Opinion
Case No. 1:04-CV-43.
March 28, 2005
OPINION
Defendants Douglas Bernacchi and Leon Zappia and their professional corporations have moved for partial summary judgment as to several claims asserted against them in this suit. Plaintiff Charles Lyle White, II has opposed Defendants' Motions. The Motions, having been fully briefed, may now be resolved without oral argument. See W.D. Mich. L. Civ. R. 7.2(d).
I. Background
This is a diversity law suit sounding in tort (legal malpractice) arising from the settlement of a car accident/personal injury claim. The car accident occurred in Van Buren County, Michigan on April 21, 2001. According to the Complaint, the driver of vehicle was killed in the accident and Plaintiff, a passenger, suffered serious and permanent closed-head injuries. The suit was filed in the Van Buren County Circuit Court and removed to this Court on January 22, 2004.
In this suit, Plaintiff sues his former attorneys for failing to investigate and pursue claims related to the intoxication of the driver under Michigan's Dram Shop Act, Mich. Comp. Laws §§ 436.1801 et seq. Plaintiff's former attorneys are residents of Indiana. Plaintiff is a resident of Michigan. The Notice of Removal notes that more than $75,000 of damages are at issue. (Notice of Removal, ¶ 4(c).)
Plaintiff's Complaint includes the following Counts which are the subject of the Motions for Partial Summary Judgment: Count III, Spoliation; Count IV, Michigan Consumer Protection Act, Mich. Comp. Laws §§ 445.901 et seq.; Count V, Fraudulent Concealment; and Count VI, Conversion.
Most of the briefing by the parties relates to legal disputes concerning the nature of the claims under Michigan law. However, Counts V and VI relate to factual issues concerning the settlement of the personal injury matter. As to the underlying matter, a $100,000 insurance settlement was reached premised on a release of all claims by Plaintiff. (Pl.'s Ex. 8.) Plaintiff signed an attorney Retainer Contract in connection with that matter. (Pl.'s Ex. 3.) Plaintiff agreed, as part of the representation, to compensate Defendants a portion of any recovery received on Plaintiff's behalf. ( Id.) After the settlement was reached, Defendants agreed to split 10 percent of the recovery ($10,000) as their fee; Plaintiff for his part signed written statements agreeing to the $10,000 disbursement to Defendants as attorney fees. (Pl.'s Ex. 8 Bernacchi Ex. 1.)
Plaintiff's counsel does argue that certain terms of the Agreement (specifically a 40 percent recovery provision) violated Michigan Court Rule 8.121 and Michigan Rule of Professional Conduct 1.5. Those Rules permit only a 33 percent contingent fee, after subtracting out the costs of obtaining the recovery. Assuming that those Rules were applicable to Indiana attorneys, then the portion of continent above 33 percent may have been unenforceable. However, this controversy seems irrelevant to the questions at hand since only a 10 percent contingent fee was charged. The fee charged seems more consistent with the handwritten language on Agreement, which permitted a 12 percent fee for the first $100,000 recovered (if no court action was necessary).
Counsel for Plaintiff does not dispute the Agreement or the Settlement Statement, but asserts that there was an additional parol term of the Agreement which required Defendants to spend the $10,000 fee to further investigate and pursue Plaintiff's Dram Shop Act claims. (Aff. of Jessie Brink.) Counsel notes that it was Defendants' obligation under the Retainer Agreement to "proceed against any and all responsible parties. . . ." (Pl.'s Ex. 3.) Plaintiff's counsel further raises questions concerning whether Plaintiff was at the time competent to approve the agreements and statements in question. ( See Pl.'s Ex. 1, 6 7.)
II. Standard for Summary Judgment
Under Federal Rule of Civil Procedure 56(c), summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact. The party moving for summary judgment bears the initial burden of specifying the basis on which summary judgment should be granted and identifying portions of the record which demonstrate the absence of a genuine issue of material fact. Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). Once this initial burden is met, the non-moving party has the burden of presenting specific facts, supported by the record, showing a genuine issue of material fact. Bill Call Ford, Inc. v. Ford Motor Co., 48 F.3d 201, 205 (6th Cir. 1995) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party]." Anderson, 477 U.S. at 252.
