Sloan Ex Rel. Juergens v. Urban Title Services, Inc. , 770 F. Supp. 2d 227 ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ANDREA SLOAN, as Guardian and
Conservator on behalf of Mary Juergens, an
Incapacitated Individual, in both Mary
Juergens’ individual capacity and as the sole
member of “1230 23rd Street, LLC,”
Plaintiff/Counter-Defendant, Civil Action No. 06-01524 (CKK)
v.
URBAN TITLE SERVICES, INC., et al.,
Defendants/Counter-Plaintiffs.
MEMORANDUM OPINION
(March 27, 2011)
Mary Juergens (“Juergens”) commenced this action on August 29, 2006, challenging the
legality of two loans extended to her, each of which was secured on a condominium located at
1230 23rd Street, N.W., Apartment 505, Washington, D.C. 20037 (the “Condo”). Subsequently,
Juergens was found to be an “incapacitated individual” and Andrea Sloan (“Sloan”), who was
appointed as Juergens’ Guardian and Conservator, was substituted for Juergens as the plaintiff in
this action.1 Over the years, the claims and defendants in this action have been successively
winnowed down by orders of this Court and by the agreement of the parties. Today, the
defendants include Dale Duncan (“Duncan”), First Mountain Vernon Industrial Loan
Association, Inc. (“FMVILA”), Brickshire Settlements, LLC, and Arthur G. Bennett
(collectively, “Defendants”). Presently before the Court is Duncan’s [185/186] Motion for
Summary Judgment, which was previously resolved in part and held in abeyance in part pending
1
The Court shall refer to Juergens and Sloan interchangeably as “Plaintiff.”
further briefing by the parties. The parties have now had the opportunity to submit the
supplemental briefing required by the Court. Based upon the parties’ submissions, the relevant
authorities, and the record as a whole, the Court shall DENY the remainder of Duncan’s
[185/186] Motion for Summary Judgment.
I. BACKGROUND
The Court assumes familiarity with its prior opinions in this action, which set forth in
detail the history of this case, and shall therefore only address the factual and procedural
background necessary to address the discrete issues currently before the Court.
The only loan that remains at issue in this action was extended by or with the assistance
of Defendants (the “Loan”). The heart of Plaintiff’s lawsuit is her allegation that the Loan was
intended to be, or should be construed as, a personal residential loan—not a commercial loan.
See Sloan v. Urban Title Servs., Inc., 689 F. Supp. 2d 123, 127 (D.D.C. 2010). The relevant
documents, taken at face value, characterize the Loan as a $250,000 commercial loan extended
by FMVILA to 1220 23rd Street, LLC (the “LLC”), a limited liability corporation of which
Plaintiff is the sole member. Id. at 127-28. Plaintiff nevertheless maintains that the Loan is, or
should be construed as, a personal residential loan because (a) the documents relating to the Loan
were fraudulently obtained by forgery and (b) the Loan is an illegal consumer residential loan
disguised as a commercial loan in order to evade fair lending and disclosure requirements. See
4th Am. Compl., Docket No. [120], ¶¶ 89-92. Unsurprisingly, Defendants deny Plaintiff’s
allegations and assert that the Loan is a valid commercial loan extended to Plaintiff’s LLC. See
id. ¶¶ 94-96. By their account, Defendants assisted Plaintiff, at her request, in establishing the
LLC; the title to the Condo was transferred from Plaintiff to the LLC; and FMVILA extended a
2
lawful commercial loan for $250,000, secured by the Condo, to the LLC. See id. ¶ 96.
Therefore, as presented by the parties, the central question underlying this lawsuit is whether the
Loan is or is not a legitimate commercial loan lawfully extended to the LLC.
As is relevant to the instant motion, the operative version of Plaintiff’s Complaint
includes five claims against Duncan relating to his alleged role in the creation of the LLC and the
closing of the Loan.2 The five claims may be divided into two groups—the claims in each of the
two groups are based on an identical set of factual allegations and essentially set forth alternative
theories of recovery for the same conduct:
• Claims Concerning the Creation of the LLC. The three claims in the first group
(the “LLC Creation Claims”)—Count XVIII (Legal Malpractice), Count XIX
(Breach of Fiduciary Duty), and Count XX (Negligence)—are each premised on an
identical set of factual allegations relating to Duncan’s role in the creation of the
LLC. See 4th Am. Compl. ¶¶ 351-74. Plaintiff alleges that, by claiming to have
prepared documents creating the LLC on Plaintiff’s behalf and receiving a fee for
doing so, and then filing these documents with state authorities, Duncan entered into
an attorney-client relationship with Plaintiff and owed her a fiduciary duty and a duty
of care. Id. ¶¶ 352, 360, 368. Plaintiff contends that Duncan violated these various
duties because, by virtue of the creation of the LLC, (a) she received no benefit from
the transaction, (b) she was required to pay “transfer” and “recordation” taxes, (c) she
lost the ability to obtain a homestead tax deduction, (d) Duncan failed to register the
LLC as a foreign limited liability company authorized to do business in the District
of Columbia, (e) Duncan failed to register the Condo as rental property, and (f) the
transaction allowed FMVILA to fraudulently disguise the Loan as a commercial loan
in order to charge Plaintiff a higher rate of interest and circumvent consumer and fair
lending laws. Id. ¶¶ 353-356, 361-364, 369-372.
