Scotchel v. Fluharty
| Docket Number | 20-0635,21-0572 |
| Decision Date | 30 August 2022 |
| Parties | John C. Scotchel, Jr., Plaintiff Below, Petitioner v. Thomas H. Fluharty, Defendant Below, Respondent AND Thomas H. Fluharty, Defendant Below, Petitioner v. John C. Scotchel, Jr., Plaintiff Below, Respondent |
| Court | West Virginia Supreme Court |
These consolidated appeals arise out of a civil action in which self-represented litigant John C. Scotchel, Jr. ("Plaintiff") sued Thomas H. Fluharty ("Defendant") in the Circuit Court of Harrison County for legal malpractice. In Appeal No. 20-0635 Plaintiff appeals (1) the circuit court's September 23 2019, order awarding summary judgment to Defendant; and (2) the circuit court's July 28, 2020, order denying Plaintiff's motion to alter or amend the September 23, 2019, order. In Appeal No. 21-0572, Defendant appeals the circuit court's June 25, 2021, order denying his motion for attorney's fees and costs. Plaintiff filed a reply in No. 20-0635, and, Defendant, by counsel Robert L. Bays, filed a reply in No. 21-0572.[1]
The Court has considered the parties' briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the circuit court's September 23, 2019, and July 28, 2020, orders, in Appeal No. 20-0635, and the circuit court's June 25, 2021, order, in Appeal No. 21-0572, is appropriate under Rule 21 of the Rules of Appellate Procedure.
Plaintiff is a disbarred attorney.[2] Defendant is a bankruptcy attorney, who represented Plaintiff in a bankruptcy proceeding.[3] See In re Scotchel ("Scotchel I"), 491 B.R. 739 (Bankr., N.D. W.Va. 2013). On January 5, 2012, Plaintiff filed a petition for bankruptcy, pursuant to Chapter 7 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Northern District of West Virginia. With Plaintiff's bankruptcy petition, Defendant, his counsel, filed a schedule of assets.
On Schedule B, "personal property," next to the box entitled "[o]ther contingent and unliquidated claims of every nature," Defendant listed a contingent fee agreement Plaintiff had with the law firm Bordas & Bordas ("B & B"). Defendant also listed the contingent fee agreement on Schedule C, as property Plaintiff wanted to claim as exempt from the bankruptcy estate and gave the agreement a nominal value of $1. The contingent fee agreement involved Plaintiff's client, Cindy Jo Falls, who was in an automobile accident and who retained Plaintiff to represent her in a personal injury action. Although that action was eventually dismissed in September of 1999, during the litigation, it became apparent that Ms. Falls had a first party bad faith settlement claim against her insurer, Allstate Insurance Co. Thereafter, on September 1, 2000, Plaintiff entered into the contingent fee agreement for B & B to prosecute the bad faith claim on behalf of Ms. Falls ("Falls case").
On the same day that Plaintiff's bankruptcy petition was filed, January 5, 2012, Allstate made its first offer to settle the bad faith claim in the Falls case. Thereafter, the parties in the Falls case agreed to a settlement on March 7, 2012. Pursuant to the contingent fee agreement in the Falls Case, the portion of the fee due to Plaintiff was $690,000. However, given Plaintiff's ongoing bankruptcy proceeding, B & B disbursed the $690,000 to Martin P. Sheehan, the Chapter 7 trustee, who held it in a trust account. Plaintiff and Mr. Sheehan disputed whether the $690,000 was included in the bankruptcy estate.
491 B.R. at 744-45 (footnote omitted). Plaintiff argued in Scotchel I that the Falls Case contingent fee agreement was an executory personal service contract which Mr. Sheehan could not assume as Chapter 7 trustee. Id. at 746. While the bankruptcy court agreed with Plaintiff that the contingent fee agreement was an executory contract, the bankruptcy court determined that "whether such a contract is executory, or assumable by the [t]rustee, or even property of the estate, does not address whether the bankruptcy estate is entitled to any fees for prepetition legal services." Id. Accordingly, the bankruptcy court found that "whether a contingent fee contract is assumable under [Title 11, Section] 365 [of the United States Code] has no bearing on whether a debtor's right to future payment under the contract is property of the estate." Id. (internal quotations and citations omitted).
