Court Opinion

ID: 1031193
Source: CourtListenerOpinion
Date Created: 2013-07-05 08:27:13.452408+00
Date Added: 2024-06-11T15:37:37.536366
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 08-2275

HINKLE OIL & GAS, INCORPORATED, an Oklahoma Corporation,

                Plaintiff - Appellant,

           v.

BOWLES RICE MCDAVID GRAFF & LOVE, LLP, a West Virginia
Limited Liability Partnership; CHARLES B. DOLLISON; JULIA A.
CHINCHECK; DOES 1 – 100; MARC MONTELEONE; GERARD STOWERS,

                Defendants - Appellees.

Appeal from the United States District Court for the Western
District of Virginia, at Roanoke.  Samuel G. Wilson, District
Judge. (7:07-cv-00487-sgw-mfu)

Argued:   October 29, 2009                 Decided:   January 5, 2010

Before NIEMEYER and DUNCAN, Circuit Judges, and Benson E. LEGG,
United States District Judge for the District of Maryland,
sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: Hugo Nathan Gerstl, HUGO N. GERSTL, INC., Monterey,
California, for Appellant.    William Delaney Bayliss, WILLIAMS
MULLEN, Richmond, Virginia, for Appellees. ON BRIEF: Brendan D.
O’Toole, WILLIAMS MULLEN, Richmond, Virginia, for Appellees.
Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

     Hinkle Oil & Gas, Inc. (“Hinkle”) challenges the district

court’s   grant     of   summary    judgment        in   favor   of   the   law    firm

Bowles    Rice    McDavid   Graff     &    Love,     LLP   (“Bowles    Rice”),     and

individual       partners   Charles       Dollison,      Marc    Monteleone,      Julia

Chincheck, and Gerard Stowers on Hinkle’s claims for intentional

interference with economic advantage, breach of fiduciary duty,

and legal malpractice.             For the reasons set forth below, we

affirm.

                                        I.

                                      A.

     Appellant Hinkle, an oil and gas well development company,

had a sister corporation named Minerals Management Group, Inc.

(“MMGI”).          In    1997,   MMGI        sued    Buffalo      Properties,       LLC

(“Buffalo”) over the leasing rights to two oil and gas wells in

Kentucky.        The litigation continued into 2004, at which point

Buffalo sought Chapter 11 bankruptcy protection.

     On June 6, 2005, the bankruptcy matter became a Chapter 7

proceeding.       Buffalo’s eligible assets were transferred to its

bankruptcy estate.          The assets included 19 wells in Kentucky

(“KY wells”) and 274 wells in West Virginia (“WV wells”).                            A

bankruptcy trustee was appointed to liquidate Buffalo’s assets

and pay off creditors.

                                           3
      In early spring 2006, the trustee negotiated a plan under

which Hinkle would buy the KY wells for $400,000 and would drop

MMGI’s lawsuit against Buffalo.              On March 1, 2006, the trustee

faxed Hinkle a proposed contract for the KY wells reflecting the

$400,000 price.        Hinkle then hired attorney Julia Chincheck of

the Bowles Rice law firm to complete the negotiations and obtain

approval from the bankruptcy court.             Although Chincheck notified

her     partners     about   this   matter,     none    reported   a    conflict

relating to Hinkle or Buffalo.               Hinkle paid a $5,000 retainer

and Chincheck began representation.

      On May 3, 2006, the trustee moved for the bankruptcy court

to approve a proposed contract to sell the WV wells to Applied

Mechanics Corporation (“AMC”) for $400,000.                 On May 23, 2006,

two of Buffalo’s creditors, Mervil Perry and the Estate of Bobby

Gillispie      (“Gillispie”),       filed    separate    objections     to   the

proposed sale.

      That same day, the bankruptcy trustee agreed to sell the KY

wells    to    Elk   River   Energy,   LLC    (“Elk    River”)   for   $450,000,

abandoning the tentative plan to sell to Hinkle for $400,000.

On May 25, 2006, the trustee moved for the bankruptcy court to

approve this sale.

