Cross v. Forman, Perry, Watkins, Krutz, & Tardy, PLLC , 182 F. App'x 308 ( 2006 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT May 23, 2006
Charles R. Fulbruge III
Clerk
No. 05-60279
JAMES B. CROSS, LELAND A. GRAUL, EILEEN M. MCGINLEY, SCOTT M.
UNIVER, JACK A. WEISBAUM, and BDO SEIDMAN, LLP,
Plaintiffs-Appellants,
versus
FORMAN, PERRY, WATKINS, KRUTZ, & TARDY, PLLC, ALAN W. PERRY,
WALTER H. BOONE, and PHILIP S. SYKES,
Defendants-Appellees.
--------------------
Appeal From the United States District Court
for the Southern District of Mississippi
3-02-CV-261
--------------------
Before KING, STEWART and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:*
The plantiffs-appellants in this case, consisting of the
accounting firm of BDO Seidman, LLP and several of its member
partners (referred to hereafter collectively as “BDO”), sued
defendants-appellees Forman, Perry, Watkins, Krutz, & Tardy, PLLC,
a law firm, as well as several of its members (referred to
hereafter collectively as “Forman”). BDO sued alleging malicious
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
No. 05-60279
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prosecution by Forman of a conspiracy claim arising from the
bankruptcy of one of Forman’s clients, River Oaks Furniture.
I. BACKGROUND
River Oaks, a furniture company that is no longer a party to
this litigation, discovered accounting irregularities as it was
preparing its 1996 financial statements. It could not identify the
cause of the problem, and it asked its regular accounting firm,
BDO, to assist it. BDO cautioned River Oaks that it should hire an
outside accounting firm, but it agreed to stay on and it ultimately
determined that an employee of River Oaks, Kim Long, had committed
fraud in her capacity as bookkeeper for River Oaks.
As a result of the irregularities, River Oaks filed a lawsuit
against BDO alleging negligence, and it later added a conspiracy
claim that BDO fraudulently attempted to avoid liability based on
an alleged delay in reporting the fraud to River Oaks after BDO
discovered it. River Oaks failed financially as a result of the
fraud and a delay in preparing its income statements, and the
lawsuit was transferred to bankruptcy court. Forman represented
River Oaks in these proceedings and on the conspiracy claim.
The conspiracy claims Forman pursued alleged that BDO and its
members had knowledge of the fraud for several months prior to
reporting it to River Oaks. The claim alleged that BDO failed to
disclose its findings as part of a calculated effort to avoid
No. 05-60279
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liability in later litigation, and that it attempted to use its
role as auditor to seek evidence placing the blame on River Oaks’
management so as to deflect blame from itself.
The bankruptcy court twice upheld the conspiracy claim on
summary judgment motions prior to trial, and it allowed River Oaks
to proceed to trial. At the close of the presentation of River Oaks
claims’ at trial, the court granted a motion for summary judgment
made by BDO on the conspiracy claim, finding that the evidence
presented did not support the claim.
River Oaks ultimately settled with BDO and waived its
attorney-client privileges with respect to the lawsuit. BDO filed
the malicious prosecution claim that is the subject of the current
proceedings against Forman, alleging that Forman initiated the
conspiracy claims without basis and without consulting crucial
witnesses in determining whether there was a basis to file the
claim.
Forman filed a motion for summary judgment, solely limited to
the issue of whether Forman had probable cause to file its claims.
BDO responded with a Rule 56(f) motion to stay summary judgment
pending discovery. The district court granted the motion, but
concluded that discovery should be limited because of the extensive
discovery conducted in the underlying bankruptcy case and the fact
that the summary judgment motion addressed only one element of the
No. 05-60279
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claim. The district court allowed BDO five interrogatories and two
document requests.
After oral argument and review of the evidence and the record,
the district court denied additional requests for discovery by BDO
and granted the summary judgment motion. The district court
concluded that the fact that the claim twice survived summary
judgment motions, combined with the answers to the interrogatories
and Forman’s duty to zealously advocate for River Oaks, meant that
probable cause existed as a matter of law. BDO has appealed,
assigning errors both to the decision to limit discovery and the
decision to grant summary judgment.
