Court Opinion

ID: 1689
Source: CourtListenerOpinion
Date Created: 2010-04-15 00:15:04+00
Date Added: 2024-06-11T16:42:00.853691
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                            No. 09-1314

STAR BROADCASTING, INCORPORATED,

                Plaintiff – Appellant,

           v.

REED SMITH, LLP,

                Defendant - Appellee.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.    Claude M. Hilton, Senior
District Judge. (1:08-cv-00616-CMH-JFA)

Argued:   March 25, 2010                  Decided:   April 14, 2010

Before NIEMEYER and KING, Circuit Judges, and Eugene E. SILER,
Jr., Senior Circuit Judge of the United States Court of Appeals
for the Sixth Circuit, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED:   Arthur   Mark  Schwartzstein,  McLean,   Virginia,  for
Appellant.     William B. Cummings, WILLIAM B. CUMMINGS, PC,
Alexandria, Virginia, for Appellee. ON BRIEF: Jack D. Lapidus,
MACLEAY, LYNCH, GREGG & LYNCH, Washington, D.C., for Appellant.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

        In    June   2008,    Star   Broadcasting,      Incorporated     (“Star”),

instituted this legal malpractice suit in the Eastern District

of Virginia, alleging that the law firm Reed Smith, LLP (“Reed

Smith”), committed malpractice by rendering negligent advice in

its representation of Star.               In February 2009, after assessing

the relevant summary judgment record and applicable state law

legal principles — particularly with respect to expert-witness

issues — the district court awarded summary judgment to Reed

Smith.       See Star Broad., Inc. v. Reed Smith, LLP, No. 1:08-cv-

00616 (E.D. Va. Feb. 24, 2009) (the “Opinion”).                        This appeal

followed and, as explained below, we affirm.

                                          I.

                                          A.

        In early 1998, the Defense Commissary Agency (the “DeCA”) —

a Department of Defense agency that operates a worldwide chain

of   approximately      three     hundred       commissaries   providing   grocery

items    to    military      personnel,   retirees,     and    their   families   —

issued a Request for Proposal, seeking a contractor to install,

maintain, and operate a satellite-based radio network in its

                                            2
commissaries (the “RFP”). 1     The RFP explained that the contractor

would be responsible, at no cost to the DeCA, for broadcasting

music and announcements over the radio network.             Importantly,

the RFP further specified that the contractor “will be expected

to sell air time to potential advertisers to cover all cost[s]

associated with operation of the network and provide [the] DeCA

with a percentage of revenue generated by its sales.”            J.A. 59. 2

In other words, the DeCA expected the contractor to finance the

radio network by selling advertising opportunities to the DeCA’s

vendors — who supplied the commissaries with food and other

items — and to pay a percentage of the resulting advertising

revenue to the DeCA as a commission.

     In the spring of 1998, Star — a Minnesota corporation in

the business of installing and operating on-site radio networks

— submitted a contract proposal in response to the RFP.                 In

November 1998, the DeCA invited Pasquale (“Pat”) DiPlacido —

Star’s sole shareholder, president, and CEO — to present Star’s

proposal   at   the   DeCA’s   headquarters   in   Fort   Lee,   Virginia.

     1
       The facts spelled out herein are        drawn from the summary
judgment record and are presented in the       light most favorable to
Star,   as  the   nonmoving   party  in        the   summary  judgment
proceedings. See Seabulk Offshore, Ltd.        v. Am. Home Assur. Co.,
377 F.3d 408, 418 (4th Cir. 2004).
     2
       Citations herein to “J.A. ___” refer to the Joint Appendix
filed by the parties in this appeal.