      Elk River had been recently organized by two Bowles Rice

partners, Charles Dollison and Marc Monteleone, and a friend of

theirs.       It is unknown whether any Bowles Rice partners knew of

                                        4
the    potential     conflict      between       Elk    River      and   Hinkle    when

Chincheck opened the Hinkle file. 1               Bowles Rice became aware of

the conflict at least by early May when the trustee informed

Dollison     that    his    law    partner,      Chincheck,        was   representing

Hinkle.      According to the district court’s opinion, Dollison

assured the trustee, “Don’t worry, I’ll take care of it.”                           J.A.

736.

       Bowles Rice did not, however, resolve the conflict or even

inform Hinkle that its partners were involved with Elk River.

Hinkle only learned of the conflict through its own independent

investigation.        At a meeting on May 25, 2006, the trustee told

Hinkle that Buffalo had entered into a written contract to sell

the    Kentucky     wells   to    Elk   River.         This    information     prompted

Hinkle to investigate Elk River, and the inquiry unearthed the

involvement of the Bowles Rice partners.                      Hinkle then confronted

Bowles     Rice,    demanding     that   Elk     River        mitigate   the   harm   to

Hinkle by assigning its contract to Hinkle and paying Hinkle the

$50,000 difference.          Bowles Rice rejected this demand.                    Hinkle

never requested that Bowles Rice return its retainer fee, and

the firm never did.

       1
       Bowles Rice concedes that a conflict exists for purposes
of this case.

                                          5
     Dollison and Monteleone then met with Gerard Stowers, who

oversaw risk management for Bowles Rice.                Based on the group’s

decision, Bowles Rice stopped representing Hinkle, and Elk River

requested that the trustee withdraw his May 25, 2006, motion for

court approval of the sale.        The trustee rejected that request.

     The   proposed    contract    of    sale   to    Elk   River   allowed   for

“upset bids,” namely, higher bids by outside parties that would

trigger an auction to the highest bidder.                   The sales contract

stated, “The sale . . . allows . . . upset bids in an amount of

$455,000[] or more . . . provided such upset bid is accompanied

by an earnest money deposit of $25,000 in immediately available

funds.”    J.A. 430.     On June 9, 2006, Hinkle submitted to the

trustee and the bankruptcy court a $455,000 upset bid with the

required   $25,000    earnest     money.        The   upset   bid   included   a

proposed purchase agreement that, by its own terms, was subject

to the approval of the court.           On June 12, 2006, Elk River filed

an objection to the trustee’s May 25, 2006, motion for approval

of its own sales contract, explaining that Hinkle had threatened

litigation.

     On July 3, 2006, the bankruptcy court received a letter of

intent from First South Investments offering to purchase all of

Buffalo’s assets for $2,500,000.            On July 7, 2006, before taking

any action on the proposed sale of the KY wells to Elk River,

the court held a hearing on the trustee’s May 3, 2006, motion to

                                        6
approve the sale of the WV wells to AMC.                     The trustee, Perry,

and    Gillispie      were   represented      at   the    hearing.         Energy   One

Group, Inc. (“EOG”), who had submitted an upset bid in that

sale, and James Clowser, who was a member of Buffalo, were also

represented.       At the hearing, the creditors and Clowser informed

the court that “at least two entities had expressed interest in

acquiring all of the assets of the Debtor for substantially more

than    the   total     of   the   highest     existing     bids     for    the     West

Virginia Oil and Gas Asset and the Kentucky Oil and Gas Asset of

the Debtor.”       J.A. 505.

       On July 17, 2006, the court decided the motion.                         In its

order, the court noted the mention of the higher offers.                            The

court sustained the creditors’ objection to the WV wells sale

and    ordered   the    trustee    to    propose    new    sale    procedures       that

would permit credit bidding, allow prospective buyers to make

one bid for the KY wells and WV wells combined, and provide for

an    auction    to    choose    among    multiple       qualifying    bids.        The

trustee soon proposed new procedures, which the court approved

over Hinkle’s objection.

