Court Opinion

ID: 1025451
Source: CourtListenerOpinion
Date Created: 2013-07-05 06:49:59.239069+00
Date Added: 2024-06-11T15:09:43.591376
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 07-1009

CHRISTOPHER U. HALL,

                Plaintiff - Appellant,

           v.

ROGER J. SULLIVAN; MARK DEVAN; COVAHEY, BOOZER, DEVAN & DORE,
LLC; DIPAULA & SULLIVAN, LLC,

                Defendants - Appellees,

           v.

SODEXHO, INCORPORATED,

                Movant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. William D. Quarles, Jr., District Judge.
(1:04-cv-02846-WDQ)

Argued:   January 31, 2008                 Decided:   April 8, 2008

Before WILKINSON and TRAXLER, Circuit Judges, and Liam O’GRADY,
United States District Judge for the Eastern District of Virginia,
sitting by designation.

Affirmed by unpublished per curiam opinion.
ARGUED: Michael P. Coyle, Columbia, Maryland, for Appellant.
Stephan Young Brennan, ILIFF & MEREDITH, P.C., Pasadena, Maryland,
for Appellees.    ON BRIEF: Kathleen Howard Meredith, ILIFF &
MEREDITH, P.C., Pasadena, Maryland, for Appellees.

Unpublished opinions are not binding precedent in this circuit.

                                2
PER CURIAM:

        Christopher Hall sued Roger J. Sullivan, Esq., Mark Devan,

Esq., DiPaula & Sullivan, LLC, and Covahey, Boozer, Devan & Dore,

LLC, for legal malpractice. The district court granted Defendants’

motion for summary judgment and denied Plaintiff’s motion for

summary judgment.        The district court held that under Maryland law

Hall had not met the burden of proving that defendants breached the

standard     of   care     in   structuring       the    franchise   investment

transaction,      that   the    termination      agreement    concerning   other

franchises did not release Hall’s rights under the remaining

franchise agreement, and that Hall failed to prove that he suffered

a loss proximately caused by defendants.                The district court also

held that the attorneys properly billed Hall for their efforts to

enforce the franchise rights and that Sullivan’s alleged negligence

in making settlement demands to Smoothie King® did not cause Hall’s

losses.    Finding no error, we affirm the judgment of the district

court.

                                       I.

     Christopher Hall, a seasoned businessman who previously owned

GNC® franchises, sought to invest in Smoothie King® franchises in

1998.    Hall consulted with the law firm of Kilpatrick Stockton LLP

in connection with a venture capital investment in, and consulting

service    arrangement      with,   the       acquisition   of   three   separate

                                          3
Smoothie King® franchises; one in North Carolina, one in Boston,

and one in South Carolina.        Hall received a retainer letter from

Kilpatrick Stockton LLP on June 19, 1998, which detailed the

documents necessary to complete Hall’s desired franchise investment

transactions.

     Instead of retaining Kilpatrick Stockton LLP, Hall faxed the

retainer letter from Kilpatrick Stockton LLP, containing Hall’s

handwritten annotations from his conversations with them, along

with a handwritten note to Sullivan on June 23, 1998.                  Hall

instructed    Sullivan    to   expeditiously      prepare   the    documents

delineated in the Kilpatrick Stockton LLP retainer letter.             Hall

emphasized that the transaction was to be structured so that Hall

would provide financial backing and consulting services to the

three franchises, yet Hall’s liability would be limited, his

investment would be protected, and Hall would not have to pay state

taxes.

     Hall further told Sullivan to create three corporations for

the Smoothie King® franchises and to prepare warrant certificates

to   each    franchise,   which    Hall   would    hold.     The    warrant

certificates, upon presentation, would allow Hall to purchase a

majority interest in each corporation on demand, thereby permitting

Hall to step in and take control of the franchise.           The structure

of this transaction, as envisioned by Hall, protected his interest

in the Smoothie King® franchise, yet shielded him from liability.

                                     4
     Sullivan, who previously represented Hall in connection with

other legal matters, agreed to represent Hall in this matter.

Accordingly, Sullivan prepared the franchise investment transaction

documents specified by Hall for the three franchises.               With regard

to the South Carolina franchise, Hall provided financing to Ryan

Beck, so that Beck could open and manage the South Carolina

franchise.       Sullivan created a corporation called Rybeck, Inc. to

hold the franchise assets and prepared a warrant agreement signed

by Ryan Beck on behalf of Rybeck, Inc.                  The warrant agreement

allowed Hall to become the majority shareholder of Rybeck, Inc. on

demand, giving him the authority to exercise control of the South

Carolina franchise at his option.            Sullivan also reviewed and

prepared other documents for the South Carolina franchise1.