• Claims Concerning the Closing of the Loan. The two claims in the second group
(the “Loan Closing Claims”)—Count XXII (Breach of Fiduciary Duty) and Count
XXIII (Negligence)—are each premised on an identical set of factual allegations
relating to Duncan’s role in the closing of the Loan. See 4th Am. Compl. ¶¶ 383-98.
Plaintiff alleges that Duncan owed her a duty of care and a fiduciary duty to perform
the closing on the Loan. Id. ¶¶ 384, 392. Plaintiff contends that Duncan violated
2
Plaintiff has asserted other claims against Duncan that, unless otherwise noted herein,
are not relevant to the instant motion.
3
these duties by (a) failing to use a proper and accurate accounting statement, (b)
failing to ensure that the loan documents complied with all relevant laws and statutes,
(c) failing to promptly disburse funds associated with the Loan, (d) failing to
promptly file loan documents and loan releases, (e) failing to conduct the settlement
in a manner in accordance with all relevant laws and statutes, (f) using a HUD-13
settlement statement that did not accurately reflect the nature of the transaction, and
(g) paying “transfer” and “recordation” taxes to the Recorder of Deeds.4 Id. ¶¶ 385-
87, 393-95.
On March 7, 2009, Duncan moved for summary judgment on several fronts, including the
merits of each of the five claims identified above. See Def.’s Mem. in Supp. of Mot. for Summ.
J. (“Def.’s Mem.”), Docket No. [186-1]. He also moved for summary judgment with respect to
Plaintiff’s request for punitive damages on each of the five identified claims, as well as Count
XXI (Breach of Contract), which is based on the same allegations underlying the Loan Closing
Claims.5 See id. Plaintiff filed a timely opposition to Duncan’s motion. See Pl.’s Opp’n to
Def.’s Mot. for Summ. J. (“Pl.’s Opp’n”), Docket No. [196]. Duncan filed a reply. See Def.’s
Reply to Pl.’s Opp’n to Def.’s Mot. for Summ. J. (“Def.’s Reply”), Docket No. [224].
Duncan’s primary argument was that Plaintiff’s claims for legal malpractice, breach of
fiduciary duty, and negligence are all predicated upon a finding that he entered into an attorney-
client relationship with Plaintiff and that, absent such a relationship, she cannot succeed on her
3
The HUD-1 is a standard form used to itemize services and fees charged to a borrower
by a lender or broker.
4
Plaintiff’s additional allegation that Duncan failed to properly notarize and authenticate
documents by a licensed notary was dismissed as moot in a prior opinion. See Sloan v. Urban
Title Servs., Inc., 702 F. Supp. 2d 1 (D.D.C. 2010).
5
Duncan did not move for summary judgment on the merits of Count XXI (Breach of
Contract), limiting his motion, as it pertained to that particular claim, to challenging Plaintiff’s
request for punitive damages. See Sloan v. Urban Title Servs., Inc., 689 F. Supp. 2d 94, 102 n.4
(D.D.C. 2010).
4
claims. See Def.’s Mem. at 4-8. Plaintiff, for her part, conceded that she never entered into an
attorney-client relationship with Duncan in connection with the closing of the Loan, but
maintained that such a relationship nonetheless existed with respect to the creation of the LLC.
See Pl.’s Opp’n at 9-16. In addition, Plaintiff argued that, even in the absence of an attorney-
client relationship, Virginia law permits third parties to bring a legal malpractice claim in certain
“special circumstances” where the third party’s reliance is reasonable and foreseeable and,
irrespective of the question of whether an attorney-client relationship existed, her claims based
on negligence and fiduciary duty would survive. See id. at 11-16. In reply, Duncan offered no
direct response to Plaintiff’s argument, but instead argued for the first time that Plaintiff’s claims
must fail because she is required to proffer expert testimony to establish the appropriate standard
of care and to prove liability. See Def.’s Reply at 4-8.
On February 12, 2010, this Court issued a decision addressing, inter alia, Duncan’s
Motion for Summary Judgment. See generally Sloan v. Urban Title Servs., Inc., 689 F. Supp. 2d
94 (D.D.C. 2010) (hereinafter, “Sloan II”). As noted by the Court at the time, the parties’
briefing left much to be desired. Indeed, the Court observed that its resolution of Duncan’s
motion was “significantly hindered by the generally deficient quality of the parties’ briefing.” Id.
at 104. Among other things, the parties had failed to provide the Court with anything beyond a
“bare outline” of the facts relevant to Duncan’s role in creating the LLC and closing the Loan.
Id. As a result, the precise contours of Duncan’s conduct remained, to a large degree, unclear.
Id. Nevertheless, the following background could be gleaned from the parties’ respective
submissions, which the Court shall quote in full here as it sets the stage for the issues that remain
open:
5
As the parties agree, Duncan acted as FMVILA’s attorney with
respect to the FMV Loan transaction. Plaintiff admitted as much at
deposition, testifying that she knew Duncan was counsel for FMVILA
and that he had neither agreed to be nor was acting as her attorney
with respect to the FMV Loan.
The details of the FMV Loan closing itself are largely absent from the
parties’ briefing. The parties’ agree, however, that Duncan was
present at the FMV Loan closing and that he discussed the FMV Loan
papers with Plaintiff. Although Plaintiff was aware that Duncan was
acting as FMVILA’s attorney at the closing, she testified that she
“trusted” him because he was a lawyer who was “there to be on your
side and not take advantage.”
