Zee Co. v. Williams, Mullen, Clark & Dobbins, P.C.

• Decision Date: 10 May 2012
• Docket Number: Case No. 1:11cv458.
• Citation: 871 F.Supp.2d 498
• Court: U.S. District Court — Eastern District of Virginia
• Parties: ZEE COMPANY, INC., R.C. Conrad, Robert Dodd, Benjamin Lukowski, Barry Owings, Plaintiffs/Counterclaim Defendants, v. WILLIAMS, MULLEN, CLARK & DOBBINS, P.C., Defendant/Counterclaim Plaintiff.

871 F.Supp.2d 498

ZEE COMPANY, INC., R.C. Conrad, Robert Dodd, Benjamin Lukowski, Barry Owings, Plaintiffs/Counterclaim Defendants,

v.WILLIAMS, MULLEN, CLARK & DOBBINS, P.C., Defendant/Counterclaim Plaintiff.

Case No. 1:11cv458.

United States District Court,

E.D. Virginia,

Alexandria Division.

May 10, 2012.

Donald Charles Weinberg, Thomas Barton Almy, Dombroff & Gilmore PC, McLean, VA, for Plaintiffs/Counterclaim Defendants.

William Delaney Bayliss, Brendan David O'Toole, Williams Mullen, Richmond, VA, John David Wilburn, McGuireWoods LLP, McLean, VA, Jodie Nicole Herrmann, McGuireWoods LLP, Charlotte, NC, for Defendant/Counterclaim Plaintiff.

MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

This action arises from an alleged failure of the defendant law firm, which represented the plaintiff company in a separate tort suit in state court, to communicate a so-called “walk-away” offer of settlement to the company. The plaintiff company further alleges that it would have accepted the “walk-away” offer, which would have resolved the tort suit with no payment by either party. The defendant law firm denies that any walk-away offer of settlement was made and indeed denies that any binding settlement offer was made at the time alleged. The plaintiff company, which was exposed to millions of dollars in damages and attorney's fees resulting from the underlying action, now brings claims against the defendant law firm for legal malpractice and constructive fraud.

At issue on summary judgment is whether the plaintiff has adduced sufficient admissible evidence to create a triable issue of fact as to whether a “walk-away” offer of settlement was actually made to the defendant law firm, or that a more favorable outcome in the underlying action would have resulted had the statement alleged to be a “walk-away” offer been communicated to the plaintiff. For the reasons that follow, there is no admissible record evidence that a “walk-away” offer was ever made, nor does the summary-judgment record contain evidence that defendant's failure to communicate to plaintiff the statement plaintiff contends constitutes the walk-away offer actually injured plaintiff. Summary judgment must therefore be granted on plaintiff's claims for legal malpractice and constructive fraud.

I.¹

The parties in this action consist of a private company, several of its employees, and the law firm that represented the company and the employees in the underlying litigation giving rise to this dispute. Plaintiff / counterclaim defendant Zee Company, Inc. (“Zee Company”) is based in Tennessee and provides water processing products and services. At all relevant times, Zee Company employed the individual plaintiffs / counterclaim defendants R.C. Conrad, Robert Dodd, Benjamin Lukowski, and Barry Owings (collectively referred to as the “Zee Individuals” and together with Zee Company, referred to simply as “Zee”). GE Betz, Inc. (“GE Betz”), a competing water processing company headquartered in North Carolina, was originally named as a defendant in this action but was subsequently dismissed. See Zee Co. v. Williams, Mullen, Clark & Dobbins, P.C., No. 1:11cv458 (E.D.Va. Dec. 16, 2011) (Order) (dismissing fraud, intentional interference with contractual relations, and punitive damages claims against GE Betz). Defendant / counterclaim plaintiff Williams, Mullen, Clark & Dobbins, P.C. (“Williams Mullen”) is a Virginia-headquartered law firm retained by Zee to represent Zee in an action brought by GE Betz in North Carolina state court in April 2007 (the “North Carolina action”).

In the North Carolina action, GE Betz alleged, inter alia, that the Zee Individuals, who were former GE Betz employees, had violated non-compete agreements after joining Zee Company. More specifically, GE Betz asserted against Zee claims of tortious interference with contract and business expectancy, as well as unfair and deceptive trade practices pursuant to North Carolina General Statutes § 75–1.1 et seq. The GE Betz principal responsible for the North Carolina action was Glynn Key, GE Betz's general counsel. GE Betz was represented in the North Carolina action by a team consisting of lead counsel Victoria Cundiff, a partner of the New York—based law firm Paul Hastings LLP, and trial counsel John Martin and Jenna Butler, members of the North Carolina-based law firm Ward and Smith, P.A. With respect to Zee, Robert Barrett, a Williams Mullen shareholder, served as lead counsel for Zee in the North Carolina action until Williams Mullen was permitted to withdraw in June 2010.