     The structure of Hall’s proposed transaction required advance

approval    by    Smoothie   King®,   because     the   franchise   investment

structure violated certain terms of the Smoothie King® Franchise

Agreement    and     Smoothie    King®     Area    Development      Agreement.

Accordingly, Sullivan drafted a letter agreement on July 10, 1998,

to Smoothie King® which detailed the structure of Hall's franchise

     1
      Sullivan prepared the Smoothie King® Area Development
Agreement, the Smoothie King® Franchise Agreement naming Ryan Beck
as franchisee, a pledge and security agreement between Hall, Ryan
Beck, and Rybeck, Inc., a revolving credit master note for Rybeck,
Inc., a revolving credit loan agreement for Rybeck, Inc., a
consulting agreement, and a guarantee agreement signed by Ryan
Beck.

                                       5
investment transaction2. Approval was received on October 8, 1998.

Pursuant to the South Carolina Smoothie King® Area Development

Agreement,     Ryan   Beck   and   Rybeck,    Inc.,   which    were    treated

interchangeably by Smoothie King® and Hall, were to have three

Smoothie King® stores in operation by November 1, 1999.               Ryan Beck

and Rybeck, Inc. opened one store in South Carolina in early 1999.

     Beck also opened a Smoothie King® cart at the University of

South Carolina campus but ceased the operation soon thereafter

because of operational problems. Beck attempted to open a Smoothie

King® store at the University of South Carolina in March 1999, but

the University declined to enter into a contract.             As a result of

the failed business venture with the University of South Carolina,

Hall believed that he had causes of action against Smoothie King®

for breach of contract and tortious interference of contract3.

     By May 11, 2000, Beck and Rybeck's only store was in default

for failure to pay operating and advertising fees to Smoothie

King®,   and   Beck   and    Rybeck   were   in   default   under     the   Area

     2
      Hall would provide financial backing to Ryan Beck for the
South Carolina franchise, and to two other individuals for the
North Carolina and Boston franchises, and Hall maintained the right
to step in and take control of each franchise at any time. The
letter agreement also set forth each section of the Smoothie King®
Franchise Agreement and Smoothie King® Area Development Agreement
that this transaction could potentially violate, and sought
Smoothie King®’s approval.
     3
      Hall believed that Smoothie King® attempted to negotiate a
contract with the University of South Carolina to cut him out of
the deal and place him in default under the Area Development
Agreement for failure to open the requisite number of franchises.

                                       6
Development Agreement for failure to open the requisite number of

Smoothie King® stores.     As a result of Beck and Rybeck’s defaults,

in March of 2002 Sullivan obtained a confessed judgment on behalf

of Hall against RyBeck, Inc. in the amount of $348,730.23 plus

attorney's fees in the amount of $52,309.53, and a confessed

judgment against Ryan Beck in the amount of $431,411.23, plus

attorney's fees in the amount of $64,711.18.        Sullivan was able to

obtain these judgments in favor of Hall because of the documents

Sullivan had earlier prepared to protect Hall’s interest in the

South Carolina franchise.        On April 3, 2002, Hall exercised the

warrant certificates and became the majority shareholder of Rybeck,

Inc.   On September 6, 2002, Hall and Beck signed an agreement that

transferred all of Ryan Beck’s rights under the Smoothie King®

Franchise Agreement to Hall.

       Hall also encountered difficulties with the Boston and North

Carolina franchises, and Smoothie King® stores in those locations

never opened.     Sullivan negotiated a Termination Agreement between

Smoothie King®, Hall, and the two franchisees in those locations,

which was entered into on June 15, 2001.              The terms of that

Agreement released Hall and the franchisees from their obligations

under the Smoothie King® Franchise Agreements and Smoothie King®

Area Development Agreements, and Hall received a full return of his

investment   in   the   Boston   and   North   Carolina   franchises   from

Smoothie King® in the amount of $65,000.00.

                                       7
     Ryan Beck eventually abandoned the South Carolina franchise,

moved to Florida for personal reasons, and became an operations

manager at Smoothie King® Corporate.      As a result of Hall and Ryan

Beck’s deteriorated relationship, Ryan Beck’s move to Florida, and

the failure of the University of South Carolina business venture,

Hall accused Smoothie King® of breach of contract and tortious

interference of contract. Smoothie King® responded by letter that

the Termination Agreement had released all claims against it for

the Boston, North Carolina, and South Carolina franchises, and that

Hall’s claim for tortious interference lacked merit.      Hall did not

further pursue the claim against Smoothie King® and instead filed

the instant legal malpractice action.

                                  II.

     Hall   disputes   the   district   court’s   conclusion   that   the

attorneys did not breach the appropriate standard of care under

Maryland law.4   Hall also argues that the district court erred when

it ruled that the Termination Agreement did not negate Hall’s

ability to sue Smoothie King® or vitiate the 1998 letter agreement.