       The trustee eventually auctioned off Buffalo’s assets under

the new procedures.             Hinkle made the highest bid for the KY

wells at $500,000.           But the overall highest bidder was Heritage

Financial Group, Inc. (“Heritage”), which offered $7,000,000 for

all of Buffalo’s assets.           Elk River did not bid at all.                  After

                                          7
making the purchase, Heritage transferred Buffalo’s assets to

Mountain County Partners (“MCP”) and dissolved.

                                              B.

       After      losing      the    auction,       Hinkle      brought        this    action

against Appellees Bowles Rice, Dollison, Monteleone, Chincheck,

and     Stowers.            The     amended       complaint      alleged        intentional

interference         with     economic     advantage         (Count      1),     breach    of

fiduciary        duty    (Count     2),   conversion       or    misappropriation           of

property (Count 3), and legal malpractice (Count 7). 2

      Hinkle       and      Appellees      filed      cross-motions           for     summary

judgment.         On September 17, 2008, the district court awarded

summary judgment to Appellees.                    The court found that Counts 1,

2,    and    7    failed      because     Hinkle     was     unable      to     prove     that

Appellees caused it not to obtain the KY wells.                          The court also

said Count 3 failed because Hinkle never demanded the $5,000

retainer, which remained in Bowles Rice’s client trust account.

Hinkle was given ten days to file an amended complaint asserting

claims that did not require proof of causation.                               On September

18, 2008, Hinkle filed a motion for reconsideration, which the

court      denied.       On    September      19,    2008,      Hinkle    filed       another

amended complaint.            The court dismissed the amended complaint on

       2
           Hinkle abandoned Counts 4-6 of its original complaint.

                                              8
October 28, 2008, finding that all the claims raised therein

required proof of causation.          This appeal followed.

                                      II.

       Hinkle    challenges     the   district      court’s   grant      of    summary

judgment, asserting error in its conclusion that Hinkle failed

to produce sufficient evidence of causation for Counts 1, 2, and

7. 3       Hinkle asserts that it presented sufficient evidence to

raise a factual question as to causation because it showed that,

had Elk River not objected to its own sale contract for the KY

wells, Hinkle would have been the successful upset bidder. 4

       We review de novo a grant of summary judgment.                         Smith v.

Ozmint, 578 F.3d 246, 250 (4th Cir. 2009).                  Summary judgment is

appropriate      if   “the    pleadings,      the   discovery      and   disclosure

materials,      and   any    affidavits    show     that   there   is    no    genuine

issue as to any material fact and that the movant is entitled to

       3
       Hinkle does not challenge and thus waives objection to the
district court’s grant of summary judgment on Count 3.
       4
       Hinkle concedes that its intentional interference with
economic advantage, breach of fiduciary duty, and legal
malpractice claims all require proof that Appellees’ conduct was
the proximate cause of Hinkle’s failure to obtain the KY wells.
West Virginia law defines proximate cause to mean “that cause
which in actual sequence, unbroken by any independent cause,
produced the wrong complained of, without which the wrong would
not have occurred.” Spencer v. McClure, 618 S.E.2d 451, 455 (W.
Va. 2005) (citation and internal quotations omitted).

                                          9
judgment as a matter of law.”                         Fed. R. Civ. P. 56(c)(2).                   We

construe the evidence in the light most favorable to Hinkle and

draw all reasonable inferences in its favor.                                   See Smith, 578

F.3d   at     250.         Although      Hinkle        does   not    have       to    show      that

Appellees’ conduct “was the sole proximate cause of the injury,”

Spencer,       618       S.E.2d    at    455-56        (emphasis         omitted),      “a      mere

possibility of causation is not sufficient” to defeat summary

judgment, id. at 456 (citation and quotations omitted).

       Hinkle argues that Elk River’s objection caused it to lose

in the bidding process.                 Its position hinges on an assertion of

inevitability: had Elk River not objected, the process would

have   proceeded          quickly       to   a   resolution         in    its    favor.          The

record, however, does not bear this out.

