Hamilton v. Bangs, McCullen, Butler, Foye & Simmons, L.L.P. ( 2012 )


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  •                United States Court of Appeals
    For the Eighth Circuit
    ___________________________
    No. 11-1823
    ___________________________
    Douglas W. Hamilton
    lllllllllllllllllllll Plaintiff - Appellant
    v.
    Bangs, McCullen, Butler,
    Foye & Simmons, L.L.P.;
    and Jeffrey G. Hurd
    lllllllllllllllllllll Defendants - Appellees
    ____________
    Appeal from United States District Court
    for the District of South Dakota - Rapid City
    ____________
    Submitted: February 14, 2012
    Filed: August 6, 2012
    ____________
    Before GRUENDER, BENTON, and SHEPHERD, Circuit Judges.
    ____________
    SHEPHERD, Circuit Judge.
    Douglas W. Hamilton appeals the district court’s1 order granting summary
    judgment in favor of appellees and dismissing his claims for legal malpractice and
    breach of fiduciary duty. We agree with the district court that Hamilton has failed to
    show that his loss of net worth was proximately caused by the actions of appellees.
    Accordingly, we affirm.
    I.
    Hamilton is the president and owner of Barker & Little, Inc. (Barker & Little),
    a real estate management company with its principal place of business in Rapid City,
    South Dakota. In 2004, Hamilton and his company were sued in federal district court
    by an employee, Celisity Klein-Cadotte, who alleged claims of sexual harassment,
    retaliation, and intentional infliction of emotional distress. Hamilton retained the law
    firm of Bangs, McCullen, Butler, Foye & Simmons, L.L.P. (Bangs McCullen) to
    represent him and his company. Bangs McCullen assigned one of its partners, Jeffrey
    Hurd, to act as lead defense counsel. Bangs McCullen did not disclose to Hamilton
    that Hurd had relatively little trial experience and virtually none in regard to sexual
    harassment claims.
    Before the case proceeded to trial, Klein-Cadotte declared bankruptcy. At that
    time, she valued her claim at $35,000. Hurd made no attempt to try to purchase the
    claim from the bankruptcy trustee. Although Hamilton now contends he would have
    been willing to settle the case with the trustee for $35,000, Hamilton was otherwise
    unwilling to mediate or to settle the case.
    The Klein-Cadotte case proceeded to trial, and the jury returned a verdict
    against Barker & Little for $4.1 million. No verdict or judgment was rendered against
    Hamilton personally. The court reduced the judgment against Barker & Little to
    1
    The Honorable Jeffrey L. Viken, United States District Judge for the District
    of South Dakota.
    -2-
    approximately $1.7 million. The court then granted Barker & Little’s motion for a
    new trial, finding that one of its rulings on an attorney-client privilege issue unduly
    prejudiced Barker & Little. Before proceeding to a second trial, Barker & Little and
    Klein-Cadotte settled Klein-Cadotte’s claims.2
    Hamilton was the personal guarantor on the loans and credit lines provided by
    lenders to Barker & Little. After the original jury verdict, banks and lenders refused
    to continue extending credit to Hamilton. As a result, Hamilton’s personal empire of
    real estate holdings crumbled, causing Hamilton to lose dozens of commercial and
    residential properties, hundreds of mobile homes and land parcels, and his home.
    In this action, Hamilton sued Hurd and Bangs McCullen (collectively
    “appellees”) based on their representation in the Klein-Cadotte litigation. Hamilton
    contends appellees committed a series of negligent errors during their representation,
    which “ultimately forced the underlying retaliation and sexual harassment case to be
    tried to verdict, when it instead could, and should, have been settled confidentially or
    otherwise disposed of well before trial.” Hamilton claims the appellees’ negligence
    resulted in a multi-million dollar award against Barker & Little, which in turn caused
    banks and lenders to refuse to continue lending credit to Hamilton.
