Court Opinion

ID: 43107
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:51:19+00
Date Added: 2024-06-11T09:40:10.479639
License: Public Domain

United States Court of Appeals
                                                                     Fifth Circuit
                                                                  F I L E D
               IN THE UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT                        May 23, 2006

                                                              Charles R. Fulbruge III
                                                                      Clerk
                              No. 05-60279

  JAMES B. CROSS, LELAND A. GRAUL, EILEEN M. MCGINLEY, SCOTT M.
         UNIVER, JACK A. WEISBAUM, and BDO SEIDMAN, LLP,

                        Plaintiffs-Appellants,

                                 versus

  FORMAN, PERRY, WATKINS, KRUTZ, & TARDY, PLLC, ALAN W. PERRY,
              WALTER H. BOONE, and PHILIP S. SYKES,

                        Defendants-Appellees.

                        --------------------
           Appeal From the United States District Court
              for the Southern District of Mississippi
                             3-02-CV-261
                        --------------------

Before KING, STEWART and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:*

     The plantiffs-appellants in this case, consisting of the

accounting firm of BDO Seidman, LLP and several of its member

partners   (referred   to   hereafter   collectively   as   “BDO”),     sued

defendants-appellees Forman, Perry, Watkins, Krutz, & Tardy, PLLC,

a law firm, as well as several of its members (referred to

hereafter collectively as “Forman”). BDO sued alleging malicious

     *
       Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
                           No. 05-60279
                                -2-

prosecution by Forman of a conspiracy claim arising from the

bankruptcy of one of Forman’s clients, River Oaks Furniture.

                          I. BACKGROUND

     River Oaks, a furniture company that is no longer a party to

this litigation, discovered accounting irregularities as it was

preparing its 1996 financial statements. It could not identify the

cause of the problem, and it asked its regular accounting firm,

BDO, to assist it. BDO cautioned River Oaks that it should hire an

outside accounting firm, but it agreed to stay on and it ultimately

determined that an employee of River Oaks, Kim Long, had committed

fraud in her capacity as bookkeeper for River Oaks.

     As a result of the irregularities, River Oaks filed a lawsuit

against BDO alleging negligence, and it later added a conspiracy

claim that BDO fraudulently attempted to avoid liability based on

an alleged delay in reporting the fraud to River Oaks after BDO

discovered it. River Oaks failed financially as a result of the

fraud and a delay in preparing its income statements, and the

lawsuit was transferred to bankruptcy court. Forman represented

River Oaks in these proceedings and on the conspiracy claim.

     The conspiracy claims Forman pursued alleged that BDO and its

members had knowledge of the fraud for several months prior to

reporting it to River Oaks. The claim alleged that BDO failed to

disclose its findings as part of a calculated effort to avoid
                            No. 05-60279
                                 -3-

liability in later litigation, and that it attempted to use its

role as auditor to seek evidence placing the blame on River Oaks’

management so as to deflect blame from itself.

     The bankruptcy court twice upheld the conspiracy claim on

summary judgment motions prior to trial, and it allowed River Oaks

to proceed to trial. At the close of the presentation of River Oaks

claims’ at trial, the court granted a motion for summary judgment

made by BDO on the conspiracy claim, finding that the evidence

presented did not support the claim.

     River   Oaks   ultimately   settled   with   BDO   and   waived   its

attorney-client privileges with respect to the lawsuit. BDO filed

the malicious prosecution claim that is the subject of the current

proceedings against Forman, alleging that Forman initiated the

conspiracy claims without basis and without consulting crucial

witnesses in determining whether there was a basis to file the

claim.

     Forman filed a motion for summary judgment, solely limited to

the issue of whether Forman had probable cause to file its claims.

BDO responded with a Rule 56(f) motion to stay summary judgment

pending discovery. The district court granted the motion, but

concluded that discovery should be limited because of the extensive

discovery conducted in the underlying bankruptcy case and the fact

that the summary judgment motion addressed only one element of the
                                  No. 05-60279
                                       -4-

claim. The district court allowed BDO five interrogatories and two

document requests.

      After oral argument and review of the evidence and the record,

the district court denied additional requests for discovery by BDO

and   granted   the    summary    judgment     motion.   The   district   court

concluded that the fact that the claim twice survived summary

judgment motions, combined with the answers to the interrogatories

and Forman’s duty to zealously advocate for River Oaks, meant that

probable cause existed as a matter of law. BDO has appealed,

assigning errors both to the decision to limit discovery and the

decision to grant summary judgment.

