Johnson v. Bank of America, N.A.

Robert C. JOHNSON, II et al. v. BANK OF AMERICA, N.A., Trustee et al.

No. X03HHDCV156066060S

Superior Court of Connecticut, Judicial District of Hartford, Hartford, Complex Litigation Docket

August 29, 2018

UNPUBLISHED OPINION

OPINION

Carl J. Schuman, Judge, Superior Court

Defendants Kelley Drye & Warren, LLP, James Nealon, James Moriarity, and M. Ridgway Barker (hereinafter Kelley Drye the Kelley Drye defendants, or the defendants) move for summary judgment on six counts of a nine-count complaint filed by named plaintiff Robert C. Johnson II and nineteen other plaintiffs. The gravamen of the allegations is that the defendants, who consist of a law firm and three lawyers working for that firm, rendered inadequate legal services in obtaining a $9.8 million settlement for the plaintiffs in a stockholder suit against nonparty Gibbs Wire & Steel Company.

I

A

This case has a long and tortuous history. The undisputed facts begin in 1956 with the formation of a Connecticut corporation named Gibbs Wire & Steel Company by R.C. Johnson, grandfather of the named plaintiff, and Charles Gibbs. Johnson provided $40,000 of the company’s starting capital of $50,000 and Gibbs provided the remaining $10,000. The organization of the company provided for both voting common stock and nonvoting stock. Gibbs owned 51% of the voting stock and Johnson owned 44% of the voting stock.

Over the years, the company became successful and profitable. But discord eventually developed between the Johnson and Gibbs families. In 2008, the Gibbs company (Gibbs) sued some of the current Johnson plaintiffs for specific performance of a contract to sell their 35,200 voting shares, then held by a family trust, back to the company (the voting shares action). The Johnsons, represented by Kelley Drye, obtained a settlement in which the Johnson trust sold these shares to Gibbs for $60.91 per share.

After the voting shares action, the Johnsons still sought to liquidate their remaining nonvoting equity interest in Gibbs which totaled approximately 38%. Gibbs, however, was unwilling to purchase such a large amount of shares or pay the Johnsons the price they demanded. In 2009, the plaintiffs, represented by the Kelley Drye defendants, filed an action against Gibbs, pursuant to General Statutes § 33-896, for dissolution of the corporation on the ground of minority shareholder oppression (the oppression action).^[1]

The Kelley Drye defendants attempted to negotiate a settlement on behalf of the plaintiffs, but the parties initially could not reach an agreement. In January 2012, the Gibbs defendants filed a motion for summary judgment. After argument of the summary judgment motion before Judge Kevin Dubay in May 2012 but before any decision on the motion, the parties participated in mediation with Judge William Bright. Based on the mediation and the recommendations of the Kelley Drye defendants, the plaintiffs agreed in principle to a settlement of the oppression action in July 2012. All parties signed a written settlement agreement in November 2012. Accordingly, Judge Dubay did not have occasion to decide the summary judgment motion.

The settlement called for Gibbs to buy the plaintiffs’ shares at a price of $40 per share. The total amount paid to the plaintiffs over time would approximate $9.8 million.^[2] Based on an engagement letter with the Kelley Drye defendants and subsequent discussions, the plaintiffs paid these defendants approximately $1.1 million in attorneys fees.

B

In 2015, the plaintiffs brought this suit against the Kelley Drye defendants and Bank of America challenging, principally, the representation of the plaintiffs by the Kelley Drye defendants in the negotiations leading to the $9.8 million settlement in the underlying oppression action. The plaintiffs alleged, among other things, that the Kelley Drye defendants had conflicts of interest, coerced them into a settlement, and overcharged them attorneys fees. The first amended complaint, filed in January 2016, contained nine counts, six of which named the Kelley Drye defendants.^[3] These counts alleged breach of fiduciary duty (count two), legal malpractice (count three), breach of contract (count four), breach of the implied covenant of good faith and fair dealing (count five), violations of the Connecticut Unfair Trade Practices Act (CUTPA) (count eight), and violations of the Connecticut Uniform Securities Act (CUSA) (count nine).

