382 F.Supp.2d 229 (2005) | Cited 1 time | D. Massachusetts | August 2, 2005


James H. Robinson ("Robinson") alleges that his formerAttorneys, Joseph S.U. Bodoff ("Attorney Bodoff") and PrestonHalperin ("Attorney Halperin"), and their law firm, Shectman Levy& Halperin ("SLH") committed malpractice while representing himon several legal matters. The Court has dismissed several claimson motions for summary judgment. Plaintiff now moves for leave toamend the complaint.

I. Background

In 1987, Robinson, together with John Leatham ("Leatham"),formed a corporation, Robinson Letham and Company, for thepurpose of organizing limited partnerships to purchase andoperate low-income housing projects. In 1988, John Marbury Nelson IV ("Nelson") became a shareholder of the subjectcorporation and the name of the company was changed to Robinson,Leatham and Nelson, Inc. ("RLN"). Before long, Robinsondiscovered that Nelson had been misappropriating RLN's tradesecret information for his own use and had failed to transfer toRLN $256,225 in fees that were owed to it. On March 20, 1990, RLNsued Nelson in the United States District Court for the NorthernDistrict of California ("the California suit").

During discovery, Robinson came to suspect that Nelson wasattempting to conceal his assets in a number of trusts and otherentities. On March 28, 1995, Robinson filed suit against Nelsonin Middlesex County Probate & Family Court, in Massachusetts,alleging fraudulent conveyance and seeking to avoid certaintransfers ("the fraudulent conveyance suit"). RLN was representedin the fraudulent conveyance suit by Attorney Joseph H. Walsh("Attorney Walsh") who obtained a temporary restraining orderpreventing Nelson from transferring any of his assets. On June10, 1996, Nelson moved for summary judgment but the entire actionwas stayed pending the outcome of an appeal in the Californiasuit.

The preceding October, a jury in the California suit had foundNelson liable and judgment against him was entered for $292,008together with prejudgment interest at a rate of 10% from January22, 1990 through August 1, 1995 and post judgment interest at a lesser rate onward ("the California judgment").Plaintiff appealed and the judgment was affirmed in April, 1997.

In August, 1997, Robinson met with Attorney Bodoff, who wasthen associated with the law firm of Hinckley, Allen & Snyder("the Hinckley firm"), to discuss his possible representation ofRLN in the fraudulent conveyance suit and with respect toattempts to collect the California judgment. On February 24,1998, Attorney Bodoff entered his appearance in the fraudulentconveyance suit. At the time, Nelson's motion for summaryjudgment was pending.

Attorney Bodoff thereafter obtained Nelson's financial recordsand they were sent to John Chuta ("Chuta"), a forensicaccountant, for analysis. Chuta prepared a report in May, 1998("the Chuta Report"), allegedly finding inconsistencies betweenNelson's tax returns and his personal financial statements.

In June 1998, Attorney Bodoff left the Hinckley firm and joinedSLH. He and Robinson signed a new engagement letter. AttorneyPreston Halperin ("Attorney Halperin") began assisting AttorneyBodoff with the representation at that time.

On November 17, 1998, Attorney Bodoff received notice thatthere would be a hearing on Nelson's motion for summary judgmenton January 6, 1999. The day before that hearing, Attorneys Bodoffand Halperin filed their opposition papers. At the motionhearing, Nelson argued that Robinson's allegations were deficient because he had failed to identify any specific fraudulenttransfer that had taken place. On January 21, 1999, the ProbateCourt allowed Nelson's motion for summary judgment on the groundsthat 1) Robinson had failed to identify any specific fraudulenttransfer and 2) additional discovery would not be permittedbecause Robinson had failed to exercise diligence in pursuingdiscovery.

Robinson discharged the defendant-attorneys and hired AttorneyTara Richardson. She appealed the allowance of summary judgmentand, while that appeal was pending, settled the case againstNelson for $250,000.

Robinson filed the instant malpractice action on April 7, 2003.The Amended Complaint stated claims for breach of contract (CountI), fraud or misrepresentation (Count II), unfair or deceptivepractices pursuant to M.G.L. c. 93A (Count III), legalmalpractice (Count V) and civil conspiracy (Count VI). On June14, 2004, Robinson filed a motion for partial summary judgment onthe issue of liability for legal malpractice. On the same day,defendants moved for summary judgment on all counts.

On February 2, 2005, this Court entered a Memorandum and Orderdenying plaintiff's motion for partial summary judgment andallowing, in part, and denying, in part, defendants' motion forsummary judgment. The Court dismissed Counts II (fraud ormisrepresentation), III (chapter 93A claim) and IV (civil conspiracy). Counts I (breach of contract) and V (legalmalpractice) remain viable.

