants, v. Harvey FRANK, et al., Defendants-Appellees. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 92

16 F.3d 92

62 USLW 2638

Lewis C. HOPPER, Individually and as General Partner of Gulf

Coast Television, Ltd., and Joe Sanderson, Plaintiffs-Appellants, v. Harvey FRANK, et al., Defendants-Appellees.

No. 93-7483

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

March 15, 1994.

Joseph E. Roberts, Jr., Crymes Pittman, Pittman, Germany, Roberts & Welsh, Jackson, MS, for plaintiffs-appellants.

Patrick H. Scanlon, Sandra Coody Bradshaw, Young, Scanlon & Sessums, Jackson, MS, for defendants-appellees.

Appeal from the United States District Court for the Southern District of Mississippi.

Before JOLLY, WIENER, and EMILIO M. GARZA, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

This appeal is from a summary judgment for the defendants on a legal malpractice claim. The plaintiffs, in their individual capacities, sued the defendant law firm for malpractice in connection with work the law firm did for their limited partnership, which is now in bankruptcy. We hold that the plaintiffs lack standing to bring this suit because they fail to establish an attorney-client relationship in their individual capacities separate from their partnership. We therefore affirm the judgment of the district court.

I

Lewis Hopper and Joe Sanderson were the majority stockholders of Four-O, Inc., a Mississippi corporation formed in 1981. Sometime prior to 1986, Hopper and Sanderson decided to have Four-O, Inc. raise the capital necessary to construct a television station in southern Mississippi through a limited partnership vehicle. Then, in 1986, Hopper and Four-O, Inc. formed the limited partnership, Gulf Coast Television, Ltd. ("Gulf Coast") and had the partnership purchase all of the assets of Four-O, Inc. Hopper was a general partner and Four-O, Inc. was the managing general partner of Gulf Coast. Gulf Coast engaged Harvey Frank, an Ohio resident, and his law firm, Benesch, Friedlander, Copelan & Aronoff ("the Benesch Firm"), an Ohio general partnership, for the purpose of preparing public offering documents. In 1987, the attempted public offering of limited partnership interests in Gulf Coast was unsuccessful. In 1988, Four-O, Inc. d/b/a Gulf Coast filed a voluntary bankruptcy petition.

II

In 1988, Hopper, Sanderson, and Gulf Coast filed a legal malpractice suit against Frank and the Benesch Firm (collectively, the "Benesch Firm") in Mississippi state court. Hopper and Sanderson claimed that in addition to the $4,000,000 damages suffered by Four-O, Inc. d/b/a Gulf Coast, they had suffered separate damages in their individual capacities of $4,000,000 each. The three plaintiffs alleged that the Benesch Firm's delay in providing the final public offering documents did not give the plaintiffs sufficient time to sell the limited partnership interests. The plaintiffs argue that this delay by the Benesch Firm thus caused the failure of the offering and their consequent financial losses. On August 12, 1992, the Benesch Firm removed to federal court on the basis of diversity jurisdiction pursuant to 28 U.S.C. Sec. 1332.

On March 15, 1993, the district court entered summary judgment for the Benesch Firm against Gulf Coast and against Hopper and Frank as individuals. First, the district court reasoned that Gulf Coast's $4,000,000 claim was probably part of Four-O, Inc.'s bankruptcy estate, which only the bankruptcy trustee could bring. Second, the district court reasoned that two letters dated in 1986 made it clear that despite Hopper's and Sanderson's bare assertions in their affidavits that they had employed the Benesch Firm as individuals, the attorney-client relationship was between the Benesch Firm and Gulf Coast only; thus, any malpractice claim arising out of that relationship could be brought by Gulf Coast only. In short, Hopper and Sanderson had no standing to sue. On March 29, Hopper and Sanderson filed a motion to reconsider or for a new trial. In support of their alternative motions, Hopper and Sanderson offered correspondence dated in 1985 between Hopper and the Benesch Firm regarding the public offering and Gulf Coast and claimed the need for more discovery. On June 23, the district court entered an order denying both motions reasoning that it had ruled on the summary judgment based the evidence before it at that time and that the motion for further discovery was untimely. On July 22, Hopper and Sanderson filed a joint notice of appeal; Gulf Coast, however, did not join in this appeal. ¹

III

On appeal, Hopper and Sanderson contend that the district court erred in granting summary judgment to the Benesch Firm on the grounds that there was no attorney-client relationship between them, as individuals, and the Benesch Firm that encompassed the allegedly inadequate services. Thus, Hopper and Sanderson contend that the district court erred in concluding that Hopper and Sanderson lacked standing to sue.