In addition, the parties appear to agree that Duncan assisted with the
preparation and filing of the articles of organization necessary for the
formation of Plaintiff’s LLC. A material dispute exists, however, as
to whether Duncan did so at Plaintiff’s request. As to this point, the
parties present contradictory stories. According to Duncan, Plaintiff
requested that Duncan assist with the formation of a limited liability
corporation. Duncan agreed to the request, but he maintains that in
so doing, he made it clear to Plaintiff that he was not acting as her
attorney.
Plaintiff for her part denies that she ever requested Duncan to assist
with the formation of the LLC. Specifically, Plaintiff testified at
deposition that she never signed any document containing the words
“1230 23rd Street, LLC” and that she only learned of the existence of
the LLC during the course of the pending litigation. The implication,
of course, is that she never requested that Duncan establish an LLC
and that the decision to form a limited liability company was made by
Duncan, FMVILA, or one of the other FMV Defendants without her
consent or knowledge.
Sloan II, 689 F. Supp. 2d at 104-05 (internal citations, quotations, and notations omitted).
From this foundation, the Court proceeded to assess the merits of the parties’ arguments.
Succinctly stated, the Court found that no reasonable fact finder “could reasonably conclude that
[Duncan] and Plaintiff entered into an attorney-client relationship.” Sloan II, 689 F. Supp. 2d at
109. Nevertheless, based on the scant record support and legal authority provided by the parties,
6
the Court could not agree with Duncan that the absence of an attorney client-relationship
conclusively established his entitlement to summary judgment on Plaintiff’s claims for legal
malpractice, breach of fiduciary duty, and negligence. Id. The fundamental—and ultimately
fatal—shortcoming in Duncan’s submissions on this issue was that he “chose not to directly
respond” to Plaintiff’s position that, irrespective of the answer to the question of whether an
attorney-client relationship existed, Virginia law permits third parties to bring a legal malpractice
claim in certain special circumstances and, in any event, her claims based on negligence and
fiduciary duty are based on duties arising independently of the attorney-client relationship. Id. In
the end, the Court could not “determine whether Duncan, who appears to have been the only
attorney present at the FMV Loan closing (albeit as FMVILA’s attorney), owed Plaintiff any
duties . . . or may be held liable for legal malpractice under Virginia law, and the Court
decline[d] to advance arguments that the parties themselves ha[d] not made.” Id. As a result, the
Court held that Duncan had simply failed to “show[] that he is entitled to summary judgment on
Plaintiff’s claims for legal malpractice, negligence and breach of fiduciary duty based on the
absence of an attorney-client relationship alone.” Id. The Court did not solicit supplemental
briefing on the issue or otherwise afford Duncan a second bite at the apple. Therefore, the
question of whether the absence of an attorney-client relationship precludes Plaintiff from
recovering on her claims for legal malpractice, breach of fiduciary duty, and negligence is not
before the Court in connection with the instant motion.
The same is not true of the second issue raised by Duncan—namely, that Plaintiff’s
claims for legal malpractice, breach of fiduciary duty, and negligence must fail because she is
required to proffer expert testimony to establish the appropriate standard of care and to prove
7
liability. While the Court declined to consider this argument because it was raised by Duncan for
the first time in his reply papers, the Court nevertheless observed that, if meritorious, the
argument would appear to be dispositive of Plaintiff’s claims. Sloan II, 689 F. Supp. 2d at 112.
In light of this observation, the Court concluded that the most prudent course was to hold
Duncan’s motion in abeyance to provide Plaintiff with a full and fair opportunity to respond to
Duncan’s argument concerning the need for expert testimony. Id. The Court set an appropriate
supplemental briefing schedule. See Order (Feb. 12, 2010), Docket No. [246]. Both parties were
instructed that any supplemental briefing was limited to two discrete issues: (a) whether Virginia
law requires Plaintiff to present expert testimony in this case to establish three things—the
appropriate standard of care, whether Duncan breached that standard of care, and whether his
breach was the proximate cause of Plaintiff’s damages, and (b) whether Plaintiff has failed to
produce expert testimony sufficient to meet that requirement. Id. at 2. Both parties were
“admonished that any future briefing must include accurate citations to both evidentiary and legal
support for their arguments.” Sloan II, 689 F. Supp. 2d at 112.
In addition, reasoning that resolution of the underlying merits of Plaintiff’s claims for
legal malpractice, breach of fiduciary duty, and negligence in light of the expert testimony issue
could render it unnecessary to address Plaintiff’s request for punitive damages in connection with
such claims, the Court also held in abeyance Duncan’s motion insofar as it pertained to the
punitive damages issue. See Sloan II, 689 F. Supp. 2d at 116. The Court indicated that it would
revisit the issue, as may be appropriate, upon reviewing the parties’ supplemental briefing on the
expert testimony issue. Id.On March 12, 2010, Plaintiff filed her supplemental opposition. See Pl.’s Mem.
8
Concerning Expert Test. on Def.’s Malpractice, Fiduciary Duty and Negligence Claims (“Pl.’s
Suppl. Opp’n”), Docket No. [254]. On March 29, 2010, Duncan filed his reply. See Def.’s
Reply to Pl.’s Mem. Concerning Expert Test. on Def.’s Malpractice, Fiduciary Duty and
Negligence Claims (“Def.’s Suppl. Reply”), Docket No. [261]. The matter is therefore fully
briefed and ripe for adjudication.