III. Legal Analysis
Since these Motions pertain to matters of state law, the Court must apply state law as determined by the state's highest court. Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). If a state's highest court has not spoken to an issue, the Court must determine state law based on "all relevant data," including decisions of intermediate state courts, decisions of federal courts interpreting state law, case precedents from other states, and scholarly commentary. Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (citing cases). In this process, intermediate state court decisions are especially important unless the other data suggest that the state's highest court would not follow such decisions. Id. A. Count III — Spoliation
Count III asserts a claim for spoliation of evidence — referring to the 1998 GMC vehicle which was the subject of the accident and the crash site. Spoliation is the "intentional destruction, mutilation, alteration, or concealment of evidence. . . ." B. Garner, Black's Law Dictionary (7th Ed. 1999). Michigan court cases have recognized that there is no common law or statutory cause of action in Michigan for spoliation of evidence. See, e.g., Panich v. Iron Wood Products Corp., 445 N.W.2d 795, 799 (Mich.Ct.App. 1989). The Court views this interpretation as controlling Michigan law. Plaintiff's citation of a single unpublished decision, which admitted the possibility of recognizing the cause of action but did not recognize the cause of action, does nothing to further the discussion. Therefore, the Court finds that Plaintiff cannot recover on this Count, and Defendants are entitled to summary judgment.
B. Count IV — MCPA Claim
Michigan's Consumer Protection Act applies to the "conduct of a business providing . . . services for personal, family, or household purposes. . . ." Mich. Comp. Laws § 445.902(d). The question raised by the parties is whether the Act includes the provision of professional services. The Michigan Court of Appeals appears to have answered this question, for the most part, to the negative in Nelson v. Ho, 564 N.W.2d 482, 486 (Mich.Ct.App. 1997). Although the Ho decision made some exceptions for the business and entrepreneurial aspects of the professions, these exceptions do not apply to the conduct of professional services. Id. The Michigan Court of Appeals has also issued unpublished opinions applying the Ho holding to the legal profession. ( See Def. Bernacchi's Br. at 5; see also Mercer v. Jaffe, Snider, Raitt Heuer, P.C., 713 F. Supp. 1019, 1030 (W.D. Mich. 1989) (holding securities dealers immune from Act).
Plaintiff's counter-argument is that Defendants should not benefit from the professional exception made by Ho since Defendants were not licensed to practice law in Michigan at the time. This is true, but irrelevant. The exception made by Ho was made because the Michigan Court of Appeals found that there was no indication in the legislation that the legislature intended to apply the Act to the professions and, in the process, change the legal standards governing professional liability. The exception is based on the kind of services provided. It is proper regardless of whether the attorneys were licensed to practice in Michigan, Indiana or the most outlying territories of the United States. Therefore, Defendants are entitled to summary judgment on this Count.
C. Count V — Fraud and Fraudulent Concealment
Plaintiff's Complaint alleges fraud and fraudulent concealment in that Defendants falsely represented that they were using the $10,000 attorney fee payment for the investigation of future Dram Shop Act claims and failed to disclose that the settlement agreement and release had the effect of barring future Dram Shop Act claims. (Compl. at ¶ 34.) The Affidavit of Jessie Brink supports this theory of liability. (Pl. Ex. 2) Although these claims seem unlikely given the written documentation, the Court will accept for the moment that there are genuine issues of material fact concerning this Count. These factual issues include whether misrepresentations were made as to the use of the funds and whether Plaintiff was legally competent at the time of the alleged fraud to approve the settlement documents. As such, summary judgment will be denied due to genuine issues of material fact. D. Count VI — Conversion
Count VI seeks damages for common law conversion of the $10,000 contingency fee paid to Defendants. As stated above, Plaintiff's theory is that the funds were misapplied by Defendants, i.e., they were applied as a contingency fee rather than expended for the investigation of Dram Shop Act claims. The misapplication of property contrary to an agreement has been deemed by the Michigan Supreme Court as creating a cause of action for conversion. See Baxter v. Woodward, 158 N.W. 137, 139 (Mich. 1916); In re Little, 163 B.R. 497, 503 (Bankr. E.D. Mich. 1994) (discussing cause of action for misapplication of trust property); cf. Hopkins v. Grand Rapids Trust Co., 247 N.W. 175 (Mich. 1933) (distinguishing Baxter). Although the Retainer Agreement and Settlement Statement do not suggest any such misapplication, there are sufficient allegations and evidence of a parol agreement and/or fraud and/or the possible incompetence of Plaintiff in approving the documents such that summary judgment must be denied due to genuine issues of material fact.
IV. Conclusion
For the reasons given, summary judgment will be granted as to Counts III and IV, but denied as to Counts V and VI. An Order and Partial Judgment shall issue consistent with this Opinion.