Court Opinion

ID: 204611
Source: CourtListenerOpinion
Date Created: 2011-02-11 20:15:51+00
Date Added: 2024-06-11T17:27:44.944898
License: Public Domain

FILED
                                                            United States Court of Appeals
                                                                    Tenth Circuit

                                                                 February 11, 2011
                     UNITED STATES COURT OF APPEALS
                                                  Elisabeth A. Shumaker
                                                                    Clerk of Court
                            FOR THE TENTH CIRCUIT

    GARY JEROME LYON;
    JEANNE LYON,

                Plaintiffs-Appellants,
                                                          No. 10-2192
    v.                                        (D.C. No. 1:08-CV-01114-LFG-DJS)
                                                           (D. N.M.)
    ESTEBAN A. AGUILAR, SR.;
    AGUILAR LAW OFFICES, and
    DOES I-X,

                Defendants-Appellees.

                             ORDER AND JUDGMENT *

Before MURPHY, Circuit Judge, McWILLIAMS, Senior Circuit Judge, and
McKAY, Circuit Judge.

         Pro se plaintiffs-appellants Gary and Jeanne Lyon appeal from the district

court’s judgment entered in favor of defendants-appellees Esteban A. Aguilar and

Aguilar Law Offices, P.C. (“ALO”). On appeal, plaintiffs challenge the district

*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
court’s orders (1) granting summary judgment in favor of defendants on all claims

in the complaint; (2) denying plaintiffs’ motion to amend their complaint; and

(3) denying plaintiffs’ motion to disqualify defense counsel. We have jurisdiction

over this diversity case pursuant to 28 U.S.C. § 1291, and we affirm.

                                          I.

      The district court provided a thorough summary of the facts in its orders

granting summary judgment, and we need not restate them in detail here. This

case involves allegations of legal malpractice arising out of Mr. Aguilar’s

representation of plaintiffs in two related cases filed in state court in New

Mexico: a legal malpractice suit against Gregory Pelton, and an insurance bad

faith suit against Title Resources Guaranty (TRG). In the state cases, summary

judgment was granted in favor of TRG and partial summary judgment was granted

in favor of Mr. Pelton. After Mr. Aguilar was given permission to withdraw from

representing plaintiffs, they dismissed the remaining claims they had against

Mr. Pelton.

      Plaintiffs ultimately filed a pro se complaint in federal district court against

Mr. Aguilar and his law firm, alleging various state law claims including breach

of contract, professional malpractice, and breach of fiduciary duty arising out of

defendants’ representation in the TRG and Pelton cases. Plaintiffs subsequently

moved to amend their complaint to assert claims under 42 U.S.C. § 1983, alleging

that defendants violated their constitutional rights to due process and equal

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protection. The district court denied the motion. Plaintiffs also moved to

disqualify the Madison law firm from representing defendants. The district court

also denied that motion.

      Defendants filed three motions for partial summary judgment. In the first

motion, defendants moved to dismiss with prejudice all of plaintiffs’ claims that

were not covered by defendants’ professional liability insurance policy. In the

second and third motions, defendants moved for judgment on the remaining

claims for professional malpractice and breach of fiduciary duty related to

defendants’ handling of plaintiffs’ cases against TRG and Mr. Pelton. The

district court granted all three motions and entered judgment in favor of

defendants. Plaintiffs now appeal and challenge the district court’s orders

denying their motion to amend their complaint, denying their motion to disqualify

defense counsel, and granting summary judgment in favor of defendants on all

claims in the complaint.

                                         II.

      We review for abuse of discretion the district court’s denial of the motion

to amend and the denial of the motion to disqualify counsel. See Anderson v.

Suiters, 499 F.3d 1228, 1238 (10th Cir. 2007); Chavez v. New Mexico, 397 F.3d

826, 839 (10th Cir. 2005). “We review the district court’s grant of summary

judgment de novo, applying the same legal standard used by the district court.”

Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005). Summary

                                         -3-
judgment is appropriate “if the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to a judgment as a matter of law.”

Fed. R. Civ. P. 56(a). 1 “When applying this standard, we view the evidence and

draw reasonable inferences therefrom in the light most favorable to the

nonmoving party.” Garrison, 428 F.3d at 935 (quotation omitted).