After filing its complaint in the North Carolina action in early April 2007, GE Betz proceeded promptly to seek preliminary relief. On April 16, 2007, the state court entered a temporary restraining order enjoining Zee Company from certain conduct with respect to GE Betz's customers. The next day, Cundiff (GE),² in the presence of Butler (GE), spoke by phone with Williams Mullen attorney Barrett (Zee) about the North Carolina action. ³ At the time of the April 17, 2007 phone conversation, GE Betz and Zee, as well as their respective legal teams, were prepared to engage in extensive, expedited discovery prior to the preliminary-injunction hearing. Cundiff testified in her deposition that in the course of the conversation, she had told Barrett the following:

I said, Well, we could continue the discussions that [Barrett] and [GE Betz's local counsel] have started. If [Zee] were prepared to cease switching of accounts, [were] prepared to withdraw the DAK proposal, [were] prepared to agree on the customers subject to the agreements, and [were] prepared to agree to a restart of the time period of the restrictive covenant, [we] might be able to wrap things up.

(Doc. 181–1, 2d Cundiff Dep. 16) (the “Cundiff statement”). According to Cundiff, Barrett, in response, insisted that the matter should proceed. Specifically, by Cundiff's recollection, Barrett responded by slating (i) that Zee “disagreed that there should ever have been an injunction,” (ii) that “GE wasn't entitled to enforce the contracts,” (iii) that GE Betz's “point on switching was wrong,” (iv) that Barrett would not agree to an “extension of the TRO for any purpose,” and (v) that discovery should proceed. ( Id. at 17–19, 46). On April 27, 2007, the state court issued a preliminary injunction enjoining Zee from: (i) communicating with entities on the customer list GE Betz submitted for a period of one year, (ii) soliciting any GE Betz employees, (iii) using or disclosing GE Betz's confidential information, or (iv) assisting others in doing the foregoing. Months later, in December 2007, Zee asserted counterclaims against GE Betz alleging tortious interference with contract and business expectancy, and unfair and deceptive trade practices.

GE Betz and Zee engaged in substantial discovery efforts in the North Carolina action. In this regard, the parties produced and exchanged large volumes of documents and deposed many witnesses. As a result of these litigation activities, the parties incurred substantial legal fees and expenses. Indeed, by letter dated November 14, 2007, Butler (GE) told Barrett (Zee) that “GE Betz always has been and remains serious about collecting its attorneys' fees and damages,” and that “GE Betz intends to pursue its rightful claims, and it is not willing to simply walk away.” (Doc. 171–14, at 1 (emphasis added)).

Beginning in February 2008, GE Betz made several settlement offers to Zee, all of which involved Zee's payment of money to GE Betz. Specifically, during a February 2008 mediation, GE Betz offered to accept $800,000 from Zee in settlement of the North Carolina action.⁴ Zee rejected this offer and apparently made a counteroffer, which was not accepted, that Zee pay GE Betz $170,000. ( See Doc. 171–1, Billiard Dep. 110). Next, in June 2008, GE Betz sent a written offer to settle the matter—GE Betz's only written settlement offer—for Zee's payment of approximately $1.393 million. Zee also rejected this offer and, in a written counteroffer that GE Betz ultimately rejected, proposed that GE Betz pay Zee's attorney's fees and dismiss its claims in exchange for Zee dismissing its counterclaims. Finally, during a February 2010 mediation, GE Betz offered to settle the matter for Zee's payment of $1.8 million. Once again, Zee rejected settlement. After Zee had declined each of GE Betz's offers, jury selection and trial in the North Carolina action began in February 2010.⁵

At some point in time—the record does not disclose precisely when—rumors began to circulate among GE Betz's lawyers that at the outset of the North Carolina action, GE Betz had extended a “walk-away” offer to Zee wherein both GE Betz and Zee would agree to abandon their respective litigation efforts without payment of money by either side. The first Zee attorney to hear these rumors was Daniel Barks, whom Zee had retained to observe certain proceedings in the North Carolina action. Barks testified that in February 2010, during jury selection in the North Carolina action, he had heard from Martin (GE) that GE Betz had given Zee “an opportunity to walk away” and also heard Martin “describe[ ] a settlement offer that had been conveyed ... to stop the whole thing for no money[.]” (Doc. 177–3, Barks Dep. 79). Barks also testified that he had heard from Key (GE) that “there was an offer to walk away, no payment, around the time of the TRO, and everyone go do their own thing,” ( Id. at 94). Neither Martin nor Key indicated to Barks who on GE Betz's behalf had communicated a walk-away offer to Zee. ( Id. at 100–01). Martin later testified that he lacked any personal knowledge of such an offer, and Key testified that she did not recall GE Betz ever making such an offer. ( See Doc. 171–16, 1st Martin Dep. 15, 39; Doc. 171–17, 2d Martin Dep. 31–32; Doc. 177–1. Key Dep. 23).

Later in 2010, Stephanie Adams, a lawyer with the North Carolina law firm Rountree, Losee and Baldwin, LLP...