An attorney-client relationship provides standing for a legal malpractice suit. ² See Singleton v. Stegall, 580 So.2d 1242, 1244 (Miss.1991). The existence of an attorney-client relationship is determined under state law. ³ Mississippi adheres to the general rule that an attorney-client relationship arises when:

(1) A person manifests to a lawyer the person's intent that the lawyer provide legal services for the person;

and

(2)(a) The lawyer manifests to the person consent to do so, or (b) fails to manifest lack of consent to do so, knowing that the person reasonably relies on the lawyer to provide the services, or (c) a tribunal with power to do so appoints the lawyer to provide the services.

Singleton, 580 So.2d at 1244 n. 2 (quoting Restatement of The Law: The Law Governing Lawyers Sec. 26 (Prelim. Draft No. 6, July 25, 1990)).

However simple the above formula may appear, difficulties arise when trying to apply it to individuals and the business entities they represent.

The necessity of determining whether an attorney-client relationship exists often arises in an ethical context. Pursuant to section 73-3-143, the Mississippi Bar's Board of Commissioners has adopted Model Rule of Professional Conduct 1.13 that generally provides that when a lawyer represents an organization, he represents the organization as an entity instead of its officers or representatives. The American Bar Association ("ABA") Opinion 91-361 interprets Model Rule 1.13 in answering the question, "When does a partnership's lawyer have an attorney-client relationship with an individual partner?" The opinion provides:

[A] lawyer who represents a partnership represents the entity rather than the individual partners unless the specific circumstances show otherwise....

... This analysis may include such factors as whether the lawyer affirmatively assumed a duty of representation to the individual partner, whether the partner was separately represented by other counsel when the partnership was created or in connection with its affairs, whether the lawyer had represented an individual partner before undertaking to represent the partnership, and whether there was evidence of reliance by the individual partner on the lawyer as his or her separate counsel, or of the partner's expectation of personal representation....

(citing Quintel Corp., N.V. v. Citibank, N.A., 589 F.Supp. 1235, 1240 (S.D.N.Y.1984) (recognizing that limited partnership is analogous to a corporation for purposes of determining existence of attorney-client relationship with owners); Security Bank v. Klicker, 142 Wis.2d 289, 418 N.W.2d 27 (1987) (stating that attorney-client relationship between partnership's lawyer and individual partner is not automatic)).

Further, ABA Opinion 91-361 recognizes that a lawyer's representation of a partnership may preempt the prior representation of the partners as individuals. Similarly, Mississippi courts recognize that once a corporation adopts a preformation contract that was made by one of its incorporators with a view toward forming the entity, the corporation preempts the incorporator's status as a party to the contract and, thus, assumes the incorporator's liability on that contract. See Fortune Furniture Mfg. Co., Inc. v. Mid-South Plastic Fabrication Co., Inc., 310 So.2d 725, 727 (Miss.1975) (holding the corporation liable on a preformation contract that it adopted after formation); 18 Am.Jur.2d Corporations Sec. 131 (1985) ("[I]f the person dealing with the promoter knew that the corporation did not exist and that the promoter did not intend to be liable, the promoter will not be liable [on the preformation contract]"); see generally, Mulvihill v. Vicksburg Ry., Power and Mfg. Co., 88 Miss. 689, 40 So. 647, 650 (1906) (citing Whitney v. Wyman, 101 U.S. (11 Otto) 392, 396, 25 L.Ed. 1050 (1879) (holding that individual directors were not liable individually on preformation contract later ratified by corporation)). ABA Opinion 91-361 further provides, "There is no logical reason to distinguish partnerships from corporations or other legal entities in determining the client a lawyer represents." Thus, the controlling legal framework for our review of the summary judgment will focus on the factors listed in ABA Opinion 91-361, including the possibility of preemption by Gulf Coast of any preformation attorney-client relationship established with Hopper and Sanderson as individuals.

IV

Against this background, we examine whether the district court erred in granting summary judgment to the Benesch Firm--on grounds of plaintiffs' lack of standing--because no attorney-client relationship existed between that firm and Hopper and Sanderson as individuals. Hopper and Sanderson contend that the district court erred because there was a genuine issue of material fact as to whether they had an attorney-client relationship with the Benesch Firm.

We review the district court's grant of summary judgment de novo, applying the same standards used by the district court. United States v. Arron, 954 F.2d 249, 251 (5th Cir.1992). A party is entitled...