                                  II. ANALYSIS

      BDO has raised a number of issues relating to both the

discovery limitations and the summary judgment granted by the

district court on its malicious prosecution claim. As to the

limitations on discovery, BDO contends that additional discovery

was required to properly investigate the issue of probable cause

and   that   the     district    court   erred   in    imposing   unreasonable

limitations     on   discovery.    BDO   further      argues   that   privileged

communications       between    Forman   and   River    Oaks   were   improperly

withheld by Forman, and that Forman’s response to its discovery

request was inadequate because it merely regurgitated information

from the underlying case. As to the decision by the district court

to grant summary judgment, BDO argues that the court improperly
                                No. 05-60279
                                     -5-

decided    probable   cause    as    a    matter   of   law,     improperly      drew

inferences in favor of Forman as the moving party, and erred in its

consideration of the decision by the bankruptcy court to twice

affirm the conspiracy claim on summary judgment as evidence of its

merit. BDO also argues that there was a question of material fact

requiring a jury trial in that Forman failed to interview key

witnesses or investigate the claim.

      As to the discovery issues, the standard of review is for

abuse of discretion. Beattie v. Madison County Sch. Dist., 254 F.3d
595, 605 (5th Cir. 2001). As to the question of whether summary

judgment was properly granted, we review de novo. Blow v. City of

San Antonio, 236 F.3d 293, 296 (5th Cir. 2001).

      We   conclude   that    the    district      court   did    not    abuse    its

discretion in imposing limitations on discovery and did not err in

granting summary judgment.

      The district court did not abuse its discretion in limiting

the   discovery   here   to   five       interrogatories    and    two    document

requests. As the district court noted, this case had already been

subject    to   substantial    discovery      as    part   of    the    underlying

conspiracy claim and the bankruptcy case of which it was a part.

Additionally,     a   nonmoving     party    making     requests    for    further

discovery under Rule 56(f) must “show how the additional discovery

will defeat the summary judgment motion, that is, will create a

genuine dispute as to a material fact” and “‘may not simply rely on
                           No. 05-60279
                                -6-

vague assertions that additional discovery will produce needed, but

unspecified facts.’” International Shortstop, Inc. v. Rally’s,

Inc., 939 F.2d 1257, 1267 (5th Cir. 1992), quoting SEC v. Spence &

Green Chemical Co., 612 F.2d 896, 901 (5th Cir. 1980). We have

reviewed the five areas of inquiry BDO presented to the district

court as necessitating further discovery, and conclude that several

of these relied on vague assertions without specifying what facts

were to be discovered. To the extent these areas of inquiry were

sufficiently specific, we conclude that five interrogatories were

adequate to discover the facts that were specified. Our review

indicates that the district court did not err in its holding that

BDO failed to show a substantial need for the materials withheld

under the work-product doctrine. Finally, the similarity between

Forman’s response to the discovery requests here and its responses

made in the earlier litigation does not render the response here

inadequate. Forman was obligated to produce new information in its

response only to the extent that new information was available, and

BDO does not assert that any specific facts or documents are being

withheld. BDO’s discovery requests were sufficiently broad that an

adequate response would necessarily cover the same ground as prior

responses.

     The district court also did not err in granting summary

judgment to Forman as a matter of law. Under Mississippi law, in

malicious prosecution cases “the question of probable cause is a
                             No. 05-60279
                                  -7-

mixed question of law and fact; that whether the circumstances

alleged to constitute probable cause are sufficiently established,

is a matter of fact for the jury; but whether, supposing them to be

true, as alleged, they amount to probable cause, is a question of

law, to be decided by the court.” Owens v. Kroger, Co., 430 So. 2d
843, 847 (Miss. 1983), quoting Whitfield v. Westbrook, 40 Miss. 311

(Miss. 1866).    BDO argues that the district court improperly drew

inferences in favor of Forman, the moving party, by describing

Forman’s success in defending the conspiracy claims against two

summary judgment motions as “highly persuasive indicia that Forman

Perry   had   ample   probable   cause   to   file   and   prosecute”   the

conspiracy claims. We find no error here, as the district court

correctly stated its obligation to resolve doubts against the

movant and as BDO’s objection is predicated on the assumption that

it was improper to consider probable cause as a matter of law. BDO

additionally argues that it was error for the district court to

consider these prior rulings on the summary judgment motions as

conclusive proof of probable cause. The district court’s opinion

expressly stated that it did not consider these rulings to be

binding, and after referencing the summary judgment rulings it went

on to discuss the district court’s own review of the record. We

find no error in its decision to find the prior rulings on the

summary judgment motions persuasive but not conclusive. Finally,

BDO contends that there was an issue of material fact sufficient to
                           No. 05-60279
                                -8-

defeat summary judgment on the probable cause issue. We agree with

the district court that the ability of the conspiracy claims to

survive two summary judgment motions was substantial evidence of

their merit, and upon reviewing the record find no genuine dispute

as to a material issue of fact. We therefore AFFIRM the judgment of

the district court.