Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-5_06-cv-05076/USCOURTS-arwd-5_06-cv-05076-1/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1441 Petition For Removal--Other Contract

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The Court will rule on the Defendants’ Motion as a motion to dismiss. Plaintiff has indicated 1

to the Court it has not taken any depositions at this time and pursuant to the Court’s Final

Scheduling Order three months remained for discovery at the filing of Defendants’ motion.

Defendants contend that certain affidavit testimony submitted by Plaintiff was not proper 2

for summary judgment review. Because the Court has ruled on the pleadings as a motion

to dismiss only, the Defendants motion is denied. 

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

ROSE CARE, INC. PLAINTIFF

v. CASE NO. 06-5076

GODWIN GRUBER, LLP and 

G. MICHAEL STEWART DEFENDANTS

MEMORANDUM OPINION & ORDER

On March 30, 2006, this case was filed by Rose Care, Inc.

(“Rose Care”) in the Circuit Court of Benton County, Arkansas.

On May 1, 2006, the Defendants filed a Notice of Removal. The

Complaint alleges negligence, breach of contract, and breach of

fiduciary duty with regard to Defendants legal representation

of Rose Care. The Defendants filed a Motion to Dismiss or

Partial Summary Judgment and Brief in Support (Docs. 29 & 30)

as to Rose Care’s negligence and breach of fiduciary duty

claims. For the reasons set forth herein, the Defendants’

Motion is DENIED. Defendants also filed a Motion to Strike and 1

Objections to Rose Care’s Summary Judgment Evidence (Docs. 43

& 44). That motion is denied and the objections overruled.2

Standard of Review.

In ruling on a motion to dismiss, the district court must

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accept the allegations contained in the complaint as true, and

all reasonable inferences from the complaint must be drawn in

favor of the non-moving party. Hafley v. Lohman, 90 F.3d 264,

266 (8th Cir. 1996). Complaints should be liberally construed

in the plaintiff’s favor and should not be dismissed for failure

to state a claim “unless it appears beyond doubt that the

plaintiff can prove no set of facts in support of [its] claim

which would entitle [it] to relief.” Rucci v. City of Pacific,

327 F.3d 651, 652 (8th Cir. 2003) (quoting Conley v. Gibson, 355

U.S. 41, 45-46 (1957)).

Background.

Rose Care is a corporation engaged in the business of

operating nursing homes in Arkansas. In 2003, Rose Care faced

several lawsuits and hired Defendants G. Michael Stewart

(“Stewart”) and Godwin Gruber, LLP (“Gruber”) to represent Rose

Care in pending litigation. Rose Care has now sued the

Defendants for legal malpractice, breach of fiduciary duty, and

breach of contract in connection with Defendants’ representation

of Rose Care in the case of: Helen Ross, Special Administratrix

of the Estate of Eula Givens, Deceased v. Rose Care, Inc.,

Saline County Circuit Case No. CIV01-549-3 (“Givens”). 

In Givens, the plaintiff sued Rose Care for medical

malpractice, negligence, violations of the Arkansas Long Term

Care Residents’ Rights Law, and wrongful death in connection

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with the death of Eula Givens. In preparation of the

representation of Rose Care in the Givens trial, Stewart spent

approximately two weeks in Little Rock observing the trial of

another case against Rose Care. During this time, Stewart spent

extra time with Michele Rose, Rose Care’s corporate

representative. Rose Care alleges that Stewart used this time

to take advantage of Michele Rose, who it alleges was in a

vulnerable position because of the personal stress and other

problems caused by several pending lawsuits. Rose Care alleges

Stewart made inappropriate statements to Michele Rose and

engaged in inappropriate conduct with her while he represented

Rose Care in the Givens case. 