                                    3
Written materials that DiPlacido provided to the DeCA during the

presentation confirmed that Star expected to generate sufficient

advertising revenue from the DeCA’s vendors to cover its costs

of operating the radio network in the commissaries.                                 DiPlacido

emphasized, however, that the DeCA would need to promote the

network    and    encourage       vendors      to     advertise     in   order       for    the

project     to    be    financially          viable.       Indeed,       Star’s      written

materials reflected that, pursuant to its proposal, the DeCA

would be obligated to encourage vendors to purchase advertising

from Star at a minimum rate of one quarter of one percent of the

DeCA’s     purchases      from    each       vendor. 3      Star    referred         to    this

mechanism — that is, the DeCA’s obligation to promote the radio

network     and       encourage    its        vendors      to   purchase        a    minimum

percentage of advertising — as “cooperative advertising.”

      On   February       8,   1999,     the       DeCA   decided   to    accept      Star’s

radio-network proposal for its commissaries.                         To initiate the

contract-drafting         process,       a    contracting       officer    at       the    DeCA

sent Pat DiPlacido of Star a draft contract, which the parties

referred to as the “strawman” agreement (the “strawman”).                                   The

strawman provided that Star, in return for an exclusive license

to   operate      a    radio   network       in     the   DeCA’s    commissaries,          was

      3
       For example, if the DeCA purchased $1 million in goods
from a particular vendor, the DeCA would encourage that vendor
to purchase at least $2500 in advertising from Star.

                                               4
obliged to install, maintain, and operate the network at no cost

to the DeCA.        Other than granting Star an exclusive license, the

strawman     imposed      no    obligations       on    the     DeCA.       Notably,      the

strawman      did        not    reference         Star’s        proposed       cooperative

advertising program.            After forwarding the strawman to Star, the

DeCA also scheduled a meeting with Star officials, to be held on

February 18, 1999, in order to finalize the license agreement.

      Prior to the February 18 meeting of Star and the DeCA, Pat

DiPlacido     contacted          Glenn       Mahone,     primarily         a    commercial

transactions        partner      in    Reed   Smith’s        Pittsburgh        office,    and

requested     that        Mahone      and     Reed     Smith      represent        Star    in

negotiating the final terms of the license agreement with the

DeCA.   Between February 9 and February 16, 1999, Pat and Frank

DiPlacido    (Pat’s       brother      and    Star’s    vice-president)          discussed

the strawman with Mahone on multiple occasions.                           The DiPlacidos

advised Mahone that the radio network could not be successful

without a cooperative advertising program.                       Attorney Mahone thus

knew that Star would not enter into a license agreement unless

the DeCA agreed to promote the radio network and encourage its

vendors to purchase advertising.                   Accordingly, Mahone prepared,

on behalf of Star, a revised strawman agreement (the “revised

strawman”) that included a “best efforts” provision, obligating

the   DeCA    to    “use       its    best    efforts      to    assist     Star    in    the

development        and    implementation          of    an      effective      advertising

                                              5
inventory    sales     program.”        J.A.    135.      The   revised       strawman

further obligated the DeCA to develop and implement “a vendor

cooperative advertising program . . . with a minimum of one-

quarter (1/4) of (1) one percent participation rate designated

for In-Store Radio” and “programs designed to promote the In-

Store Radio Network to commissary vendors.”                 Id. at 136.         Mahone

advised    Star    that    the   best    efforts       clause   included       in   the

revised strawman “met Star’s needs” and obligated the DeCA to

promote     the    radio     network      and      implement       a     cooperative

advertising program.         Id. at 224.        Mahone did not, in his work

for Star, consult with a government contracts specialist, nor

did he research any legal principles that could possibly limit

the DeCA’s ability to promote Star’s radio network.

     On March 12, 1999, after the DiPlacidos and Mahone met with

DeCA officials at Fort Lee to discuss the revised strawman, the

parties    executed    their     agreement      (the    “License       Agreement”    or

“Agreement”).        The License Agreement called for Star to sell

advertising directly to the DeCA’s vendors, but required the

DeCA to exercise its best efforts to assist Star in implementing

an advertising sales program to attract vendors to advertise on

the radio network.          In particular, the DeCA agreed to assist

Star in developing and implementing a cooperative advertising

program,    with   a    targeted    minimum      participation         rate    of   one

quarter of one percent.            The Agreement further obligated the

                                         6
DeCA       to    inform       vendors      of    Star’s     radio      network      in   the

commissaries            and    encourage         their      full     participation        in

advertising opportunities available through Star.