II. LEGAL STANDARD
Summary judgment is appropriate where “the movant shows that there is no genuine
dispute as to any material fact and [that it] . . . is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). The mere existence of some factual dispute is insufficient on its own to bar
summary judgment; the dispute must pertain to a “material” fact, and therefore “[o]nly disputes
over facts that might affect the outcome of the suit under the governing law will properly
preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986). Nor may summary judgment be avoided based on just any disagreement as to the
relevant facts; the dispute must be “genuine,” meaning that there must be sufficient admissible
evidence for a reasonable trier of fact to find for the non-movant. Id.In order to establish that a fact is or cannot be genuinely disputed, a party must (a) cite to
specific parts of the record—including deposition testimony, documentary evidence, affidavits or
declarations, or other competent evidence—in support of its position, or (b) demonstrate that the
materials relied upon by the opposing party do not actually establish the absence or presence of a
genuine dispute. Fed. R. Civ. P. 56(c)(1). Conclusory assertions offered without any factual
basis in the record cannot create a genuine dispute sufficient to survive summary judgment.
Ass’n of Flight Attendants-CWA v. U.S. Dep’t of Transp., 564 F.3d 462, 465-66 (D.C. Cir. 2009).
9
Moreover, where “a party fails to properly support an assertion of fact or fails to properly address
another party’s assertion of fact,” the district court may “consider the fact undisputed for
purposes of the motion.” Fed. R. Civ. P. 56(e).
When faced with a motion for summary judgment, the district court may not make
credibility determinations or weigh the evidence; instead, the evidence must be analyzed in the
light most favorable to the non-movant, with all justifiable inferences drawn in its favor. Liberty
Lobby, 477 U.S. at 255. If material facts are genuinely in dispute, or undisputed facts are
susceptible to divergent yet justifiable inferences, summary judgment is inappropriate. Moore v.
Hartman, 571 F.3d 62, 66 (D.C. Cir. 2009). In the end, the district court’s task is to determine
“whether the evidence presents a sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a matter of law.” Liberty Lobby, 477
U.S. at 251-52. In this regard, the non-movant must “do more than simply show that there is
some metaphysical doubt as to the material facts,” Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986); “[i]f the evidence is merely colorable, or is not
sufficiently probative, summary judgment may be granted,” Liberty Lobby, 477 U.S. at 249-50(internal citations omitted).
III. DISCUSSION
The Court’s discussion here divides into three parts. First, the Court addresses Duncan’s
argument that Plaintiff has not proffered sufficient expert testimony to support her claims for
legal malpractice, breach of fiduciary duty, and negligence. Second, the Court addresses
Duncan’s argument that Plaintiff is not entitled to punitive damages on certain claims. Third,
and finally, the Court shall explain why it has not considered certain evidence proffered by
10
Plaintiff in opposition to the instant motion.
A. Duncan is Not Entitled to Summary Judgment on Plaintiff’s Claims for Legal
Malpractice, Breach of Fiduciary Duty, and Negligence
Duncan argues that Plaintiff has not proffered sufficient expert testimony to support her
claims for legal malpractice, breach of fiduciary duty, and negligence—the LLC Creation Claims
and the Loan Closing Claims. The Court shall first explain why expert testimony is required in
this context and then turn to the question of whether Plaintiff’s proffered expert testimony is
sufficient to survive summary judgment.
1. Plaintiff Must Support Her Claims with Expert Testimony
Under Virginia law,6 it is well-established that “[u]nless a malpractice case turns upon
matters within the common knowledge of laymen, expert testimony is required to establish the
appropriate professional standard, to establish a deviation from that standard, and to establish
that such a deviation was the proximate cause of the claimed damages.” Seaward Int’l, Inc. v.
Price Waterhouse, 391 S.E.2d 283, 287 (Va. 1990) (internal citations omitted). As the foregoing
formulation makes clear, the need for expert testimony is presumed but not universal—provided
the subject matter is within the common knowledge of laymen, no such testimony is required.
Whitley v. Chamouris, 574 S.E.2d 251, 252 (Va. 2003). In other words, there is no brightline
rule delineating when expert testimony will and will not be needed; the court must instead
address the issue on a “case-by-case” basis, in the context of the particular facts presented.
Polyzos v. Cotrupi, 563 S.E.2d 775, 778 (Va. 2002). Where professional conduct is involved, the
6
The Court previously found that the law of the Commonwealth of Virginia applies to
Plaintiff’s claims for legal malpractice, breach of fiduciary duty, and negligence. See Sloan, 689
F. Supp. 2d at 106. Both parties have briefed the instant motion accordingly. See Pl.’s Opp’n;
Def.’s Suppl. Reply.
11
essential question is whether the acts at issue involve transactions or matters beyond the capacity
or laymen to comprehend “without the assistance of expert testimony.”7 Id.Plaintiff has taken the position that expert testimony is not required in this case.
Unfortunately, apart from reciting the general legal standard, the totality of her argument is the
first clause of a single sentence:
While Plaintiff Sloan believes that expert testimony is not required to
prove Defendant Duncan’s legal malpractice, breach of fiduciary duty
and negligence, the expected testimony of Harvey S. Jacobs, Esquire,
will define the applicable standards and duties at issue and show how
Defendant Duncan’s actions deviated from these standards and duties.