In December 2016, the court, Sheridan, J., granted the Kelley Drye defendants’ motion to strike counts four, five, and nine and denied their motion to strike counts two, three, and eight. In June 2017, the plaintiffs filed a second amended complaint that, with minor revisions, repleaded all six counts against the Kelley Drye defendants, including the three counts that the court had stricken. (Docket (Dkt.) # 287.00) The Kelley Drye defendants now move for summary judgment on all six counts.

The defendants raise two principal arguments for summary judgment with regard to the allegations in counts two and three (breach of fiduciary duty and legal malpractice) that challenge the quality and loyalty of the defendants’ representation in the settlement negotiations in the underlying oppression action. They argue that the plaintiffs cannot prove that the defendants’ alleged shortcomings caused any damages because, initially, the plaintiffs would not have received more in settlement negotiations than $40 per share and thus 1) the court would have then decided and granted the summary judgment motion against them or, alternatively, 2) they would not have done any better at trial. The defendants also argue with respect to the second count that, as a matter of law, they did not have a conflict of interest and did not breach their fiduciary duties to the plaintiffs. The defendants contend on the CUTPA count that they did not engage in any wrongful conduct in collecting the firm’s fee or in any other entrepreneurial aspect of the practice of law.

In a separate motion, but one addressed here, the defendants move for summary judgment on counts four, five, and nine. They argue that the repleaded counts in the second amended complaint are the same as those in the first complaint and that Judge Sheridan’s decision is the law of the case on those counts.

II

The court applies the accepted standards governing summary judgment motions. "Practice Book § [17-49] requires that judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. A material fact is a fact that will make a difference in the result of the case ... The facts at issue are those alleged in the pleadings ...

"In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact ... As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent ...

"The party opposing a motion for summary judgment must present evidence that demonstrates the existence of some disputed factual issue ... The movant has the burden of showing the nonexistence of such issues but the evidence thus presented, if otherwise sufficient, is not rebutted by the bald statement that an issue of fact does exist ... To oppose a motion for summary judgment successfully, the nonmovant must recite specific facts ... which contradict those stated in the movant’s affidavits and documents ... The opposing party to a motion for summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact together with the evidence disclosing the existence of such an issue ... The existence of the genuine issue of material fact must be demonstrated by counteraffidavits and concrete evidence ..." (Citations omitted; internal quotation marks omitted.) Morrissey-Manter v. Saint Francis Hospital & Medical Center, 166 Conn.App. 510, 516-18, 142 A.3d 363, cert. denied, 323 Conn. 924, 149 A.3d 962 (2016).

III

Generally a plaintiff alleging legal malpractice must prove all of the following elements: "(1) the existence of an attorney-client relationship; (2) the attorney’s wrongful act or omission; (3) causation; and (4) damages." (Italics omitted; internal quotation marks omitted.) Bozelko v. Papastavros, 323 Conn. 275, 283, 147 A.3d 1023 (2016). The elements of breach of fiduciary duty are similar: "(1) That a fiduciary relationship existed which gave rise to (a) a duty of loyalty on the part of the defendant to the plaintiff, (b) an obligation on the part of the defendant to act in the best interests of the plaintiff, and (c) an obligation on the part of the defendant to act in good faith in any matter relating to the plaintiff; (2) [T]hat the defendant [advanced] his own interests to the detriment of the plaintiff; (3) That the plaintiff sustained damages; (4) That the damages were proximately caused by the fiduciary’s breach of his or her fiduciary duty." (Internal quotation marks omitted.) Doe v. Villa Marie Education Center, No. FBTCV 165032101S, 2017 WL 3671352, at *5 (Conn.Super.Ct. July 20, 2017) .

The defendants’ principal argument for summary judgment on the...