Lane-Detman, L.L.C. v. Miller & Martin

• Decision Date: 09 January 2002
• Citation: 82 S.W.3d 284
• Parties: LANE-DETMAN, L.L.C., et al. v. MILLER & MARTIN, et al.
• Court: Tennessee Court of Appeals

82 S.W.3d 284

LANE-DETMAN, L.L.C., et al. v. MILLER & MARTIN, et al.

Court of Appeals of Tennessee, Eastern Section, at Knoxville.

January 9, 2002.

Application for Permission to Appeal Denied by Supreme Court July 1, 2002.

COPYRIGHT MATERIAL OMITTED

J. Harvey Cameron, Jasper, Tennessee, for the appellants, Lane-Detman, LLC, Clara Lane and Darlene Lane-Detman.

Gary S. Napolitan and D. Scott Bennett, Chattanooga, Tennessee, for the appellees, Miller & Martin, Miller & Martin, LLP, and W. Scott McGinness, Jr.

Samuel L. Felker and Anna M. Grizzle, Nashville, Tennessee, for the appellee, Choicepoint Services, Inc., f/k/a Equifax Services, Inc.

OPINION

D. MICHAEL SWINEY, J., delivered the opinion of the court, in which CHARLES D. SUSANO, JR., J. and WILLIAM H. INMAN, SR. J., joined.

In 1995, Lane-Detman, LLC, Clara Lane, and Darlene Lane-Detman ("Plaintiffs") invested $600,000 in two businesses in which Samuel Cooper ("Cooper") had an ownership interest. This investment soured, and in December 1997, Plaintiffs obtained a default judgment against Cooper. Before Plaintiffs invested with Cooper, Plaintiffs' attorney, defendant W. Scott McGinness, Jr. ("Defendant McGinness"), performed a background search on Cooper at the request of Plaintiff Darlene Lane-Detman ("Plaintiff Lane-Detman"). In addition to other investigative efforts, Defendant McGinness had the co-defendant, Equifax Services, Inc. ("Defendant Equifax"), perform a background search on Cooper. Defendant Equifax's report revealed no questionable or negative history on Cooper. After Plaintiffs obtained their default judgment against Cooper, Plaintiffs hired other counsel to assist with collection of the judgment. In 1998, Plaintiffs' new counsel uncovered an abundance of questionable and negative history on Cooper. Thereafter, in 1999, Plaintiffs sued Defendant McGinness and his law firm, Miller & Martin ("Defendant Miller & Martin"), and Defendant Equifax. The Trial Court granted summary judgment to the defendants, finding that Plaintiffs' claim against Defendant Equifax was barred by an exculpatory clause in the contract between Defendant Equifax and Defendant Miller & Martin and that Plaintiffs' claim against Defendants Miller & Martin and McGinness was barred by the statute of limitations. Plaintiffs appeal. We affirm.

Background

In January 1995, Plaintiff Lane-Detman hired Defendant McGinness to represent her in connection with an investment with PCM Holdings, LLC, and to perform a background check on PCM Holdings, LLC, and its principal, Samuel Cooper. The record on appeal contains an engagement letter dated January 12, 1995, sent from Defendant McGinness and received by Plaintiff Lane-Detman. Debbie Souders, an employee of Defendant Miller & Martin, then contacted Defendant Equifax and requested that it perform a background check on Cooper. Souders provided Defendant Equifax with Cooper's name, personal address and position as president and director of PCM Holdings, LLC.

Thereafter, on February 2, 1995, Defendant McGinness sent correspondence to Plaintiff Lane-Detman regarding his investigative efforts which included interviewing Cooper, Cooper's personal attorney, and others who had been associated with Cooper in business transactions. This correspondence stated the following:

We had a Dunn & Bradstreet report run on the Company, but since it is still in the start-up stage, the results of the check were not meaningful. We have also ordered a background check on Mr. Cooper by EquiFax, which should be completed by the end of next week.

(emphasis added). This correspondence ended with the following paragraph:

In summary, none of the contacts I have made to date in the course of my investigations has revealed any adverse information concerning either the Company or Mr. Cooper. Please do not hesitate to contact me if you have any questions in this regard.

The Trial Court found that on February 13, 1995, Defendant Equifax reported the findings of its investigation to Debbie Souder over the telephone. Souder then requested Defendant Equifax to close its investigation of Cooper and stated that if she received additional leads on Cooper, she would order an additional report from Defendant Equifax so that a more thorough investigation could be performed. On that same date, Defendant Equifax sent a final, written report to Souder regarding its investigation. The Equifax report essentially reiterated the information Souder received over the telephone which included its finding that Cooper owned no real property in Shelby County, had no UCC filings in Shelby County, and had not been involved in any lawsuit in Shelby County state or federal court. The report also contained qualifying language that since the investigator did not have Cooper's date of birth and social security number, the results could not be verified.

