SUPERIOR COURT

OF THE
STATE OF DELAWARE

VIVIAN L. MEDINILLA LEONARD L. WILLIAMS JUSTICE CENTER
JUDGE 500 NortH KING STREET, SUITE 10400

WILMINGTON, DE 19801-3733

TELEPHONE (302) 255-0626

December 16, 2019

Art C. Aranilla, Esquire Patrick K. Gibson, Esquire
Marshall, Dennehey, Warner, Ippoliti Law Group

Coleman & Coggin 1225 North King Street, Suite 900
1007 North Orange Street, Suite 600 Wilmington, DE 19801

Wilmington, DE 19899

Aaron E. Moore, Esquire (Pro Hac Vice)
Marshall, Dennehey, Warner,

Coleman & Coggin

2000 Market Street, Suite 2300
Philadelphia, PA 19103

Re: Gellert Scali Busenkell & Brown, LLC, v. Country Life Holmes,
LLC, et al., C.A. No.: N19C-03-228

Dear Counsel:

In March of 2016, Defendants retained the legal services of Plaintiff Gellert
Scali Busenkell & Brown, LLC! (Plaintiff). Plaintiff filed claims against
Defendants”? for unpaid monies allegedly owed for legal services rendered. In
response, Defendants filed counterclaims alleging two counts of legal malpractice
and respondeat superior. Plaintiff moves for dismissal under Superior Court Civil
Rule 12(b)(6) for failure to state a claim. After consideration of all pleadings and

 

' For ease of reference, Plaintiff/Counterclaim Defendant, herein Plaintiff includes the law firm
of Gellert Scali Busenkell & Brown, LLC.

* For ease of reference, Defendants/Counterclaim Plaintiffs, herein Defendants include Country
Life Homes, LLC; Hearthstone Manor I, LLC; Hearthstone Manor JI, LLC; River Rock, LLC;
Key Properties Group, LLC; Cedar Creek Landing Campground, LLC; and, MBT Land
Holdings, LLC. Elmer Fannin and Mary Ann Fannin are principals of these entities.

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oral arguments on November 18, 2019, for the reasons stated below, Plaintiff's
Motion is GRANTED.

Factual and Procedural Background

On March 1, 2016, Defendants retained Plaintiff to represent them in their efforts
to restructure commercial loans and lines of credit that Defendants had through
Fulton Bank, N.A. (“Fulton”). After unsuccessful efforts, Fulton instituted legal
proceedings against Defendants for the repayment of over $6 million in unpaid
loans. Fulton retained counsel to prosecute various civil actions.’ Plaintiff defended
these actions on behalf of Defendants including disputing the accuracy of the
amounts owed to Fulton.‘

In September of 2018, Defendants terminated Plaintiff's services and retained
another law firm. Three months later, Defendants resolved the Fulton matter through
mediation on December 14, 2018 and paid $6,730,578.71. This included, in relevant
part, payment to Fulton in full satisfaction of all obligations under the loans, and the
payment of Fulton’s legal fees and litigation expenses.

On March 22, 2019, Plaintiff filed a Complaint against Defendants seeking
approximately $124,000 for unpaid fees related to alleged legal services rendered in
the Fulton matter. On June 19, 2019, in addition to the Answer and Affirmative
Defenses, Defendants filed these counterclaims for legal malpractice related to the
representation of attorneys Charles J. Brown III, Esquire and Michael Busenkell,
Esquire (Attorneys Brown and Busenkell) (Count I), and under a theory of
respondeat superior against their firm (Count II). Defendants allege strategic and

 

3 See Defendants’ Counterclaim 7§ 19-79 (referring to cases: (1) C.A. No. N16C-11-199 PRW;
(2) C.A. No. N16C-11-200 PRW; (3) C.A. No. N16C-12-077 PRW; (4) C.A. No. N16C-12-076
PRW; (5) C.A. No. N17C-12-108 PRW; (6) C.A. No. N17C-12-104 PRW; (7) C.A. No. NI7C-
12-146 PRW; (8) C.A. No. N17C-12-138 PRW; and (9) C.A. No. N17C-02-062 PRW).