On February 11, 2005, plaintiff filed a motion for leave toamend the complaint on the basis of his discovery of alleged newinformation. He states that, on April 27, 2004, plaintiff deposedAttorney Bodoff who testified that "[t]here's one case I canremember at Gaston & Snow. I think we filed a Chapter 7 petitionon behalf of the holding company for Boston Trade Bank". Furtherinvestigation revealed that, in 1991, Attorney Bodoff assistedthe holding company for the Boston Trade Bank ("the BTB holdingcompany") in filing for Chapter 7 bankruptcy.

Plaintiff contends that Attorney Bodoff's prior representationof the BTB holding company presents a conflict of interest withhis representation of Robinson because the Boston Trade Bank wasa creditor of Nelson and, as such, "would have an adverseposition to Robinson in his efforts to collect his judgment fromNelson". Attorney Bodoff did not disclose his priorrepresentation of the BTB holding company to plaintiff. Plaintiffnow seeks to amend the complaint: 1) to add the Hinckley firm asa defendant and 2) to add counts for legal malpractice, fraud,violation of M.G.L. c. 93A and civil conspiracy against AttorneyBodoff and the Hinckley firm.

On June 9, 2005, a hearing was held and the parties (includingthe Hinckley firm) orally argued in support of their positions. On June 13, 2005, this Court entered an Orderrequiring additional briefing and the parties have now filedmemoranda in response to that Order.

II. Legal Analysis

A. Legal Standard

In general, "a party may amend the party's pleading only byleave of court . . . and leave shall be freely given when justiceso requires". Fed.R.Civ.P. 15. Leave to amend must be denied,however, if the amendment would be futile or would reward unduedelay. Resolution Trust Corp. v. Gold, 30 F.3d 251, 253(1st Cir. 1994). Once a motion for summary judgment has beenfiled, a motion for leave to amend will be allowed only if theplaintiff can provide "substantial and convincing evidence" insupport of the amendment. Id.

In this case, both parties moved for summary judgment on June14, 2004 and plaintiff's motion for leave to amend was not fileduntil February 11, 2005. Thus, the plaintiff's motion will bescrutinized in accordance with the "substantial and convincingevidence" standard. Id. The fact that the plaintiff did notdiscover the facts underlying his proposed amendment until aftercommencement of the case does not alter that conclusion becausethe facts underlying the subject amendment were discovered onApril 27, 2004, six weeks before motions for summary judgment were filed and nine months before a decision was rendered.

B. Analysis

Plaintiff's proposed claims are based upon the allegation thatAttorney Bodoff was laboring under a conflict of interest whichthe defendants failed to disclose. Plaintiff contends that therewas a conflict of interest under Massachusetts Rules ofProfessional Conduct, Rule 1.9 and that Attorney Bodoff had a"continuing" duty to disclose to the FDIC any assets of Nelson'swhich he might uncover. Thus, plaintiff alleges that AttorneyBodoff had conflicting duties and loyalties at the time herepresented Robinson.

1. The Existence of a Conflict of Interest

The current version of Massachusetts Rules of ProfessionalConduct, Rule 1.9., which is substantially the equivalent of theversion then in effect, provides: [a] lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after consultation.Id. Under the Rule, a conflict exists only if the two mattersare "substantially related". Id.

Here, they are not. The sole commonality between therepresentations was that Nelson is a debtor of both the FDIC, assuccessor to the BTB, and Robinson. The representations werefactually distinct (i.e. a bankruptcy filing involving a bank as compared to an attempt to collect a judgment obtained in amisappropriation lawsuit). They were also legally distinct(Chapter 7 of the Bankruptcy Code as opposed to the Massachusettsfraudulent conveyance law).

More importantly, as the Hinckley firm points out, AttorneyBodoff did not represent the Boston Trade Bank, he representedthe BTB holding company. Robinson continually fails to recognizeor acknowledge the difference between the two entities and offersno justification for such failure. The BTB and the holdingcompany are, nevertheless, distinct corporate entities and, inthe absence of evidence to the contrary, representation of onedoes not equal representation of the other. There is no conflictof interest under Rule 1.9 between Bodoff's prior representationof the BTB holding company and his representation of Robinson.

Plaintiff also argues that Attorney Bodoff had a "continuing"duty to inform the FDIC of newly-discovered assets belonging toNelson. Plaintiff makes a valiant effort to extract that supposedduty from three sources.