Plaintiff represented himself when he appealed the bankruptcy court's decision in Scotchel I because Mr. Fluharty declined to represent him in that appeal. In affirming the bankruptcy court's decision that the $690,000 fee was included in the bankruptcy estate, the United States District Court for the Northern District of West Virginia made similar rulings in Scotchel v. Sheehan ("Scotchel II"), No. 1:13CV161, 2014 WL 823379 (N.D. W.Va. 2014) (unpublished). The district court found that the bankruptcy court's determination that Plaintiff earned none of his fee in the Falls Case post-petition was not clearly erroneous. Id. at *6. The district court further found that the bankruptcy court properly determined that Plaintiff's $690,000 fee was included in the bankruptcy estate, agreeing with the distinction that the bankruptcy court made between "the assumption of executory contracts under § 365" and "the pre-petition fees to which the estate was entitled under [Title 11, Section] 541 [of the United States Code]." Id. at *5 (). Plaintiff appealed the district court's decision in Scotchel II to the United States Court of Appeals for the Fourth Circuit, which affirmed the district court's ruling. 585 Fed.Appx. 187 (4th Cir. 2014).
Thereafter, Plaintiff filed the instant legal malpractice action against Defendant in the Circuit Court of Harrison County, seeking damages in the amount of the $690,000 fee from the Falls Case that was included in the bankruptcy estate as result of the decisions in Scotchel I and Scotchel II. Plaintiff alleged that Defendant committed legal malpractice by (1) listing the Falls Case contingent fee agreement on Schedules B and C when it should have been placed on Schedule G, the schedule for executory contracts; (2) declining to represent Plaintiff in his appeal of the bankruptcy court's decision in Scotchel I; and (3) by choosing, in his capacity as Chapter 7 trustee in the unrelated Coleman bankruptcy proceeding, to retain Mr. Sheehan, the Colemans' counsel, to represent the bankruptcy estate in that proceeding at the same time as Defendant was representing Plaintiff in his bankruptcy proceeding (in which Mr. Sheehan was the Chapter 7 trustee) and not disclosing the same to Plaintiff. In addition to his legal malpractice claim, Plaintiff asserted the following claims against Defendant: breach of contract, violations of the West Virginia Rules of Professional Responsibility, breach of fiduciary duty, fraud/misrepresentation, and misappropriation of property.
Plaintiff did not retain an expert in support of his legal malpractice and other related claims. Defendant retained former bankruptcy judge Ronald G. Pearson to provide an expert opinion regarding Plaintiff's bankruptcy proceeding. Plaintiff deposed Defendant, Judge Pearson, and Mr. Sheehan, the Chapter 7 trustee in Plaintiff's bankruptcy proceeding. Defendant deposed Plaintiff.
Thereafter, at a March 21, 2019, final pretrial conference, the circuit court considered Defendant's motion for summary judgment. Plaintiff argued that he did not need an expert to support his claims because Defendant's malpractice and/or negligence was obvious. The circuit court rejected Plaintiff's argument, finding that, while expert testimony was not necessary in all legal malpractice cases, "this case is . . . of some complexity" and that "[t]he only person who feels that [Defendant] did something wrong is [Plaintiff]." In light of the circuit court's ruling, Plaintiff requested a continuance to obtain an expert, which the circuit court denied.
The circuit court, by order entered on September 23, 2019, granted Defendant's motion for summary judgment,[4] finding that, despite the labels Plaintiff put on them, each of his causes of action sounded in legal malpractice pursuant to Syllabus Point 1 of Calvert v. Scharf, 217 W.Va. 684, 619 S.E.2d 197 (2005). The circuit court further found that Defendant was entitled to summary judgment "based upon . . . Plaintiff's failure to produce expert testimony in support of his claims arising from the complex underlying bankruptcy litigation." Finally, the circuit court determined that Plaintiff could not prove his damages because the decisions in Scotchel I and Scotchel II, that the Falls Case fee agreement's status as an executory contract was irrelevant to whether his $690,000 fee from that case was included in the bankruptcy estate, constituted the law of the case.
On October 8, 2019, Plaintiff filed a motion to alter or amend the circuit court's September 23, 2019, order awarding summary judgment to...
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