II. ANALYSIS
BDO has raised a number of issues relating to both the
discovery limitations and the summary judgment granted by the
district court on its malicious prosecution claim. As to the
limitations on discovery, BDO contends that additional discovery
was required to properly investigate the issue of probable cause
and that the district court erred in imposing unreasonable
limitations on discovery. BDO further argues that privileged
communications between Forman and River Oaks were improperly
withheld by Forman, and that Forman’s response to its discovery
request was inadequate because it merely regurgitated information
from the underlying case. As to the decision by the district court
to grant summary judgment, BDO argues that the court improperly
No. 05-60279
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decided probable cause as a matter of law, improperly drew
inferences in favor of Forman as the moving party, and erred in its
consideration of the decision by the bankruptcy court to twice
affirm the conspiracy claim on summary judgment as evidence of its
merit. BDO also argues that there was a question of material fact
requiring a jury trial in that Forman failed to interview key
witnesses or investigate the claim.
As to the discovery issues, the standard of review is for
abuse of discretion. Beattie v. Madison County Sch. Dist., 254 F.3d
595, 605 (5th Cir. 2001). As to the question of whether summary
judgment was properly granted, we review de novo. Blow v. City of
San Antonio, 236 F.3d 293, 296 (5th Cir. 2001).
We conclude that the district court did not abuse its
discretion in imposing limitations on discovery and did not err in
granting summary judgment.
The district court did not abuse its discretion in limiting
the discovery here to five interrogatories and two document
requests. As the district court noted, this case had already been
subject to substantial discovery as part of the underlying
conspiracy claim and the bankruptcy case of which it was a part.
Additionally, a nonmoving party making requests for further
discovery under Rule 56(f) must “show how the additional discovery
will defeat the summary judgment motion, that is, will create a
genuine dispute as to a material fact” and “‘may not simply rely on
No. 05-60279
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vague assertions that additional discovery will produce needed, but
unspecified facts.’” International Shortstop, Inc. v. Rally’s,
Inc., 939 F.2d 1257, 1267 (5th Cir. 1992), quoting SEC v. Spence &
Green Chemical Co., 612 F.2d 896, 901 (5th Cir. 1980). We have
reviewed the five areas of inquiry BDO presented to the district
court as necessitating further discovery, and conclude that several
of these relied on vague assertions without specifying what facts
were to be discovered. To the extent these areas of inquiry were
sufficiently specific, we conclude that five interrogatories were
adequate to discover the facts that were specified. Our review
indicates that the district court did not err in its holding that
BDO failed to show a substantial need for the materials withheld
under the work-product doctrine. Finally, the similarity between
Forman’s response to the discovery requests here and its responses
made in the earlier litigation does not render the response here
inadequate. Forman was obligated to produce new information in its
response only to the extent that new information was available, and
BDO does not assert that any specific facts or documents are being
withheld. BDO’s discovery requests were sufficiently broad that an
adequate response would necessarily cover the same ground as prior
responses.
The district court also did not err in granting summary
judgment to Forman as a matter of law. Under Mississippi law, in
malicious prosecution cases “the question of probable cause is a
No. 05-60279
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mixed question of law and fact; that whether the circumstances
alleged to constitute probable cause are sufficiently established,
is a matter of fact for the jury; but whether, supposing them to be
true, as alleged, they amount to probable cause, is a question of
law, to be decided by the court.” Owens v. Kroger, Co., 430 So. 2d
843, 847 (Miss. 1983), quoting Whitfield v. Westbrook, 40 Miss. 311
(Miss. 1866). BDO argues that the district court improperly drew
inferences in favor of Forman, the moving party, by describing
Forman’s success in defending the conspiracy claims against two
summary judgment motions as “highly persuasive indicia that Forman
Perry had ample probable cause to file and prosecute” the
conspiracy claims. We find no error here, as the district court
correctly stated its obligation to resolve doubts against the
movant and as BDO’s objection is predicated on the assumption that
it was improper to consider probable cause as a matter of law. BDO
additionally argues that it was error for the district court to
consider these prior rulings on the summary judgment motions as
conclusive proof of probable cause. The district court’s opinion
expressly stated that it did not consider these rulings to be
binding, and after referencing the summary judgment rulings it went
on to discuss the district court’s own review of the record. We
find no error in its decision to find the prior rulings on the
summary judgment motions persuasive but not conclusive. Finally,
BDO contends that there was an issue of material fact sufficient to
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defeat summary judgment on the probable cause issue. We agree with
the district court that the ability of the conspiracy claims to
survive two summary judgment motions was substantial evidence of
their merit, and upon reviewing the record find no genuine dispute
as to a material issue of fact. We therefore AFFIRM the judgment of
the district court.