De La Maria v. Powell, Goldstein, Frazer & Murphy
| Decision Date | 08 July 1985 |
| Docket Number | Civ. A. No. C83-852A. |
| Citation | 612 F. Supp. 1507 |
| Parties | Eduardo De La MARIA, Plaintiff, v. POWELL, GOLDSTEIN, FRAZER & MURPHY, a Georgia Partnership and John L. Gornall, Jr., Defendants. |
| Court | U.S. District Court — Northern District of Georgia |
James D. McGuire, Kane, McGuire & Whatley, Gerard Carty, Taylor W. Jones, Jones, Ludwick & Malone, Atlanta, Ga., for plaintiff.
Emmet J. Bondurant, III, Bondurant, Miller, Hishon & Stephenson, H. Lamar Mixson, Atlanta, Ga., for defendants.
ORDER OF COURT
The above-styled action is before the Court on the defendants' motion for a judgment notwithstanding the verdict or, in the alternative, for a new trial. After an exhaustive review of over 200 pages of briefs, the trial transcript, and the relevant case law, this Court concludes that it must grant the defendants' motion for a judgment notwithstanding the verdict.
In December, 1978, the plaintiff, Eduardo De La Maria, engaged defendant Powell, Goldstein, Frazer & Murphy, (Powell, Goldstein), to render certain legal services to him in connection with a proposed business venture in Georgia. At that time, the plaintiff was the President of a Spanish corporation involved in the production and manufacture of jewelry. The plaintiff wanted to move this business from Spain to the United States.
On May 29, 1979, defendant John Gornall, a lawyer in the Powell, Goldstein firm, sent the plaintiff a letter stating the following in pertinent part:
In late July and early August, 1979, the plaintiff visited the United States to attend a jewelry show in Atlanta. During this visit to Atlanta, the plaintiff was introduced to Mr. Hayes by Mr. Gornall. The plaintiff and Mr. Hayes had several meetings during which they discussed the terms of their business venture. Mr. Gornall was not present during all of these meetings. By the time the plaintiff was ready to return to Spain, the two men had agreed in principle to go into the jewelry business together. They agreed that there would be four equal shareholders in the company including the wives of the plaintiff and Mr. Hayes; that the plaintiff would contribute goods to the corporation having a value of approximately $150,000.00; that the Hayes group would invest approximately $200,000.00 in the enterprise; and that the plaintiff would be the president of the company and Mr. Hayes the treasurer. The parties also agreed that the plaintiff would be responsible for running the day-to-day operations of the business.
After this agreement was reached, the plaintiff and Mr. Hayes asked John Gornall to come to Hayes' office where they explained the agreement to him. They also asked Mr. Gornall to draft the documents needed to begin the new corporation. After that meeting, the plaintiff left Atlanta to return to Spain.
The corporation, De La Maria, Inc., was chartered on August 2, 1979. The incorporation documents, employment agreement, and shareholders agreement were all drafted by lawyers at Powell, Goldstein. These documents were delivered to Mr. Hayes who took them to Spain in September, 1979 where they were signed by the plaintiff and his wife.1
In November, 1979, the plaintiff moved to Atlanta, Georgia. Shortly thereafter, Mr. Hayes informed the plaintiff that the Hayes group, which consisted of Mr. Hayes, his wife, and a Swiss investor, Mr. Fred Thom, intended to contribute $100,000.00 in cash to the corporation and $100,000.00 in the form of a loan to the corporation. After being so informed, the plaintiff also wanted to make additional changes in the shareholders and employment agreements and prepared notes of these changes and gave them to Mr. Gornall. In addition, the plaintiff decided that the jewelry and molds which he contributed to the corporation should be valued at $213,000.00 instead of the $150,000.00 figure he had discussed with Mr. Hayes in July.
In December and January, 1979, lawyers at Powell, Goldstein drafted various documents on behalf of De La Maria, Inc. These documents included a loan agreement, a promissory note and voting proxies.2 The plaintiff and the other investors signed these documents in January, 1979.
After the drafting of these documents, the plaintiff and his wife received 50% of the shares of De La Maria, Inc., in return for contributing jewelry, molds, and tools to the corporation. Mr. Hayes' wife and Mr. Thom purchased the remaining 50% of the corporation. Mr. Hayes, although treasurer of the corporation, was not a shareholder.