Pl.’s Opp’n at 13. Plaintiff makes no credible attempt to situate the facts of this case within the
applicable legal standard and the relevant body of case law.8 See Pl.’s Opp’n. In light of this
7
While there is a well-developed body of case law from the Virginia courts addressing
these principles in connection with claims for professional malpractice and negligence, see, e.g.,
Seaward, 391 S.E.2d at 287; Whitley, 574 S.E.2d at 252; Hewlette v. Hovis, 318 F. Supp. 2d 332,
335 (E.D. Va. 2004), the same is not true of claims for breach of fiduciary duty, though the
Court’s independent research suggests that the same principles would apply in a case such as this,
see, e.g., Feld v. Priebe, No. HQ-111512-1, 2004 WL 2999114, at *4 (Va. Cir. Ct. Dec. 22,
2004) (without expert testimony, plaintiff failed to establish that fiduciary breached his duty to
principal by making investments with a reasonable degree of investment certainty). Regardless,
in briefing the present motion, both parties have assumed that these principles apply with equal
force to Plaintiff’s claims for legal malpractice, breach of fiduciary, and negligence. See Def.’s
Reply; Pl.’s Suppl. Opp’n; Def.’s Suppl. Reply. Since the parties do not raise the issue, the
Court need not reach the question.
8
To the extent Plaintiff intends to rely on the authorities she cites in describing the
general legal standard, even a cursory review of those authorities would reveal how inapposite
they are here. In Beverly Enterprises-Virginia, Inc. v. Nichols, 441 S.E.2d 1, 3 (Va. 1994), the
Supreme Court of Virginia encountered one of the “rare instances” in which expert testimony is
unnecessary. There, the defendant left food with, and failed to provide any assistance to, an
individual known to be unable to feed herself and who had experienced serious choking incidents
on two separate occasions. Id. In other words, the defendant’s failure to live up to the
expectations of care was so blatant that no expert testimony was required. Meanwhile, the
decision of the Circuit Court of Virginia in McCabe v. Reed, No. L00-1636, 2001 WL 34037268(Va. Cir. Ct. Mar. 13, 2001), if anything, undermines Plaintiff’s position. In that case, a legal
malpractice action, the court held that expert testimony was required even though the alleged
12
entirely cursory treatment, the Court simply is not in a position to consider the merits of
Plaintiff’s argument on this point. Estate of Gaither ex rel. Gaither v. District of Columbia, 655
F. Supp. 2d 69, 87 n.13 (D.D.C. 2009); cf. Armstrong v. Geithner, 608 F.3d 854, 857 n.2 (D.C.
Cir. 2010). The failure to provide a fulsome answer to the question is, frankly, inexplicable
given that one of the two issues Plaintiff was expressly instructed to address in the supplemental
briefing allowed by the Court was whether she is required to present expert testimony in light of
the facts of this case. See Order (Feb. 12, 2010), Docket No. [246], at 2.
Obviously, Plaintiff’s subjective belief that she is not required to present expert testimony
in support of her claims for legal malpractice, breach of fiduciary duty, and negligence is patently
inadequate to overcome the general presumption that at least some expert testimony is required
in this context. See Brown v. Slenker, 220 F.3d 411, 422 (5th Cir. 2000) (in applying Virginia
law, concluding that expert testimony is generally required to establish each element of a claim
for legal malpractice). Indeed, given that Plaintiff’s wholly conclusory denial that expert
testimony is necessary here is immediately followed by her representation that she will provide
expert testimony on these issues, and subsumed by the argument that the testimony she will
provide is sufficient, her chosen approach is tantamount to a concession that such testimony is
required. As if this were not problem enough, in attempting to bolster her proffered expert
witness’ credentials, Plaintiff maintains that the contemplated testimony will be based on
“knowledge of a subject beyond that of persons of common intelligence and ordinary experience
based on his experience, study or observation.” Pl.’s Opp’n at 14 (internal quotation marks
omitted). In other words, Plaintiff represents that the expert testimony she intends to offer will
malpractice was as simple as missing a deadline. Id. at *4.
13
be on subject matter outside the “common knowledge of laymen.” Seaward, 391 S.E.2d at 287.
In light of that admission, it is difficult to see how the Court could reach a conclusion to the
contrary.
Regardless, given the nature of Plaintiff’s LLC Creation Claims and Loan Closing
Claims, there is no doubt that testimony as to matters beyond the common knowledge of laymen
will be necessary at trial. Indeed, Plaintiff’s claims each turn on rather specific and arcane details
concerning the real estate settlement process, such as the proper preparation of loan documents,
releases, accounting statements, and articles of incorporation, tax consequences, considerations
of consumer and fair lending laws, the custom and practice within the industry, and the
relationship among and responsibilities between the parties. See 4th Am. Compl. ¶¶ 353-356,
361-364, 369-372, 385-87, 393-95. Simply put, this is not a straightforward case of legal
malpractice such that would warrant disregarding the general presumption in favor of expert
testimony. Compare Seaward, 391 S.E.2d at 287 (generally accepted auditing standards are
outside the common knowledge of laymen), with Baserva v. Remes, No. 08 Civ. 997, 2009 WL
1392532, at *2 (E.D. Va. May 18, 2009) (expert testimony not required where defendants waited
three months to file the appropriate forms with authorities).