The record on appeal shows it is undisputed that Plaintiffs never received the Equifax report. It is disputed whether the results of the Equifax report were verbally reported to Plaintiffs by Defendant McGinness. The record contains an affidavit of Defendant McGinness in which he states that after receiving the Equifax report, he contacted Plaintiff Lane-Detman and requested Cooper's social security number so that Defendant Equifax could confirm its results. According to Defendant McGinness' affidavit, Plaintiff Lane-Detman thereafter advised him on several occasions that she had asked Cooper for his social security number but Cooper refused to provide it to her. While Plaintiff Lane-Detman disputes that Defendant McGinness requested Cooper's social security number or date of birth from her, the Trial Court found, in its Memorandum Opinion, that Plaintiff Lane-Detman admitted that she did not request Cooper's social security number.

On February 28, 1995, Plaintiffs transferred a total of $600,000 to two companies in which Cooper had an ownership interest, PCM Media Fund, LLC, and PCM Clinic of Cleveland, LLC. Plaintiffs later became concerned about how Cooper was handling their investment and on December 14, 1995, demanded a financial accounting. Around this time, Plaintiff Lane-Detman withdrew her authorization allowing Cooper's daughter, acting as Cooper's agent, to sign checks on behalf of Plaintiff Lane-Detman. In August 1997, Plaintiffs filed suit against Cooper, PCM Media Fund and PCM Clinic of Cleveland, alleging intentional misrepresentation and fraud. In preparation of filing this lawsuit, Plaintiff Lane-Detman learned from her new counsel that $500,000 of Plaintiffs' investment was not reflected in any bank records.

On December 23, 1997, Plaintiffs obtained a default judgment in excess of $2 million against Cooper.¹ Plaintiffs, thereafter, in an attempt to collect on their default judgment, retained the services of another attorney, Lori Keen, of Memphis, Tennessee. Memphis was the last known location of Cooper. Attorney Keen used a private investigation service, Investigations Unlimited, to perform an asset search. The record on appeal contains an affidavit of the investigator who conducted this asset search, Gene Milner. Milner's affidavit states that on July 20, 1998, he provided an attorney in Attorney Keen's law firm the results of his preliminary search and on August 17, 1998, a final report. The record on appeal shows that Attorney Keen sent correspondence to Plaintiff Lane-Detman dated August 19, 1998, in which Keen apparently enclosed Milner's findings and advised the following:

After an extensive review of these materials, it is obvious that Mr. Cooper is a professional con-artist scam extraordinaire [sic] from way back. He has had more corporations than you could imagine. He is not really showing any assets according to this report and please note that at one time, at least he did have a Swiss bank account.

The Trial Court, in its Memorandum Opinion, found that Attorney Keen's investigator reported that Cooper had been using a false social security number and had a federal tax lien filed against him in 1992 in the amount of approximately $31,700.

The record on appeal shows that Defendant Miller & Martin entered into a services contract with Defendant Equifax in September 1988. It is undisputed that this contract ("Contract") was in effect when Defendant McGinness hired Defendant Equifax to conduct a background check on Cooper in 1995. The Contract contains an exculpatory clause ("Exculpatory Clause") which states, in pertinent. part, the following:

Recognizing that information is secured by and through fallible human sources and that for the fee charged you cannot be an insuror [sic] of the accuracy of the information, we understand and agree that the accuracy of any information furnished is not guaranteed by you, and we release you and your affiliated companies and your and their officers, agents, employees, and independent contractors from liability for any negligence in connection with the preparation of such reports and from any loss or expense suffered by us resulting directly or indirectly from your reports or those of your affiliated companies.

(emphasis added).

On August 12, 1999, Plaintiffs filed suit against Defendants Miller & Martin and McGinness for legal malpractice, negligence, and breach of contract, alleging that the attorneys failed to properly perform a background check on Cooper. Thereafter, in January 2000, Plaintiffs filed an Amended and Restated Complaint ("Amended Complaint") in which they named Equifax, Inc., as a defendant, and alleged that Defendant Equifax was liable for negligence, negligent misrepresentation, and breach of contract. Plaintiffs alleged in their Amended Complaint that because they were third party beneficiaries of the Contract, Defendant Equifax was liable to them under the theories of breach of contract and negligent misrepresentation.²

Defendants Miller & Martin and McGinness filed a Motion to Dismiss or, in the Alternative, for Summary Judgment, in which...