In the Givens trial, it was alleged that Rose Care had been

cited for several administrative violations and provided poor

treatment of Givens. The jury returned a verdict for the

plaintiff of $1,600,000 in compensatory damages. Rose Care,

still represented by the Defendants, appealed the verdict to the

Arkansas Court of Appeals, and also challenged the trial court’s

admission into evidence of a 1999 nursing home survey conducted

by the Arkansas Office of Long Term care (“OLTC survey”). Rose

Care argues the company would have paid only $300,000 in damages

if the case had settled as Rose Care requested. Rose Care

claims it was the insistence of Stewart that caused the case to

proceed to trial which resulted in increased costs to Rose Care.

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See the letter from G. Michael Stewart on Godwin Gruber letterhead, to Brian Reddick, 3

plaintiff’s attorney for the estate of Eula Givens (May 17, 2005) (enclosing two checks of

$500,000 each to settle the Givens case). 

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In the Spring of 2005, while the case was on appeal,

Stewart initiated settlement discussions. Rose Care contends

Stewart began settlement pursuit only because of the demands

from Michele Rose and Rose Care’s insurance representatives.

On May 12, 2005, Rose Care contends the Givens plaintiffs agreed

to conclude the case for $1,000,000, which it was willing to

pay. However, the Defendants contend Rose Care was pursuing a

global settlement of a group of cases being prosecuted by the

same plaintiff’s attorney. According to Defendants, the

settlement agreement had not been finalized by June 1, 2005––the

date the Arkansas Court of Appeals issued its opinion in

Givens––and therefore neither party to the Givens appeal

notified the Court of Appeals of a settlement. Rose Care

contends that a settlement had been reached and Stewart was

ethically and legally obligated to inform the Arkansas Court of

Appeals of the settlement. 

Rose Care contends Stewart also failed to disclose the

settlement to the attorney hired by Rose Care to represent it

in the appeal. Plaintiff contends Stewart misled this attorney

by stating the case was not settled because the terms were not

final, but that this was after Stewart sent the Givens’

plaintiff’s counsel $1,000,000 in settlement checks.3

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Givens, 91 Ark. App. at 208, 209 S.W. 3d at 406. 4

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Defendants contend that Michele Rose was asked via e-mail

whether she wanted to “shut down” the appeals process or wait

for the result, and contend they complied with her answer:

“whatever.” (See Ex. F at 1). 

On June 1, 2005, the Arkansas Court of Appeals issued its

decision in favor of the plaintiffs on all issues. Defendants

contend existing Arkansas law was applied and no new law was

created, but Rose Care argues the decision was detrimental to

future litigation against Rose Care. Prior to Givens, the

plaintiffs against Rose Care had to prove the specific OLTC

survey either named the plaintiff in the survey, or was

conducted while that plaintiff was a resident of that specific

nursing home. Rose Care contends that, after Givens, OLTC

surveys were difficult to keep out of evidence because the

Arkansas Court of Appeals ruled the surveys could be considered

as to the defendant [Rose Care] regardless of when the study

took place. 

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Plaintiff contends the Arkansas Court of Appeals also ruled

the jury should have been allowed to hear arguments on punitive

damages at the trial and because of that ruling, Rose Care will

be forced to expend more money to defend punitive damages issues

and be under greater pressure to settle future cases. 

The plaintiff’s attorney opposing Rose Care in the Givens

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See the email from Michael Stewart to Michele Rose (May 4, 2005)(estimating the six cases 5

would be settled for approximately $800,000. (Ex. C, App. 17)

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case, had five other cases pending against Rose Care when the

Arkansas Court of Appeals issued its opinion. Rose Care

contends that in the Spring of 2005, plaintiff’s suggested

settlement amounts for the six pending cases, totaled $1.9

million. Rose Care contends in May 2005, Stewart wrote Michele

Rose assuring her those numbers were starting figures for

negotiating purposes and the final total would be much lower.5

After the Givens opinion was issued, the attorney for plaintiffs

in the six pending cases insisted those figures were “firm

offer” numbers and were non-negotiable. Rose Care further

contends the additional cases settled for amounts higher than

estimated prior to the Givens opinion. 

Rose Care contends the actions and inactions of Defendants

damaged it both strategically and financially, and Defendants

thereby committed legal malpractice. Defendants contend there

was no harm to Rose Care in the global settlement prior to the

issuance of the Givens opinion as they were for the same amount

originally offered by the Givens plaintiffs, and no increase in

costs occurred. 