4 As part of the litigation, on December 11, 2017, Plaintiff filed two civil actions against Fulton
on behalf of Defendants, seeking a judicial declaration that the amounts owed to Fulton was less
than claimed. See Plaintiff's Opening Brief in Support of Motion to Dismiss at pages 2-3 (citing
Defendants’ Counterclaim at J§ 72, 78 (referring to C.A. No. N17C-12-138 PRW and C.A. No.
N17C-02-062 PRW)). The claims against Fulton asserted claims for breach of contract and
breach of the covenant of good faith and fair dealing based on information that Defendants had
overpaid Fulton on some of their accounts, as reported by an accounting firm, Gavin/Solmonese,
LLC, retained to review loan documents from Fulton. See id. at page 3 (citing Defendants’
Counterclaim at Jf 73, 79 (referring to C.A. No. N17C-12-138 PRW and C.A. No. N17C-02-062
PRW)).

i)
procedural errors committed in defending the Fulton action prevented Defendants
from obtaining a more favorable outcome that entitles them to damages “in excess
of $1,000,000.000.”°

On September 5, 2019, Plaintiff filed a Motion to Dismiss under Superior Court
Civil Rule 12(b)(6). On October 24, 2019, Defendants filed their response. On
October 31, 2019, Plaintiff filed its Reply. The Court heard oral argument on
November 18, 2019. The matter is ripe for review.

Standard of Review

On a Motion to Dismiss for failure to state a claim under Superior Court Civil
Rule 12(b)(6), all well-pleaded allegations in the complaint must be accepted as
true. Even vague allegations are considered well plead if they give the opposing
party notice of aclaim.’ The Court must draw all reasonable inferences in favor of
the non-moving party;? however, it will not “accept conclusory allegations
unsupported by specific facts,” nor will it “draw unreasonable inferences in favor of
the non-moving party.”? Dismissal of a complaint under Rule 12(b)(6) must be
denied if the plaintiff could recover under “any reasonably conceivable set of
circumstances susceptible of proof under the complaint.”!°

Discussion

Delaware law has established that to succeed on a claim for legal malpractice,
the plaintiff must establish the following elements: a) the employment of the
attorney; b) the attorney’s neglect of a professional obligation; and c) resulting loss."

 

> Defendants’ damage calculation includes (i) $393,151.04 [previously paid] to Plaintiff in
attorneys’ fees; (ii) $334,201.73 for the Gavin/Solmonese, LLC Report; and (iii) $823,633.00 for
Fulton’s attorneys’ fees and litigation expenses. Defendants Counterclaim at {J 116-117.
® Spence v. Funk, 396 A.2d 967, 968 (Del. 1978).
™ Inve Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006) (quoting Savor, Inc.
a FMR Corp., 812 A.2d 894, 896-97 (Del. 2002)).

Id.
° Price v. E.I. DuPont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011) (internal citation omitted).
10 Snence, 396 A.2d at 968 (citing Klein v. Sunbeam Corp., 94 A.2d 385, 391 (Del. 1952)).
"| Oakes v. Clark, 69 A.3d 371, 2013 WL 3147313, at *1 (Del. June 18, 2013) (TABLE) (citing
Weaver v. Lukoff, 511 A.2d 1044, 1986 WL 17121, at *1 (Del. July 1, 1986) (TABLE) (citing
Seiler v. Levitz Furniture Co., 367 A.2d 999, 1008 (1976))); see Lorenzetti v. Enterline, 44 A.3d
922, 2012 WL 1383186, at *2 (Del. April 18, 2012) (TABLE) (citing Weaver v. Lukoff, 511
A.2d 1044, 1986 WL 17121, at *1 (Del. July 1, 1986) (TABLE) (citing Seiler v. Levitz Furniture
Co., 367 A.2d 999, 1008 (1976))) (“On a claim of legal malpractice, the plaintiff must establish

3
To establish the third element, “the plaintiff must demonstrate that the underlying
action would have been successful but for the attorney’s negligence.”!* To establish
this element, “an attorney must cause more than speculative damage to a plaintiff,”'
and “[e]ven when proven or obvious, ‘[t]he mere breach of professional duty,
causing only . . . speculative harm, or the threat of future harm—not yet realized—
does not suffice to create a cause of action for negligence... .””'4

The crux of Defendants’ claims for legal malpractice and respondeat superior
allege that Attorneys Brown and Busenkell deviated from the standard of care
expected of a Delaware attorney in the practice of commercial litigation.
Specifically, the allegations include that they failed to identify the weaknesses of
Defendants’ civil actions early on, misrepresented the strength of Defendants’ cases,
and failed to advise Defendants that they would likely lose at trial such that they
“should have settled with Fulton under terms as favorable as possible.”!> Defendants
also argue that procedural errors were committed when the attorneys failed to request
a jury trial, failed to file a compulsory counterclaim or file an affidavit to request a
continuance to allow more time to include the accounting report in response to
Fulton’s Motion for Summary Judgment. The negligence theory advanced is
insufficient to state a claim under Rule 12(b)(6).

