Zoss v. Protsch

• Decision Date: 05 January 2023
• Docket Number: 4:20-cv-4211
• Court: U.S. District Court — District of South Dakota
• Parties: FREDERICK M. ZOSS, Plaintiff v. GREG PROTSCH and MUMFORD & PROTSCH, LLP, Defendants

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FREDERICK M. ZOSS, Plaintiff v. GREG PROTSCH and MUMFORD & PROTSCH, LLP, Defendants

No. 4:20-cv-4211

United States District Court, D. South Dakota, Southern Division

January 5, 2023

MEMORANDUM AND ORDER

Lawrence L. Piersol, United States District Judge

Pending before the Court are the Parties' cross motions for summary judgment. Defendants move for partial summary judgment, asserting that as a matter of South Dakota law which governs this dispute, noneconomic damages are not available in an attorney malpractice case such as the case before the Court. (Doc. 30). They argue such damages are not foreseeable and therefore cannot be recovered. Plaintiff opposes the motion. (Doc. 35). The Court notes that Plaintiff's Brief (Doc. 35) serves as a brief in opposition to Defendants' motion (Doc. 30) and in support of its own (Doc. 37). Defendants have replied to Plaintiff's response. (Doc. 47).

Plaintiff has filed a motion which is the mirror-image of the Defendants' partial summary judgment motion, arguing noneconomic damages can be recovered in an attorney malpractice case. (Doc. 37). Plaintiff moves for summary judgment on the issue and seeks a ruling that his claim to such damages is sufficient to create a jury question. (Id.) Defendants have responded to Plaintiffs motion addressing noneconomic damages (Doc. 49). Plaintiff has replied. (Doc. 56).

Background

Plaintiff filed suit against Defendant law firm, Mumford & Protsch LLP, and Attorney Protsch, alleging malpractice in Protsch's handling of Plaintiff s sale of cattle. The facts gleaned from the documents filed by the Parties reveal the following: Plaintiff is a retired schoolteacher and part-time farmer. Plaintiff advertised 198 Black Angus cattle for sale through a newspaper advertisement placed on December 8, 2017. Plaintiff sold his cattle to Curt Knutson, who responded to the ad. (Doc. 1, ¶ 13). Plaintiff agreed to take a deposit and to finance the rest of the $270,000 purchase price himself with a “contract for deed.” (Doc. 46-3, PgID 478, quoting text of ad). He transferred the cattle during December 2023, 2017, in advance of a snowstorm and accepted a $30,000 check. On December 28, 2017, Plaintiff met with Protsch to arrange for paperwork for the sale. At that time, Defendant advised Plaintiff he should not have handled the livestock sale in this manner. Defendant also prepared UCC financing statements, a contract, security agreement and promissory note, which Zoss and Knutson signed on December 30, 2017. Defendant advised Zoss he would file and obtain a super priority purchase money security interest in connection with the sale. Protsch filed UCC financing statements in early January 2018 in North Dakota and South Dakota but included inaccurate information identifying the buyer.

In September 2019, Knutson was required to pay $30,000 to Zoss but defaulted. Zoss went to Knutson's farm and found that only 67 cows were at the property. Eventually, Knutson filed for bankruptcy. A credit union had a blanket security interest in Knutson's property as of 2016.

Plaintiff alleges malpractice in that Defendant: 1- failed to file the UCC financing statements in a manner to perfect Plaintiffs lien; 2- failed to search for other lien holders; 3-failed to include a provision in the contract addressing replacement of the cattle; 4-failed to provide competent legal advice; and 5-failed to notify Plaintiff that he may have committed malpractice. (Doc. 1). Plaintiff alleges breach of fiduciary duty for the same conduct and seeks compensatory damages, costs, and disbursements. Defendants deny the claims, and assert they are not the cause of any damages sustained by Plaintiff. (Doc. 14)

Legal Standard

1. SUMMARY JUDGMENT

Fed. R. Civ. Pro. 56 provides as follows:

Rule 56. Summary Judgment

(a) Motion for Summary Judgment or Partial Summary Judgment. A party may move for summary judgment, identifying each claim or defense-or the part of each claim or defense-on which summary judgment is sought. The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The court should state on the record the reasons for granting or denying the motion.

Fed. R. Civ. Pro. 56.

As many courts have emphasized, summary judgment is designed to implement the goal of the Federal Rules as a whole, which is to “secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting F.R.C.P. 1).