       Shortly thereafter, Star began performing under the License

Agreement by installing its in-store radio network in the DeCA’s

commissaries and selling advertising opportunities to the DeCA’s

vendors.          Mahone      and   Reed      Smith   had   no     further      professional

contact with Star concerning the Agreement until September 2002.

                                                B.

       In approximately June of 2002, more than three years after

the License Agreement had been executed, the DeCA requested a

meeting with the DiPlacidos concerning Star’s failure to abide

by the Agreement’s installation timeline, which specified that

Star was to complete installation of the radio network in the

commissaries by November of 2000. 4                    The DeCA was also concerned

about      maintenance        problems        experienced    at     those       commissaries

where Star had installed the radio network.                         Star thus agreed to

meet with the DeCA and included as a meeting agenda item its

concern         that    the    DeCA     had     not   implemented         the    Agreement’s

cooperative advertising program with its vendors.                               On September

25,    2002,      the    DiPlacidos        (without    Mahone)      met    with    the   DeCA

       4
       By June 2002, Star had completed installation in about 90
of the DeCA’s commissaries.

                                                 7
officials      at    Fort     Lee.      With      respect     to    the   cooperative

advertising program, the DeCA asserted that it was willing to do

all that it could to promote the radio network but that it could

not legally require its vendors to participate therein.                             When

Star explained that the cooperative advertising program did not

require the DeCA’s vendors to purchase advertising, the DeCA

asked Star for drafts of documents it might use to facilitate

the cooperative advertising program.

       In late September 2002, Pat DiPlacido contacted Mahone and

engaged him and Reed Smith to assist Star in drafting documents

that the DeCA might use to implement cooperative advertising

agreements with the commissaries’ vendors.                    As a result, Mahone

prepared a series of documents that set forth the “details” and

“requirements” of the proposed cooperative advertising program.

These documents specified that the program “would consist of

participation by the Vendor in the DeCA In-Store Radio Network

. . . based on a [rate of one quarter of one percent] of [the]

DeCA purchases from the Vendor as a participation rate,” and

that    each    vendor       would    pay       Star    for   the    advertising      it

purchased.          J.A.    151.     The    proposed      cooperative     advertising

program would thus be implemented by agreements between the DeCA

and its vendors, with Star as the third-party beneficiary.

       In   addition        to     drafting      the     cooperative      advertising

documents,     Mahone       also   prepared      a     proposed    amendment   to    the

                                            8
License      Agreement         (the       “proposed        amendment”        or     “amendment”).

The proposed amendment included a provision mandating that the

DeCA    implement         a    cooperative           advertising        program,         specifying

that

       [the] DeCA shall develop and implement procedures,
       with the buyers and merchandise managers, to inform
       vendors of the [radio network] . . . and encourage
       their   full   participation   in    the   In-Store   Radio
       advertising   and   promotion    opportunities    available
       through   Star   and   the   Network.       A   cooperative
       participation   rate   for   all    vendors   and   service
       contractors would be a targeted minimum of one-quarter
       (1/4) of one percent (1%) of all [the] DeCA purchases
       . . . .

J.A.    161.        On    December           19,    2002,      Frank     DiPlacido        sent    the

various      cooperative            advertising            documents        and    the     proposed

amendment to the DeCA.

       Six    months      later,        on      June     18,    2003,    a   DeCA       contracting

officer      wrote       to    Star       and    rejected       the     proposed        cooperative

advertising         program         and    the      proposed        amendment.            The    DeCA

official       explained         that      the      cooperative         advertising         program

would    illegally        obligate           the    DeCA       to   enter    into       advertising

agreements         with       its     vendors,           requiring       that      such     vendors

purchase advertising from Star.                            The DeCA’s letter emphasized

that the “Standards of Conduct for government personnel do not

permit       us     to        require        that        our    suppliers          use     specific

merchandising        or       advertising          sources.”          J.A.       168.     The    DeCA

insisted,         however,      that       it      would    continue        to    promote       Star’s

                                                     9
radio   network    within     its    regulatory    limitations     (e.g.,     by

announcing   the     network’s       availability,       displaying    Star’s

informational     brochures    and   posters,     and   advising   vendors    of

advertising opportunities).