    Approximately six months after filing an answer to Hamilton’s complaint,
    appellees filed a motion for judgment on the pleadings pursuant to Federal Rule of
    Civil Procedure 12(c). The parties jointly moved to have the court suspend discovery
    to allow the court to rule on the Rule 12(c) motion. After Hamilton filed a brief in
    opposition that attached supporting documents, the court granted the motion to stay
    discovery and gave the parties notice that it would be treating the Rule 12(c) motion
    as one for summary judgment. See Fed. R. Civ. P. 12(d). The parties submitted
    2
    Hamilton indicates that the settlement amount was ten times what the claim
    could have been bought from the Klein-Cadotte bankruptcy trustee. However, neither
    party includes a record citation to show the settlement amount.
    -3-
    further briefing, and Hamilton’s attorney filed an affidavit seeking further discovery
    under Federal Rule of Civil Procedure 56(f).3 The court ruled in favor of the appellees
    and dismissed Hamilton’s claims. As part of its rationale, the court found that
    Hamilton’s Rule 56(f) affidavit was insufficient because it failed to include “any
    statement as to the specific facts which . . . discovery may produce which would be
    essential to plaintiff’s opposition to defendant’s motion for summary judgment.”
    Hamilton v. Bangs, McCullen, Butler, Foye & Simmons, L.L.P., No. 10-5009, 
    2011 WL 902489
    , at *7 (D.S.D. Mar. 15, 2011). Hamilton timely appealed.
    II.
    Hamilton argues the district court erred in dismissing his legal malpractice
    and breach of fiduciary duty claims.
    “To prevail in his legal malpractice action, [a plaintiff] must . . . prove the four
    basic elements of negligence: (1) an attorney-client relationship giving rise to a duty;
    (2) the attorneys, either by an act or a failure to act, violated or breached that duty;
    (3) the attorneys’ breach of duty proximately caused injury to the client; and (4) actual
    injury, loss, or damage.” Yarcheski v. Reiner, 
    669 N.W.2d 487
    , 493 (S.D. 2003).4
    3
    Rule 56(f) was the applicable rule at the time Hamilton’s counsel filed his
    affidavit asking for further discovery. “On December 1, 2010, the Federal Rules of
    Civil Procedure were amended, and it is now Rule 56(d) that allows a court to grant
    additional time for discovery to the nonmoving party in a motion for summary
    judgment.” Hargis v. Access Capital Funding, LLC, 
    674 F.3d 783
    , 792 n.4 (8th Cir.
    2012).
    4
    “Federal courts sitting in diversity apply the choice-of-law rules of the forum
    state.” Cicle v. Chase Bank USA, 
    583 F.3d 549
    , 553 (8th Cir. 2009). “South Dakota
    has adopted the most significant relationship test as its choice of law rule in tort
    cases.” Penney v. Praxair, Inc., 
    116 F.3d 330
    , 333 n.4 (8th Cir. 1997). The district
    court found, and the parties agree, that the law of South Dakota should apply. We
    agree that South Dakota has the most significant relationship to the facts of this case
    -4-
    A breach of fiduciary claim shares essentially the same four elements. “[A] plaintiff
    must prove: (1) that the defendant was acting as a fiduciary of the plaintiff; (2) that he
    breached a fiduciary duty to the plaintiff; (3) that the plaintiff incurred damages; and
    (4) that the defendant’s breach of fiduciary duty was a cause of the plaintiff’s
    damages.” Grand State Prop., Inc. v. Woods, Fuller, Shultz, & Smith, P.C., 
    556 N.W.2d 84
    , 88 (S.D. 1996) (citation and line breaks omitted).
    The district court granted judgment in favor of appellees on Hamilton’s claims
    for two reasons. First, the district court found that Hamilton failed to produce expert
    evidence to support his claim that Hurd’s conduct violated the standard of care or
    breached a duty. Second, the court found that Hamilton failed to demonstrate a legal
    causal connection between appellees’ actions and his injuries. In his appeal, Hamilton
    argues the district court erred by: (1) relying on a lack of expert testimony when
    appellees had not raised the issue and where notice was not given to the parties; (2)
    failing to allow Hamilton further discovery under Federal Rule of Civil Procedure
    56(f); and (3) finding Hamilton failed to support the proximate causation element for
    his claims of attorney negligence and breach of fiduciary duty. We focus our attention
    on Hamilton’s latter two arguments because we find them dispositive.