Rule 56(c) requires that summary judgment be entered “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). Garrison v. ConAgra Foods Packaged Foods, LLC, 833 F.3d 881, 884 (8th Cir. 2016) (citing Fed.R.Civ.P. 56(c)). As the Eighth Circuit has noted, “[S]ummary judgment is not disfavored and is designed for every action.” Briscoe v. Cnty. of St. Louis, 690 F.3d 1004, 1011 n.2 (8th Cir. 2012) (quoting Celotex, Ml U.S. at 327). When cross motions for summary judgment are before the Court, the general principles governing summary judgment apply. Anderson v. Nationwide Agribusiness Insurance Co., 2022 WL 3445838, *1 (D.S.D. 2022).

In reviewing a motion for summary judgment, a court examines “the record in the light most favorable to the nonmoving party ... drawing all reasonable inferences in that party's favor.” Whitney v. Guys, 826 F.3d 1074, 1075 (8th Cir. 2016) (citing Hitt v. Harsco Corp., 356 F.3d 920, 923-24 (8th Cir. 2004)). See also AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir. 1987); Rosebud Sioux Tribe v. Barnett, 2022 WL 1689393, *2 (D.S.D. 2022). The moving party bears the burden of showing both the absence of a genuine issue of material fact and its entitlement to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d202 (1986).

2. SUBSTANTIVE CLAIMS

The basis of Plaintiff's lawsuit is a claim for legal malpractice. The elements of such a claim have been set forth in many cases, including Zhi Gang Zhang v. Rasmus, as follows: “(1) the existence of an attorney-client relationship giving rise to a duty; (2) the attorney, either by an act or failure to act, breached that duty; (3) the attorney's breach of duty proximately caused injury to the client; and (4) the client sustained actual damage.” 932 N.W.2d 153, 162 (S.D. 2019) (quoting Peterson v. Issenhuth, 842 N.W.2d 351, 355 (S.D. 2014)). See also Loring v. United States, 2020 WL 1274989, *4 (D.S.D. 2020).

Plaintiff has also alleged Defendants breached their fiduciary duty to him. The elements of a claim of that nature were described in Chem-Age Industries v. Glover as follows: “a plaintiff must prove: (1) that the defendant was acting as plaintiffs fiduciary; (2) that the defendant breached a fiduciary duty to plaintiff; (3) that plaintiff incurred damages; and (4) that the defendant's breach of the fiduciary duty was a cause of plaintiffs damages.” 652 N.W.2d 756, 772 (S.D. 2002) (quoting Grand State Property, Inc. v. Woods, Fuller, Schultz, & Smith, 556 N.W.2d 84, 88 (S.D. 1996)).

The issue before the Court with respect to the Parties' motions is a narrow one: whether noneconomic damages may be recovered in a legal malpractice and breach of fiduciary duty case. A federal court sitting in diversity is cognizant that its task is “to interpret state law” and not to “contravene clear directives from state supreme courts.” Dzadiekv. Charter Oak Fire Insurance Company, 867 F.3d 1003, 1011 (8th Cir. 2017) (citing Karas v. American Family Insurance Co., 33 F.3d 995,1000 (8th Cir. 1994)). With that guidance the Court must examine current provisions of South Dakota law to resolve the question.

In Hamilton v. Sommers, the South Dakota Supreme Court discussed the issue of causation in a legal malpractice case and emphasized that proximate cause is an essential element. 855 N.W.2d 855, 861 (S.D. 2014) (quoting Bernie v. Catholic Diocese of Sioux Falls, 821 N.W.2d 232, 240 (S.D. 2012)). The same standard applies in a claim of breach of fiduciary duty. Chem-Age, 652 N.W.2d at 772.

In Peterson, the facts before the court involved a client who did not contact the attorney until after the action which had caused the damage. The court made clear that “[A]ctions of the defendant attorney in a malpractice action [cannot] be the proximate cause of plaintiff[ ] [client's] losses under a contract [that] existed before the attorney became involved in the transaction.” 842 N.W.2d at 356 (quoting Weiss v. Van Norman, 562 N.W.2d 113, 117 (S.D. 1997)). The court added that “an attorney is liable in a malpractice action only for losses actually sustained as a proximate result of the conduct of the attorney.” Id. (quoting Weiss at 117; Staab v. Cameron, 351 N.W.2d 463, 466 (S.D. 1984)). The Peterson court then discussed damages, all of which were economic, and stated plaintiffs could not recover because they had entered into the contract before contacting the attorney, who could not be responsible for their losses. Id. at 356.

Although noneconomic damages appear not to have been addressed in Peterson, the South Dakota Supreme Court did analyze the circumstances under which they may be awarded in Maryott v. First Nat. Bank of Eden, a case involving a bank's wrongful dishonor of the plaintiff's checks. 624 N.W.2d 96 (S.D. 2001). On appeal, the court approved the award of damages to cover the financial losses resulting from the bank's actions but disapproved the award of damages for emotional...