      Motion to Amend Complaint

      The district court denied plaintiffs’ motion to amend their complaint,

concluding it would be futile to allow amendment of the complaint to add a

§ 1983 claim because it would be subject to a subsequent motion to dismiss under

Fed. R. Civ. P. 12(b)(6). The district court reached this conclusion based on its

determination that plaintiffs could not show that the two defendants in this

case—a private attorney and his law firm—acted under color of state law, which

is a requirement for stating a claim under § 1983, see West v. Atkins, 487 U.S. 42,

48 (1988) (“To state a claim under § 1983, a plaintiff . . . must show that the

alleged [constitutional] deprivation was committed by a person acting under color

of state law.”).

1
      Rule 56 has recently been amended, effective December 1, 2010. The
summary judgment standard previously enumerated in subsection (c) was
moved to subsection (a), and there was one word change from the previous
version–genuine “issue” became genuine “dispute.” Fed. R. Civ. P. 56 advisory
committee note (2010 Amendments). But the “standard for granting summary
judgment remains unchanged.” Id.

                                         -4-
      In plaintiffs’ proposed amended complaint, they alleged that defendants’

fraudulent misrepresentations and manipulation of the New Mexico Second

Judicial District Court and the New Mexico Court of Appeals resulted in

violations of their constitutional rights to due process. Plaintiffs relied on Dennis

v. Sparks, 449 U.S. 24 (1980), to support their motion to amend. In Dennis, the

Court found that private actors were acting under color of state law because they

were “willful participant[s] in a joint action” with a judge. See id. at 27-28. In

contrast, plaintiffs here did not allege any joint action between defendants and the

various judges or courts before whom plaintiffs’ litigated. In addition, plaintiffs

acknowledged in their objections to the order denying their motion to amend that

their case was different from the Dennis case because “the New Mexico Courts

were deceived unknowing participants,” as compared to the judge in the Dennis

case who was a “coconspirator.” R. Vol. 1 at 248. Because plaintiffs’ proposed

amended complaint did not state a valid § 1983 claim and would have been

subject to dismissal, the district court properly denied plaintiffs’ motion to amend

based on futility. See Anderson, 499 F.3d at 1238.

      Motion to Disqualify Counsel

      In its order denying the motion, the district court noted that plaintiffs were

not seeking to disqualify the Madison firm because that firm had previously

represented plaintiffs and was now representing Mr. Aguilar and ALO in

opposition to plaintiffs; instead, plaintiffs offered a somewhat “novel” theory to

                                         -5-
disqualify the Madison law firm from representing defendants. R. Vol. 1 at 482.

Plaintiffs asserted that since Michael Brennan, formerly with the Madison firm,

represented Mr. Pelton in their legal malpractice action against him, the Madison

firm should be disqualified from representing defendants in this litigation because

Mr. Aguilar was their attorney in the Pelton litigation. Plaintiffs also contended

that certain pleadings filed in the Pelton litigation might become exhibits in the

present litigation, and those exhibits would have the Madison firm’s name on

them; and further that members of the Madison firm might be called upon to give

testimony in plaintiffs’ lawsuit against defendants.

      The district court concluded that there was no apparent conflict of interest

in the Madison firm’s representation of Mr. Pelton that would preclude them from

representing defendants in this case; the Professional Rules of Responsibility did

not preclude the Madison firm from representing defendants; and Mr. Brennan

and the Madison firm owed no duty to the plaintiffs in either the present or prior

litigation. The court noted also that “to the extent any information about the

Madison firm’s prior representation of [Mr. Pelton] is relevant, that information is

likely available from other sources that would not serve to put the Madison firm

in a position of conflict or violating its obligations of confidentiality.” Id. at 486.

Plaintiffs subsequently filed a motion for reconsideration, which the district court

denied. Plaintiffs have failed to show that the district court abused its discretion

in denying their motion to disqualify or their motion for reconsideration.

                                          -6-
      Summary Judgment on the Claims not Covered by Insurance

      Defendants moved for summary judgment on the claims in the complaint

that were not covered by defendants’ insurance policy, arguing that those claims

were discharged in defendants’ respective bankruptcy proceedings. The district

court agreed and granted summary judgment on all claims in the complaint except

the claims for professional malpractice and breach of fiduciary duty.

      Mr. Aguilar and ALO had each initiated separate bankruptcy proceedings

before plaintiffs filed suit against them. After plaintiffs commenced their lawsuit,

defendants notified the district court of their bankruptcy proceedings and the

litigation was automatically stayed. Plaintiffs initially filed an adversary

complaint in bankruptcy court seeking a ruling that their claims against

defendants were non-dischargeable; alternatively, they requested that the

bankruptcy court lift the stay to allow their suit to proceed in district court for

recovery of damages up to the limits of defendants’ liability insurance coverage.