From January, 1980, to May, 1981, the plaintiff attempted to turn De La Maria, Inc., into a successful jewelry business. The corporation, however, was not successful and by March 31, 1981, had lost over $450,000.00.
On May 1, 1981, there was a special meeting of the Board of Directors of De La Maria, Inc. At this meeting, Mr. Hayes told the plaintiff that the investors were not going to contribute any more money to the corporation to fund the plaintiff's future salary3 or his past due salary. Mr. Hayes told the plaintiff that he could continue to work for De La Maria, Inc., on a commission basis. After the plaintiff refused this offer, Mr. Hayes abruptly left the room. Also at this meeting, Mr. Gornall told the plaintiff that he should retain another attorney because Mr. Gornall could no longer represent him due to a conflict of interest.4 There is no evidence in the record that indicates what happened to the assets of De La Maria, Inc., if any existed, subsequent to the May 1, 1981, meeting.
The plaintiff filed this lawsuit on April 29, 1983, against John Gornall and Powell, Goldstein alleging that the defendants were liable for legal malpractice and fraud. The plaintiff later amended his complaint to include allegations that the defendants violated the Securities Laws and the Racketeer Influenced and Corrupt Organizations Act (RICO). The plaintiff's claims under the Securities Laws and RICO were dismissed by this Court upon the defendants' motion for directed verdict. At trial, the jury found for the defendants on the plaintiff's fraud claim and for the plaintiff on the claim of legal malpractice. The jury awarded the plaintiff $140,000.00 in general damages and $1,250,000.00 in aggravated damages.
The plaintiff claims that Mr. Gornall's recommendation of Mr. Hayes to the plaintiff constituted legal malpractice because Mr. Hayes, at the time of the introduction, was involved in numerous lawsuits indicating that he would not be a compatible business partner. The plaintiff blames the failure of De La Maria, Inc., on Mr. Hayes' interference with its business operations.5 The plaintiff also argues that the defendants drafted the incorporation documents in Mr. Hayes' favor and to the detriment of the plaintiff. Furthermore, the plaintiff contends that Mr. Gornall breached his duties as the plaintiff's attorney due to a conflict of interest, and that Mr. Gornall did not act properly during the May 1, 1981, directors' meeting.
The defendants deny all of these contentions. Also, they argue that, even if they acted improperly, there is no evidence linking their actions to any of the plaintiff's alleged injuries. The defendants contend that the jury's award of punitive damages is not supported by the evidence and is grossly excessive, and that this Court's instructions on such damages were improper under Georgia law. And, the defendants argue that they are entitled to a new trial because this Court erred by granting the plaintiff's motion to strike defendants' Exhibit 114 at the end of the trial.
This Court will first review the appropriate legal standards for ruling on a motion for a judgment notwithstanding the verdict. Then, this Court will detail the essential elements of a legal malpractice claim under Georgia law. Finally, this Court will discuss each of the plaintiff's allegations of malpractice, and its relationship to the plaintiff's alleged injury.
In ruling upon a motion for a judgment notwithstanding the verdict under Fed.R.Civ.Pro. 50(b), this Court must consider all of the evidence presented to the jury, not just the evidence which supports the non-movers case. Boeing v. Shipman, 411 F.2d 365 (5th Cir.1969, en banc). The evidence, however, must be viewed in a light most favorable to the party opposing the motion and all reasonable inferences must be resolved in favor of the non-movant. Id. at 374-75. The Court should grant a motion for a judgment notwithstanding the verdict only "if the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict." Id.
In Rogers v. Norvell, 174 Ga.App. 453, 330 S.E.2d 392 (1985), the Georgia Court of Appeals recently restated the elements of a valid claim of legal malpractice under Georgia law. The Rogers Court stated the following:
It is the general rule ... that in a legal malpractice action the client has the burden of establishing three elements: (1) employment of the defendant attorney, (2) failure of the attorney to exercise ordinary care, skill and diligence and (3) that such negligence was the proximate cause of damage to the plaintiff. Id.6
The Rogers Court emphasized the proximate cause element by stating that "an attorney is liable only for actual injury that his client has sustained, and an act of negligence alone does not...
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