For all these reasons, the Court concludes that Plaintiff is required to present at least some
expert testimony in support of her claims for legal malpractice, breach of fiduciary duty, and
negligence.
2. Plaintiff’s Proffered Expert Testimony Is Sufficient to Survive
Summary Judgment
In establishing Duncan’s liability for legal malpractice, breach of fiduciary duty, and
negligence—the LLC Creation Claims and the Loan Closing Claims—Plaintiff intends to rely on
14
expert testimony by Harvey S. Jacobs, Esq. (“Jacobs”). In the instant motion, Duncan argues that
Jacobs’ testimony is insufficient for three basic reasons: (a) he is not qualified to opine on real
estate settlement practice in Virginia; (b) his opinions do not align with the nature of the
underlying transaction at issue in this action; and (c) his testimony would inappropriately veer
into the jury’s domain by touching upon ultimate issues in the case. See Def.’s Reply at 4-8;
Def.’s Suppl. Reply at 8-9. The Court shall address each argument in turn.
First, Duncan argues that Jacobs is not qualified to opine on matters of Virginia real
estate settlement practice. As an initial matter, the Court observes that, in briefing this issue, the
parties’ submissions share a common and curious defect—namely, both parties cite to Virginia
law for the proposition that a witness must possess sufficient knowledge, skill, or experience to
render him competent to testify as an expert. See Def.’s Reply at 6; Pl.’s Suppl. Opp’n at 4.
While that proposition is entirely non-controversial, the parties’ reliance on state law is
misplaced; even when sitting in diversity, a district court is guided by federal law when
exercising its “gatekeeping” function in connection with expert testimony. See generally City of
Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548, 558 (11th Cir. 1998) (“[I]t is well settled that
the Federal Rules of Evidence, not state evidence law, [generally] govern the admissibility of
evidence in federal court.”) (citing Fed. R. Evid. 1101); see also Kumho Tire Co., Ltd. v.
Carmichael, 526 U.S. 137 (1999) (addressing the standards governing the admissibility of non-
scientific expert testimony in the context of a diversity action). At this stage of the proceedings,
the distinction is largely immaterial—like Virginia law, the federal standard requires an expert
witness to be “qualified . . . by knowledge, skill, experience, training, or education.” Fed. R.
Evid. 702. The Court merely takes note of the issue in the event the question of Jacobs’
15
qualifications arises again in the context of pretrial proceedings.
Turning to the merits of Duncan’s first argument, Duncan contends that Jacobs is not
licensed to practice law in Virginia and that his experience with real estate settlement practice
has focused on the laws of the District of Columbia and Maryland and not Virginia—the
jurisdiction which the parties agree has the closest ties to the settlement at issue in this action.
From this, Duncan argues that Jacobs’ testimony must be disregarded in its entirety as a matter of
law and, without such testimony, Plaintiff’s claims for legal malpractice, breach of fiduciary
duty, and negligence must fail. However, the Court cannot say, at this stage of the proceedings,
that Duncan is so patently unqualified to opine on the subject of real estate settlement practice in
Virginia that his proffered testimony must be excluded in its entirety. Jacobs is an attorney and a
member of the bars of the District of Columbia, Maryland, and New York. See Pl. Juergen’s
[sic] F.R.Civ.P.26(a)(2)(B) [sic] Expert Disclosure of Harvey S. Jacobs, Settlement Attorney
(“Jacobs Report”), Docket No. [254-2], at 1. He has purportedly processed and conducted more
than one thousand real estate settlements in this region over the course of his nearly thirty-year
career, an experience which has apparently extended to settlement closings in Virginia. See id.;
Dep. of Harvey S. Jacobs (“Jacobs Dep.”), Docket No. [254-3], at 422. He also claims to have
authored various publications and to have served as a panelist in programs touching upon real
estate practice, including the role of counsel in real estate settlements and the function of the
HUD-1 settlement statement. See Jacobs Report at 2-4. In short, Jacobs purports to have
education, training, and experience in the general field of real estate settlement practice. Id. at 4.
His opinions extend to the industry generally, and are not necessarily confined to a single
jurisdiction. Moreover, at his deposition, Jacobs testified that his opinions as to the obligations
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imposed upon the settlement agent in the context of the real estate closing process apply to
Virginia practice as well. See Jacobs Dep. at 422-23. Without a doubt, Jacobs’ testimony is less
forceful and less compelling when it relates to Virginia practice than when it relates to the
practice within the District of Columbia or Maryland, but the Court cannot say at this stage and
with this record that it is entirely unsupported or unreliable. Whatever its ultimate merits, this
factor alone does not render Jacobs so clearly unqualified that his testimony must be altogether
disregarded. Therefore, summary judgment may not rest on this basis. Of course, that does not
mean that Duncan is without recourse to test Jacobs’ qualifications. The proper vehicle for
raising such issues is a motion in limine filed in the context of pretrial proceedings and, if
necessary, the Court shall consider a request that a Daubert hearing be held to evaluate Jacobs’
proffered testimony. At this stage of the proceedings, it suffices to say that the Court cannot
conclude that Jacobs’ testimony is insufficient as a matter of law.