Analysis. 

The Defendants argue Rose Care’s negligence and breach of

fiduciary duty claims based on Defendants’ representation of

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E-mail from Jess Askew, appellate attorney for Rose Case in the Givens case, to Michael 6

Stewart (May 26, 2005)(Ex. P). 

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Rose Care during the Givens case should be dismissed for failure

to state a claim under Fed. Rules of Civ. Proc. (“F.R.C.P.”)

12(b)(6). Defendants contend Rose Care’s claims will fail on

the issues of proximate cause and damages. To prove damages and

proximate cause, the plaintiff must show that, but for the

alleged negligence of the attorney, the result in the underlying

action would have been different. Barnes v. Everett, 95 S.W.3d

740 (Ark. 2003). 

Rose Care has demonstrated facts sufficient to state a

claim in the underlying Givens causes of action. Rose Care

contends it expressed a desire to settle the Givens case prior

to the appeal but was discouraged by Stewart, and that

thereafter Stewart did not provide the Arkansas Court of Appeals

notice of the settlement. Rose Care contends Stewart was on

notice of the potential risk of allowing a ruling on the settled

case as evinced by the email from Jess Askew. Rose care 6

alleged an increase of $700,000 in costs to conclude the Givens

case because Stewart did not allow Rose Care to accept an offer

for $300,000, and $1 million was eventually required to conclude

the case. 

Rose Care contends it can no longer be as successful in

preventing the issue of punitive damages from reaching the jury

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in future cases because of the Givens opinion, and the Arkansas

Civil Justice Reform Act will not shield Rose Care from the

punitive damages ruling in the Givens opinion as Defendants

contend. Construing the facts from the briefs of the parties

in favor of Rose Care, the non-moving party, the Court can only

conclude Rose Care has met its burden to survive a motion to

dismiss. 

Defendants contend Rose Care’s claim of negligence and

breach of fiduciary duty claims based on the alleged intimate

relationship between Stewart and Michele Rose should be

dismissed for failure to state a claim under F.R.C.P. 12(b)(6)

because Rose Care failed to establish facts sufficient to

support such a claim. Rose Care has again demonstrated facts

sufficient to state a claim as to the alleged inappropriate

relationship of Stewart and Michele Rose. Defendants claim Rose

Care lacks standing, has no basis for such a claim, and can not

demonstrate proximate causation. 

Intentional misconduct is not required for an attorney to

violate the Rules of Professional Conduct, rather gross

negligence in handling a client’s matter is sufficient for a

violation of the rules. Fink v. Neal, 945 S.W.2d 916 (Ark.

1997). Defendants contend because Michele Rose was only the

corporate representative for Rose Care, and Rose Care, Inc. was

the actual client, that Stewart and Michele Rose did not enjoy

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See Plaintiff’s Initial Disclosure (listing Dent Gitchell as an expert witnessfor the Plaintiff.

7

Professor Gitchell is a University of Arkansas Law Professor and expert on the law of legal

and professional ethics). 

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an attorney-client relationship, and therefore no inappropriate

conduct could have occurred. 

Rose Care contends Stewart was involved with someone so

close to the case that it had to affect fair representation.

Rose Care contends the negative effect was improper persuasion

over Michele Rose and an unnatural influence over her decisionmaking for Rose Care which exposed Rose Care to increased

damages. Rose Care indicates it will call an expert witness who

will offer testimony regarding how Stewart breached the standard

of care and the duties of an ordinarily careful and prudent

attorney. Rose Care has sufficiently demonstrated its prima 7

facie case for legal malpractice and Defendants motion to

dismiss is denied on this point as well. 

Conclusion. 

For the reasons set forth herein, the Defendants Motion to

Dismiss is DENIED. IT IS SO ORDERED this 12th day of April,

2007. 

/s/ Robert T. Dawson 

ROBERT T. DAWSON 

UNITED STATES DISTRICT JUDGE

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