 

(i) the employment of the attorney; (ii) the attorney’s neglect of a professional obligation, and
(iii) resulting loss, i.e., that the underlying action would have been successful but for the
attorney’s negligence.”’); see also Flowers v. Ramunno, 27 A.3d 551, 2011 WL 3592966, at *2
(Del. Aug. 16, 2011) (TABLE) (citing Weaver v. Lukoff, 511 A.2d 1044, 1986 WL 17121, at *1
(Del. July 1, 1986) (TABLE) (citing Seiler v. Levitz Furniture Co., 367 A.2d 999, 1008 (1976)));
see also Rich Realty, Inc. v. Meyerson & O'Neill, No. CV N13C-06-270 MMJ, 2014 WL
1689966, at *3 (Del. Super. Ct. Apr. 14, 2014), aff'd sub nom. Rich Realty, Inc. v. Meyerson &
O'Neill, Shelsby & Leoni, P.A., 103 A.3d 515 (Del. 2014) (citing Farmers Bank of Willards v.
Becker, No. CIV.A.S09C-11016 MMJ, 2011 WL 3925428, at *3 (Del. Super. Ct. Aug. 19,
2011)).

'2 Oakes, 2013 WL 3147313, at *1; see Flowers, 2011 WL 3592966, at *2; see also Rich Realty,
Inc. v. Meyerson & O'Neill, 2014 WL 1689966, at *3.

'3 Balinski v. Baker, No. CV N13C-02-246 PRW, 2013 WL 4521199, at *3 (Del. Super. Ct. Aug.
22, 2013) (quoting Power Gourmet Concepts, Inc. v. Irwin & McKnight, 2010 WL 5147233, at
*3 (M.D. Pa. Oct. 1, 2010)).

'4 Td. (quoting Rizzo v. Haines, 555 A.2d 58, 68 (Pa. 1989) (quoting Schenkel v. Monheit, 45
A.2d 493, 494 (Pa. Super. Ct. 1979) and Budd v. Nixon, 491 P.2d 433, 436 (Cal. 1971)
(invalidated by statute))).

'S Defendants’ Counterclaim at J 87, 89.
The Court commends Defendants’ counsel for his candor in representing that
Defendants concede they cannot establish the third element of resultant loss. To get
around this obstacle, Defendants invite this Court to carve out an exception by
stretching the holdings in Dickerson v. Murray'® and Beneville v. Pileggi"’ to fit
within the facts of this case. This Court declines the invitation to make an exception
to the bright line rule under Delaware law.

Fatal to the claims is that Defendants cannot establish that the underlying
action would have been successful but for the attorney’s negligence or that Plaintiffs
alleged conduct caused them to lose any of the underlying Fulton actions. These
civil actions settled by agreement of the parties through mediation. Defendants’
claims would improperly require speculation as to what happened during these
settlement negotiations. Thus, damages are also speculative.

Neither Dickerson nor Beneville help Defendants as they are not applicable.
Dickerson involved a legal malpractice claim in relation to “the applicable standard
of care a lawyer must observe when representing a client in a real estate
transaction.”'§ Beneville also involved claims related to legal advice provided in a
transactional matter. Even in the transactional matter in Dickerson, the Court still
required proof of resultant loss—and assessed whether “the attorney’s negligence
resulted in and was the proximate cause of plaintiffs loss.”’

Defendants take a leap of faith to suggest that Plaintiff's legal strategies and
alleged procedural errors are akin to those alleged by the Dickerson plaintiff who
would have “walked away from the deal had [they] been fully advised.””° There is
no evidence of any such deal or a hint of proof that early settlement would have
occurred but for the attorneys’ conduct. Defendants ask the Court to assume that:
(1) Fulton was amendable to “early settlements;” (2) Plaintiff identified this
opportunity; and (3) Plaintiff failed to convey a settlement demand during the course
of the underlying litigation. There are no such allegations.

Under Rule 12(b)(6), in viewing the facts in the light most favorable to
Defendants, there is no factual or legal basis upon which a trier of fact could

 

'6 No. CV S14C-07-026 RES, 2016 WL 1613286 (Del. Super. Ct. Mar. 24, 2016).

'7 No. CIV.A. 03-474 JJF, 2004 WL 758038 (D. Del. Apr. 2, 2004).

'8 Dickerson v. Murray, No. CV S14C-07-026 RFS, 2016 WL 1613286, at *3 (Del. Super. Ct.
Mar. 24, 2016).

19 Id

20 Dickerson, 2016 WL 1613286, at *3.
conclude that there was professional negligence or that Defendants’ underlying
litigation would have been successful but for Plaintiffs conduct. Because
Defendants are unable to demonstrate a resultant loss in the underlying litigation and
damages alleged are purely speculative, Defendants fail to state a claim for which
relief can be granted. For these reasons, Plaintiff's Motion to Dismiss is
GRANTED, with prejudice.

vo a

“Vivian L. Medinilla \-~~
Judge .

 