Second, Duncan appears to argue that Jacobs’ opinions do not align with the nature of the
underlying transaction at issue in this action. The argument is not easy to follow. So far as the
Court can tell, the argument is this: Plaintiff admitted at her deposition that Duncan was not
functioning as her lawyer at the closing of the Loan; Jacobs’ testimony at his deposition that the
role of the settlement agent is to serve as a neutral to all the parties was followed by the qualifier
“especially if the parties don’t know that [the agent has] picked a side,” Jacobs Dep. at 423;
therefore, Jacobs’ opinion “does not apply,” Def.’s Reply at 5. However, the argument is
predicated upon a strained and ultimately untenable reading of Jacobs’ testimony. Jacobs
repeatedly offered his opinion that real estate settlement agents function as neutrals, wear many
hats, and owe duties to all the parties, including the borrower. See Jacobs Report at 8-9; Jacobs
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Dep. at 8, 422-23. By testifying that the agent’s role as a neutral is “especially” true where the
parties “don’t know that [the agent has] picked a side” does not vitiate the remainder of Jacobs’
testimony that the settlement agent owes duties to all parties at the settlement proceedings—he
did not, in other words, testify that the agent acts as a neutral “only if” the parties are aware he is
not representing a particular side. To the extent there is a contradiction here, it goes to Jacobs’
credibility and the weight to be afforded his testimony; it does not warrant summary judgment in
Duncan’s favor. However, to the extent Duncan is able to show that there is an insufficient “fit”
between Jacobs’ proffered testimony and the facts of the case—a showing he simply has not
made here—he may, if appropriate, raise the argument in the context of a motion in limine during
pretrial proceedings.
Third, Duncan argues that Jacobs’ testimony would inappropriately veer into the jury’s
domain by touching upon ultimate issues in the case. If Jacobs intends to testify as to all the
matters set forth in his expert report, Duncan is clearly correct. Simply by way of example,
Jacobs opines in his report that the conduct at issue in this case amounts to a statutory or
common law violation, or that certain allegations of which he clearly has no personal knowledge
are true or false. See Jacobs Report at 7-8. Plainly, these are questions for the jury. In this
limited respect, Duncan’s objections are valid and, should he choose to raise them in the context
of a motion in limine, he might very well prevail. Unfortunately, these defects simply do not
extend to Jacobs’ opinions concerning the broader custom, practice, and usage governing real
estate settlements. Therefore, summary judgment may not rest on this basis.
In the final analysis, neither Duncan’s arguments nor Plaintiff’s response truly speak to
the question of whether Jacobs’ proffered testimony, assuming admissibility, would suffice to
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support Plaintiff’s claims for legal malpractice, breach of fiduciary duty, and negligence. Instead,
both sides focus on issues that go to Duncan’s qualifications and competency that are more
appropriately raised in the context of pretrial proceedings. At this stage, their focus should have
been on whether Jacobs’ testimony is sufficient to establish (a) the appropriate professional
standard, (b) a deviation from that standard, and (c) that the deviation was the proximate cause of
the claimed injury. Seaward, 391 S.E.2d at 287. Critically, Duncan never attempts to show how
Jacobs’ proffered testimony falls short in establishing one or more of these elements. Indeed, he
never bothers to identify which of these elements are at issue, a failure that is especially troubling
because the Virginia Supreme Court has held that expert testimony may be required as to some
elements but not others depending on the particular facts of the case. Whitley, 574 S.E.2d at 252.
Based on its own review of Jacobs’ expert report and the limited excerpts of his
deposition testimony that the parties have provided to the Court, it is clear that Duncan’s
opinions will extend to the following: the settlement agent has a duty to the borrower and all
other parties at the settlement proceedings; the settlement agent has a duty to ensure that all
parties read and understand the documents they are signing; the settlement agent is a neutral,
wearing many hats and representing all the parties to the transaction; even if independent
attorneys are present, the settlement agent still has a duty to treat all parties fairly; the settlement
agent has a duty to explain the ramifications of signing documents, including the HUD-1
settlement statement; and Duncan’s conduct was not in compliance with industry custom,
practice, and usage. See Jacobs Report at 8-9; Jacobs Dep. at 8, 422-23. Without any contrary
argument from the parties, the Court can only conclude that a genuine dispute exists as to
whether Duncan’s conduct deviated from the applicable standard governing real estate settlement
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agents and whether that deviation caused Plaintiff harm. Stated differently, the Court cannot
conclude on this record that no reasonable fact finder could find in Plaintiff’s favor after
considering Jacobs’ testimony. This is especially true because, “[o]rdinarily, the questions of
whether an attorney has exercised the required degree of care and, if not, whether the failure was
a proximate cause of the client’s loss are to be decided by a fact finder, after considering expert
testimony.” Ripper v. Bain, 482 S.E.2d 832, 836 (Va. 1997). Therefore, the Court shall DENY
Duncan’s [185/186] Motion for Summary Judgment insofar as it seeks summary judgment on the
LLC Creation Claims and Loan Closing Claims—Count XVIII (Legal Malpractice), Count XIX
(Breach of Fiduciary Duty), Count XX (Negligence), Count XXII (Breach of Fiduciary Duty),
and Count XXIII (Negligence)—based on the sufficiency of Plaintiff’s expert testimony
concerning the applicable standard of care, whether Duncan breached that standard of care, and
whether his breach was the proximate cause of Plaintiff’s damages.