Ultimately, plaintiffs were able to obtain orders from the bankruptcy court

granting a partial lifting of the automatic stay. Plaintiffs subsequently dismissed

their adversary action in the bankruptcy proceedings and did not further

participate in or contest either the personal or corporate bankruptcy cases. The

bankruptcy court discharged defendants’ debts and both bankruptcy proceedings

were closed by final decree in October 2009.

                                           -7-
      On appeal, plaintiffs argue that the district court usurped the jurisdictional

authority of the bankruptcy court and erred in granting summary judgment in

favor of defendants on all claims not covered by the insurance policy. We

disagree. Plaintiffs have failed to show any reversible error in the district court’s

decision.

      The bankruptcy code has a specific procedure for creditors to challenge the

discharge of claims by filing an adversary complaint within sixty days after the

first creditors’ meeting. See 11 U.S.C. § 523(c)(1); Fed. R. Bankr. P. 4007(c).

That filing deadline expired in defendants’ bankruptcy proceedings in March

2009. Plaintiffs initially filed a timely adversary complaint, but then they sought

and were granted a dismissal of that complaint. By dismissing their complaint,

plaintiffs relinquished their opportunity to have the bankruptcy court rule on the

dischargeability of their claims against defendants.

      Both defendants have received a discharge of their debts in their respective

bankruptcy proceedings, which includes any debts to plaintiffs arising from any

claim for which a policy of insurance was not available. Under the bankruptcy

code, a discharge in bankruptcy voids any judgment on a debt that has been

discharged, and operates as an injunction against the commencement or

continuation of any action to collect or recover or offset any debt that has been

discharged. See 11 U.S.C. § 524(a). As the district court aptly concluded: “If

[plaintiffs] intended to assert that their causes of action . . . were

                                           -8-
non-dischargeable, they could have continued with [their] Adversary Proceedings

and obtained a ruling from the Bankruptcy Court on that issue. They chose not to

do so, and it is now too late.” R. Vol. 2 at 230. Because any claims against

defendants that were not covered by their insurance policy were discharged in

their bankruptcy proceedings, the district court properly granted summary

judgment on those claims.

      Summary Judgment on the Legal Malpractice and Fiduciary Duty Claims

      In New Mexico, a plaintiff alleging legal malpractice based on attorney

negligence must make two showings: (1) that the attorney was negligent in the

preparation, investigation, or trial of the case; and (2) the attorney’s negligence

was the proximate cause of plaintiff’s injuries. Sanders v. Smith, 496 P.2d 1102,

1105 (N.M. Ct. App. 1972). Both elements must be proved by expert testimony

from an attorney. Id. at 1104-05.

      The district court granted summary judgment on plaintiffs’ claims for legal

malpractice and breach of fiduciary duty with respect to defendants’ handling of

plaintiffs’ lawsuits against TRG and Mr. Pelton because plaintiffs failed to proffer

expert testimony on causation, an essential element of their claims. The district

court noted that although plaintiffs submitted an expert report that opined about

how defendants were negligent and breached their fiduciary duties to plaintiffs,

the expert did not give an opinion as to how any of the listed acts of negligence or

breaches of fiduciary duty were the proximate cause of plaintiffs’ lack of success

                                          -9-
in the TRG or Pelton litigation. In other words, the expert did not specify how

the results of the TRG or Pelton litigation would have been different had

defendants not been negligent and not breached their fiduciary duties.

      On appeal, plaintiffs argue generally that the district court erred in granting

summary judgment because the court ignored disputed issues of fact in their

responses to summary judgment. But they have not cited to any evidence to rebut

the district court’s determination that their expert failed to offer an opinion on

causation. Summary judgment was therefore proper on plaintiffs’ claims for

malpractice and breach of fiduciary duty in defendants’ handling of the TRG and

Pelton cases.

                                          III.

      The judgment of the district court is AFFIRMED. We grant defendants’

motion to STRIKE plaintiffs’ reply appendix because plaintiffs failed to seek

permission to file a supplemental appendix as required by 10th Cir. R. 30.2 and

all documents necessary for consideration of this appeal are contained in the

record on appeal submitted by the district court.

                                                     Entered for the Court

                                                     Monroe G. McKay
                                                     Circuit Judge

                                         -10-