     Shortly after receiving the DeCA’s June 18, 2003 letter,

Pat DiPlacido again consulted with Mahone, seeking to identify

Star’s options.      Mahone advised Star that the portion of the

License Agreement calling for a cooperative advertising program

was enforceable and that the DeCA, by failing and refusing to

implement    the      program,       had    breached       the     Agreement.

Nevertheless, he advised DiPlacido that Star should continue to

operate its radio network and complete the installation thereof

in the commissaries, emphasizing that Star had already failed to

adhere to the installation timeline and thus might be unable to

enforce the Agreement against the DeCA.                 Mahone advised that

Star could seek to recoup its losses in a breach of contract

lawsuit to be pursued after the Agreement’s expiration.                     Once

again, Mahone did not consult any of his colleagues at Reed

Smith, including those in the firm’s government contracts group.

Consistent with Mahone’s advice, Star continued to perform under

the Agreement.     In August 2004, however, the DeCA exercised its

right not to extend the Agreement beyond its termination date of

December 31, 2005.

                                      10
                                              C.

       On June 13, 2008, approximately two-and-a-half years after

the    License        Agreement        had     expired,         Star     initiated           this

malpractice suit against Reed Smith in the Eastern District of

Virginia,       invoking          diversity     jurisdiction           under      28     U.S.C.

§ 1332. 5      The complaint alleged that Mahone and Reed Smith had

failed to “competently represent Star in its relationship with

[the] DeCA” by neglecting to “appropriately involve Reed Smith’s

government contracts attorneys . . . to determine whether the

contract      he     negotiated      for   Star     was    enforceable.”              J.A.    18.

Star       alleged    that    a    reasonable      lawyer       negotiating       a     complex

transaction          with    a     governmental       agency        would        have    first

consulted      with     a    lawyer    experienced         in     government      contracts.

The complaint also alleged that, had Mahone done so, he would

have       learned    that    federal      regulations          barred     the    DeCA       from

endorsing       the     radio       network    and        would     have     advised         Star

accordingly.          Star thus alleged that Mahone’s and Reed Smith’s

negligence was the proximate cause of all losses incurred by

Star as a result of the License Agreement.

       Reed Smith moved for summary judgment on November 17, 2008,

contending,          inter    alia,     that       Star     had     failed       to     produce

       5
       Star is a Minnesota corporation with its principal place
of business in Minneapolis.    Reed Smith is a limited liability
partnership, and none of its partners are citizens of Minnesota.

                                              11
sufficient expert testimony to establish the elements of its

malpractice        claim.        In   response,         Star    asserted   that    expert

testimony was not required to survive a summary judgment motion,

as its malpractice claim turned upon matters within the common

knowledge of laypersons.               In the alternative, Star maintained

that summary judgment was precluded because its expert witnesses

had     forecast        sufficient      proof      of     its     malpractice     claim,

including the applicable standard of care, Reed Smith’s breach

thereof, and proximate causation.