Before leaving the issue, the Court pauses to observe that Jacobs’ expert report is directed
towards a now-superseded version of the Complaint in this action and does not appear to take
into account all the discovery taken in this action. The Court reminds Plaintiff that she has an
ongoing obligation to supplement her expert disclosures in a timely manner and her failure to do
so may result in the automatic sanction of exclusion. Fed. R. Civ. P. 26(e); Fed. R. Civ. P.
37(c)(1). To the extent supplementation is required, Plaintiff shall be required to serve a revised
expert report for Jacobs on or before April 22, 2011.
B. Duncan Has Failed to Show That He Is Entitled to Summary Judgment on
Plaintiff’s Request for Punitive Damages
Duncan next argues that Plaintiff cannot recover punitive damages on the LLC Creation
Claims and the Loan Closing Claims—Count XVIII (Legal Malpractice), Count XIX (Breach
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of Fiduciary Duty), Count XX (Negligence), Count XXII (Breach of Fiduciary Duty), and
Count XXIII (Negligence)—as well as Count XXI (Breach of Contract), which is based on the
same allegations underlying the Loan Closing Claims. In support, he argues that in this situation
punitive damages may only be recovered if the breach alleged constitutes an independent, willful
tort beyond the mere breach of a contractual duty and only if the breach was based on actual
malice. See Def.’s Mem. at 14-15. In opposition, Plaintiff does not dispute that Duncan has
stated the proper standard for recovery of punitive damages, but counters that she has set forth
sufficient facts to suggest that Duncan “conspired to fraudulently disguise a consumer residential
refinance loan as a commercial loan” and that this suffices to satisfy the agreed-upon standard.
Pl.’s Opp’n at 20. Unfortunately, neither party attempts to root their legal arguments in the facts
of this case, which is especially problematic since the resolution of the issue necessarily turns on
the facts. More broadly, as the Court previously observed, “the parties have provided only a bare
outline of the facts relevant to Duncan’s . . . role in forming the LLC and extending the [] Loan.”
Sloan II, 689 F. Supp 2d at 104. As a result, “[t]he specific details regarding Duncan’s exact
conduct in those transactions . . . remain unclear to a large degree.” Id. These deficiencies in the
record remain as true today as when they were first noted by the Court. At the same time,
whether the Loan is a legitimate commercial loan, or instead an unlawful and fraudulently
disguised consumer residential loan, remains an open question in this action. Id. at 100. While
Duncan’s argument may have some merit, based upon the skeletal factual record created by the
parties and their failure to tether their legal arguments to the facts of this case, the Court simply is
not in a position to engage in the fact-based inquiry required to assess whether punitive damages
may lie with respect to some or all of these claims. As such, Duncan has failed to carry his
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burden of establishing his “entitle[ment] to judgment as a matter of law” on this issue. Fed. R.
Civ. P. 56(a). Therefore, the Court shall DENY Duncan’s [185/186] Motion for Summary
Judgment insofar as it seeks summary judgment on Plaintiff’s request for punitive damages in
connection with Count XVIII (Legal Malpractice), Count XIX (Breach of Fiduciary Duty),
Count XX (Negligence), Count XXI (Breach of Contract), Count XXII (Breach of Fiduciary
Duty), and Count XXIII (Negligence).
C. In Resolving the Instant Motion, the Court Has Not Considered Plaintiff’s
Allegation that Duncan’s License to Practice Law Has Been Suspended
In opposing the instant motion, Plaintiff avers that Duncan’s license to practice law in
Virginia has been suspended for “conduct involving dishonesty, fraud, deceit, or
misrepresentation that reflects adversely on his fitness to practice law.” Pl.’s Suppl. Opp’n at 4-5
& Ex. 1 at 3. While Plaintiff represents to this Court that the referenced conduct “involved the
matter that is the basis of the instant case,” Pl.’s Opp’n at 5, she provides no competent evidence
in support of that assertion, relying exclusively on an unauthenticated printout from the Virginia
State Bar’s website that neither identifies the conduct underlying the disciplinary proceedings nor
otherwise suggests that the proceedings had any connection to Plaintiff and her claims in this
case, Pl.’s Opp’n Ex. 1 at 3. In fact, according to the Court’s independent review of the
unpublished memorandum order describing the basis for the suspension, the disciplinary
proceedings concerned an entirely unrelated matter. See Virginia State Bar ex rel. Fourth Dist.,
Section II Comm. v. Duncan, Case No. CL09003613 (Va. Cir. Ct. Mar. 15, 2010), available at
http://www.vsb.org/docs/Duncan_03-23-10.pdf. In any event, Plaintiff never bothers to
articulate how the referenced disciplinary proceedings have any relevance to the question of
whether she has adduced sufficient evidence to support her claims for legal malpractice, breach
22
of fiduciary duty, and negligence, or her ability to recover punitive damages, and the Court can
discern none. See Pl.’s Opp’n at 6-7. Accordingly, the Court has not considered the contention
in resolving in the instant motion.
IV. CONCLUSION
The Court has considered the remaining arguments tendered by the parties and has
concluded that they are without merit. Therefore, and for the reasons set forth above, the Court
shall DENY the remainder of Duncan’s [185/186] Motion for Summary Judgment. An
appropriate Order accompanies this Memorandum Opinion.
Date: March 27, 2011
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
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