       In this case, the bankruptcy court restructured the bidding

process in a way that caused Hinkle to be unsuccessful in its

bid.     It is clear from the court’s July 17, 2006, order that

this restructuring occurred as a result of the July 7, 2006,

hearing       during       which    Buffalo’s          creditors         for    the   WV     wells

brought to the court’s attention the fact that “at least two

entities had expressed interest in acquiring all of [Buffalo’s]

assets    .    .     .   for   substantially           more   than       the    total      of    the

highest existing bids.”                 J.A. 505.        Therefore, to show that Elk

River’s objection caused Hinkle to lose the bid, Hinkle would

have to present evidence that, absent Elk River’s objection, the

                                                 10
bankruptcy court would have authorized the trustee’s sale of the

KY wells to Hinkle as the upset bidder prior to July 7, 2006,

and would therefore not have had occasion to place the KY sales

back into play.          However, Hinkle has not presented any evidence

that       would    permit     it   to    assert      with   any    certainty    that     the

bankruptcy court would have approved the sale before that date.

       Hinkle’s        upset    bid      documents      clearly     indicate     that     the

proposed       sales    agreement         between      the   trustee    and    Hinkle     was

subject to the bankruptcy court’s approval. 5                               Hinkle argues,

however, that the court would have approved the sale “pro forma”

shortly after Hinkle’s upset bid.                       This assumption contradicts

the trustee’s testimony that “there is always a chance” that the

court       might    reject     the      sale.        J.A.   266.      In    fact,   in   his

deposition, the trustee agreed that “it would be speculation to

guess whether [the sale] would [have] be[en] approved” by the

bankruptcy court.              J.A. 262.         Hinkle’s assumption also ignores

       5
        Although Hinkle argues that the bankruptcy court’s
approval was not legally required, the evidence in the record
strongly supports the inference that the trustee would not have
acted without the court’s approval. The trustee filed a motion
with the court requesting its approval to complete the Elk River
sale.   Also, both Elk River’s sale contract and Hinkle’s upset
bid expressly provided that any sale of the property was
“subject to [the] approval of the Bankruptcy Court.” J.A. 413,
454.    Therefore, whether or not the approval was legally
required, there is absolutely no support for the assumption that
the trustee would have reversed course and attempted to finalize
the Hinkle sale without the court’s approval.

                                                 11
the fact that, on July 3, 2006, the court received a letter of

intent from First South Investments offering $2,500,000 for all

of Buffalo’s assets.                It would be mere speculation to assume

that the court would have ignored that offer and approved the

Hinkle sale.           Furthermore, Hinkle’s assumption that the court

would have taken a purely passive role in approving the sale is

contradicted by the court’s proactive involvement in directing

the   trustee      to   restructure       the   bidding       process      in   order    to

create the potential for higher returns for Buffalo’s creditors.

      Even assuming that the bankruptcy court would have approved

the   sale,       Hinkle      has   presented    no    evidence       to    support     the

inference that the approval would have occurred before the July

7, 2006, hearing that led to the bidding restructuring.                              Hinkle

merely speculates that the “pro forma” approval of the court

would have occurred in approximately one day.                              Hinkle cannot

“create       a    genuine      issue     of    material       fact        through     mere

speculation       or    the    building    of   one    inference       upon     another.”

Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985); see also

Francis v. Booz, Allen & Hamilton, Inc., 452 F.3d 299, 308 (4th

Cir. 2006) (“Mere unsupported speculation is not sufficient to

defeat    a   summary      judgment     motion    if    the    undisputed       evidence

indicates that the other party should win as a matter of law.”)

      Hinkle’s unsupported assertion that, but for Elk River’s

objection, the bankruptcy court would have approved the upset

                                           12
bid   before   having   an   opportunity   to   restructure   the   bidding

process is not sufficient to defeat Appellees’ summary judgment

motion.

                                   III.

      Accordingly, for the reasons stated above, we

                                                                    AFFIRM.

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