     4
      Hall also argues that the district court improperly granted
summary judgment as to the issue of Sullivan’s negligence with
regard to the South Carolina franchise sua sponte, thereby
violating the notice requirement as set forth in Allstate Ins. Co.
v. Fritz, 452 F.3d 316, 323 (4th Cir. 2006). This argument lacks
merit, as the testimony of Hall’s own expert that Sullivan did not
breach the standard of care in structuring the transaction was part
of the record. This focal issue was also addressed in the summary
judgment briefs before the district court.

                                   8
Further, Hall argues that if we determine the attorneys were

negligent, Hall is entitled to a portion of the fees he paid to the

attorneys.      Lastly, Hall argues that the district court erred when

it    granted     summary   judgment     in     Sullivan’s        favor       regarding

intemperate letters written to Smoothie King®, which Hall argues

caused Smoothie King® to decline to enter into settlement agreement

with him.

                                       III.

      In order to recover against an attorney for legal malpractice

in    Maryland,     a   plaintiff   must       prove       “(1)    the    attorney’s

employment,(2) the attorney’s neglect of a reasonable duty, and (3)

loss to the client proximately caused by that neglect of duty.”

Thomas v. Bethea, 718 A.2d 1187, 1195 (Md. 1998).                  “In order to be

a proximate cause, the negligence must be [(]1) a cause in fact,

and [(]2) a legally cognizable cause.”                Atlantic Mut. Ins. Co. v.

Kenney, 591 A.2d 507, 512 (Md. 1991).               In a legal malpractice case,

expert testimony is required to establish the standard of care and

breach thereof when the acts in question are not “within the common

knowledge or experience of a layperson as to enable him or her to

readily recognize or infer negligence therefrom.”                   Royal Ins. Co.

of Am. v. Miles & Stockbridge, P.C., 138 F. Supp. 2d 695, 701 (D.

Md.   2001),     modified   by   Royal       Ins.    Co.   of     Am.    v.    Miles   &

Stockbridge, P.C., 142 F. Supp. 2d 676 (D. Md. 2001).

                                         9
                               IV.

     The district court found that expert testimony was necessary

in this case.   The district court then correctly concluded that

Hall’s legal malpractice claim failed because he had not produced

expert testimony establishing that the structure of the franchise

transaction, as dictated by Hall, was a breach of the standard of

care.   In fact, the court found that Hall's own expert witness

concluded that the structure of the transaction by Sullivan was not

a breach of the standard of care.    Hall also argues that the

district court ignored the further testimony of his expert that

Sullivan had erred by improperly drafting the franchise transaction

to name Ryan Beck as franchisee of the South Carolina franchise

instead of naming Rybeck, Inc., as was intended. Hall argues that,

because he held a warrant certificate to Rybeck, Inc., and not to

Ryan Beck, his interest in the Columbia franchise was not protected

and he was therefore unable to compel Ryan Beck to transfer the

franchise on demand pursuant to the warrant certificate.    Again,

under Maryland law, Hall was required to establish through expert

testimony the relevant standard of care for implementation of the

franchise transaction.    Without an expert establishing to the

court's satisfaction the duty of reasonable care of counsel in this

business setting, i.e., the standard of care, the court cannot

determine whether the alleged error constitutes legal malpractice.

Hall's expert failed to do so in this case.    See Royal Ins. Co.,

                                10
138 F. Supp. 2d at 701.         Therefore, the district court properly

denied this claim.

                                     V.

     Under Maryland law, a plaintiff in a legal malpractice case

must also establish that he sustained a loss that was proximately

caused by the attorney’s breach of a reasonable duty.          See Thomas,

718 A.2d at 1195. The district court correctly concluded that Hall

had not met this burden after analyzing the pertinent documents.

     The     district   court    properly   construed   the    Termination

Agreement to preserve Hall’s rights in the South Carolina franchise

and noted that Ryan Beck was not a signatory to the Termination

Agreement of the Boston and North Carolina franchises5.          Moreover,

the court found that Hall’s rights in the South Carolina franchise

were preserved by the July 10, 1998, letter agreement between

Smoothie King® and Hall that approved the franchise investment

structure.     Accordingly, Hall could step in at any time to take

control of the South Carolina franchise.          Therefore, the court

found that Hall had the ability to assert his rights on behalf of

the South Carolina franchise but declined to do so.           He cannot now

claim that he suffered damages for his own failure to assert his

rights.

     5
      This finding blunts Hall’s claim that Sullivan erred in
naming the South Carolina franchise in the name of Ryan Beck, not
RyBeck, Inc.

                                     11
                               VI.

     For the foregoing reasons, we affirm the judgment of the

district court.6

                                                         AFFIRMED

     6
      We decline to address any further issues raised by Appellant
as they lack merit and are made moot by our holdings herein.

                               12