First, he argues that Massachusetts Rules of ProfessionalConduct, Rule 1.6 (b) establishes a continuing duty ofdisclosure. Rule 1.6 (b) provides that: a lawyer may reveal, and to the extent required by Rule 3.3, Rule 4.1 (b), or Rule 8.3 must reveal, [confidential] information . . . to prevent the commission of a criminal or fraudulent act.(emphasis in original). Plaintiff argues that, had Attorney Bodoff discovered a concealment of assets, he would have beenobliged to disclose it. As the Hinckley firm contends, however,that is a duty owed to the citizenry, not to a former client.Attorney Bodoff was not in a unique, ethical position; any lawyerrepresenting Robinson who discovered fraud or criminal activitywould have been obligated to report it.

Second, plaintiff contends that bankruptcy attorneys, asofficers of the court, are required to disclose the existence ofany concealed assets. The Court need not consider whether such aduty, if it exists, overrides the duty of confidentiality owed toone's client because plaintiff's argument is deficient for thesame reason his previous argument was. To the extent there is anobligation to report fraud to the court, it is a generalobligation of all attorneys. Attorney Bodoff occupied no specialposition and did not have a heightened duty to report uncoveredassets belonging to Nelson.

Finally, plaintiff cites 12 C.F.R. § 366.12(c). Part 366 isentitled "Minimum Standards of Integrity and Fitness for an FDICContractor" and § 12 is entitled "What are the FDIC's MinimumStandards of Ethical Responsibility?" Subsection (c) providesthat "[y]ou must disclose to us waste, fraud, abuse orcorruption. Contact the Inspector General at 1-800-964-FDIC".That provision is inapplicable to this case because AttorneyBodoff did not represent the FDIC and, in any event, it is unclear whether the rule is addressed to former FDICcontractors. See 12 C.F.R. § 366.1 ("This part establishes theminimum standards of integrity and fitness that contractors . . .must meet if they perform any service or function on ourbehalf.").

Accordingly, plaintiff has failed to allege that there was aconflict of interest or that Attorney Bodoff had a greater"continuing" duty of disclosure than any other officer of thecourt. Plaintiff's proposed claims would, therefore, bedismissible for failure to state a claim and permitting him toamend the complaint would be futile. See Fed.R.Civ.P. 15.

2. Causation and Damages

Plaintiff's proposed claims have another dispositiveshortcoming. To succeed on them, plaintiff would also need toestablish that the conflict of interest caused him damage. SeeMcCann v. Davis, Malm & D'Agostine, 669 N.E.2d 1077 (Mass.1996). The existence of a conflict without proof ofcausally-related damage is insufficient. Id.

Plaintiff has not sufficiently alleged that he suffered damagesas a result of the alleged conflict of interest and common senseindicates that such damage could not occur. The primary purposeof Rule 1.9 of the Massachusetts Rules of Professional Conduct isto prevent prejudice to the former client, here the BTB holdingcompany. See Rule 1.9 (prohibiting representation which is"adverse" to a former client "unless the former client consents after consultation"). To the extent thatRule 1.9 is designed to protect confidentiality, only the formerclient's interests are jeopardized by a conflict of interest,which is why the Rule requires only the consent of the formerclient.

A conflict of interest between a present and former clientcould, in principle, erode the attorney's loyalty to the presentclient. Obviously, however, Attorney Bodoff's loyalty to Robinsoncould only have been adversely influenced by the alleged conflictif Attorney Bodoff was aware of it. Therefore, in order to finddamages, one would have to indulge a chain of inferences that 1)Attorney Bodoff was aware of a conflict of interest which 2) hechose not to disclose and 3) instead, provided inadequaterepresentation to Robinson, 4) thus benefitting Nelson's othercreditors. Plaintiff offers no evidence, let alone "substantialand convincing" evidence, to support that chain of inferences.

There is no evidence that Attorney Bodoff harbored any loyaltyto the Boston Trade Bank or the FDIC, neither of which were everhis clients. There is no indication that Attorney Bodoffbelieved, or had reason to believe, a conflict of interestexisted. Because there is no evidence of the least disloyalty onthe part of Attorney Bodoff, there is no causation.

Moreover, there are no cognizable damages. Plaintiff hasoffered no evidence that any additional sums were collectible from Nelson which could have been seized to satisfy Robinson'sclaim. For instance, he does not allege that the FDIC, or anyother creditor of Nelson, was able to collect additional sums asa result of the dismissal of Robinson's lawsuit. It isinsufficient for the plaintiff to allege that, had the allegedconflict of interest been disclosed, he would have hired anotherattorney because there is no allegation that the result wouldhave been any different. Accordingly, for all of the articulatedreasons, plaintiff's motion for leave to amend will be denied.


In accordance with the foregoing, plaintiff's motion for leaveto amend (Docket No. 38) is DENIED.

So ordered.

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