       In its Opinion of February 24, 2009, the district court

carefully assessed the parties’ contentions and determined to

grant       Reed   Smith’s       summary    judgment       request.        The    Opinion

recognized that to establish a professional malpractice claim

under Virginia law, the plaintiff must present expert testimony

on    the    applicable      standard      of    care,    any    breach    thereof,   and

proximate causation, unless the claim turns upon matters within

the common knowledge of a layperson.                      See Opinion 16–17 (citing

Gregory v. Hawkins, 468 S.E.2d 891, 893 (Va. 1996); Heyward &

Lee Constr. Co. v. Sands, Anderson, Marks & Miller, 453 S.E.2d
270,       272   (Va.   1995);    Seaward       Int’l    v.    Price   Waterhouse,    391
S.E.2d 283, 287 (Va. 1990)). 6                  Because Star’s claim involved a

       6
       Virginia law governs Star’s malpractice claim against Reed
Smith because the License Agreement was executed and the alleged
(Continued)
                                            12
complicated contractual agreement and the possible applicability

of    government       regulations     outside        the    common       knowledge     of    a

layperson,       the    court    determined       that       Star   was      obligated       to

present expert testimony.              See id. at 17 (citing Gregory, 468
S.E.2d at 893).

        The    district        court    then      assessed          the      reports     and

depositions of Star’s proposed expert witnesses, concluding that

they    had    not     forecast    sufficient          evidence      to    withstand     the

summary       judgment    request      of    Reed      Smith.         Importantly,       the

Opinion observed that none of Star’s experts had rendered an

expert opinion on whether Reed Smith’s alleged negligence was

the proximate cause of Star’s claimed damages.                            See Opinion 17–

19.     For example, the court acknowledged that Michael Rigsby,

whose       opinions    Star    presented        to    establish       the    appropriate

standard of care and causation, asserted that Mahone should have

consulted a government contracts lawyer before advising Star as

to    the     enforceability      of   the     “best        efforts”      clause   in    the

License Agreement.             The court emphasized, however, that Rigsby

offered “no opinion whatsoever as to what would or should have

happened if Mr. Mahone had done so.”                    Id. at 18.         Similarly, the

court    assessed      the     testimony     of   L.     James      D’Agostino,       Star’s

negligent advice was at                least          partially      rendered      in    the
Commonwealth of Virginia.

                                            13
proposed expert witness on government contracts, and ascertained

that he too had expressed no opinion with respect to causation.

Id. at 17.     Although D’Agostino asserted that applicable federal

regulations     barred   the   DeCA   from    obligating      its    vendors   to

purchase advertising from Star, he relied exclusively on a Court

of Federal Claims decision — PinPoint Consumer Targeting Servs.,

Inc. v. United States, 59 Fed. Cl. 74 (2003) — rendered well

after Mahone had advised Star that the cooperative advertising

provision     was   enforceable.      D’Agostino     failed    to    present   an

expert opinion on whether a government contracts lawyer would

have advised Mahone, prior to the PinPoint decision, that the

DeCA was legally barred from participating in the cooperative

advertising program.      Accordingly, the court found that Star had

failed   to    produce   sufficient        expert   testimony       and   awarded

summary judgment to Reed Smith.        See Opinion 22.

     Star timely noted this appeal, and we possess jurisdiction

pursuant to 28 U.S.C. § 1291.

                                      II.

     On appeal, Star maintains that the district court erred in

awarding summary judgment to Reed Smith. 7           We review de novo such

     7
       More specifically, Star makes two appellate contentions:
(1) that the district court erred in concluding that expert
testimony was required to establish the elements of its
(Continued)
                                      14
an award, viewing the facts in the light most favorable to the

nonmoving party.    See Lee v. York County Sch. Div., 484 F.3d
687, 693 (4th Cir. 2007).     Summary judgment may be awarded only

if “there is no genuine issue as to any material fact and . . .

the movant is entitled to judgment as a matter of law.”           Fed. R.

Civ. P. 56(c).

     Having   had   the   benefit    of   oral   argument   and    having

carefully considered the briefs, the joint appendix, and the

applicable authorities, we are satisfied that summary judgment

was properly awarded in this case.        Accordingly, we affirm the

judgment entered in favor of Reed Smith, substantially for the

reasons spelled out by the district court.       See Opinion 16–23.

                                                                  AFFIRMED

malpractice claim; and (2) that even if expert testimony was
required, the depositions and reports of its three expert
witnesses were sufficient to withstand the summary judgment
request of Reed Smith.

                                    15