    A.
    We first address Hamilton’s contention that the court erred by not postponing
    the summary judgment ruling until after further discovery was completed. “We
    review a district court’s denial of a motion filed under Rule 56(f) for abuse of
    discretion.” Marksmeier v. Davie, 
    622 F.3d 896
    , 903 (8th Cir. 2010).
    “As a general rule, summary judgment is proper ‘only after the nonmovant has
    had adequate time for discovery.’” Iverson v. Johnson Gas Appliance Co., 172 F.3d
    and thus apply South Dakota substantive law.
    -5-
    524, 530 (8th Cir. 1999) (quoting In re TMJ Litig., 
    113 F.3d 1484
    , 1490 (8th Cir.
    1997)). “Nonmovants may request a continuance under Rule 56(f) until adequate
    discovery has been completed if they otherwise cannot present facts sufficient to
    justify their opposition. This option exists to prevent a party from being unfairly
    thrown out of court by a premature motion for summary judgment.” 
    Id.
     (citing
    Celotex Corp. v. Catrett, 
    477 U.S. 317
    , 326 (1986)). Yet Rule 56(f) “‘is not a shield
    that can be raised to block a motion for summary judgment without even the slightest
    showing by the opposing party that his opposition is meritorious.’” Humphreys v.
    Roche Biomedical Labs., Inc., 
    990 F.2d 1078
    , 1081 (8th Cir. 1993) (citation omitted).
    A Rule 56(f) affidavit must “set forth ‘specific facts further discovery might uncover,’
    or what information further discovery might reveal.” Anuforo v. Comm’r of Internal
    Revenue, 
    614 F.3d 799
    , 808 (8th Cir. 2010) (citation omitted).
    In the instant case, Hamilton’s attorney filed an affidavit lamenting the fact that
    no depositions had yet taken place and indicating that Hamilton intended to take the
    depositions of, inter alia: Hurd, representatives from various banks and lenders, and
    the Klein-Cadotte bankruptcy trustee. The affidavit stated that “this additional
    discovery will further bolster and support plaintiff’s claims and raise additional
    disputed facts that would defeat defendant’s motion.” However, this affidavit failed
    to meet Rule 56(f)’s requirement of showing what specific facts or information further
    discovery might reveal. Because Hamilton failed to show what further facts he might
    be able to uncover if he was given further opportunity for discovery, the district court
    did not abuse its discretion in denying his request to postpone ruling on the summary
    judgment motion. See Anuforo, 
    614 F.3d at 808
     (finding no abuse of discretion where
    party’s affidavit seeking more discovery failed to meet Rule 56(f)’s requirements).
    -6-
    B.
    Even if we agreed with Hamilton that his attorney’s Rule 56(f) affidavit was
    adequate, Hamilton would still have to overcome the district court’s finding that
    Hamilton could not establish proximate causation to support his claims. “We review
    de novo a district court’s grant of summary judgment, considering the evidence and
    all reasonable inferences in the light most favorable to the non-moving party.”
    Anheluk v. Ohlsen, 
    459 F.3d 874
    , 877 (8th Cir. 2006).
    “[T]o support a recovery in negligence, the defendant’s act must have
    proximately caused the plaintiff’s injury.” Goff v. Wang, 
    296 N.W.2d 729
    , 730 (S.D.
    1980). “A proximate or legal cause is a cause that produces a result in a natural and
    probable sequence and without which the result would not have occurred.” Estate of
    Gaspar v. Vogt, Brown & Merry, 
    670 N.W.2d 918
    , 921 (S.D. 2003). Proximate
    causation “excludes the idea of legal liability based on mere speculative possibilities
    or circumstances and conditions remotely connected to the events leading up to an
    injury.” Mulder v. Tague, 
    186 N.W.2d 884
    , 887 (S.D. 1971). “While legal or
    proximate cause is generally a jury question, a causal relationship between the alleged
    [negligence] and injury is not presumed.” Burley v. Kytec Innovative Sports Equip.,
    Inc., 
    737 N.W.2d 397
    , 409 (S.D. 2007). “To survive a motion for summary judgment,
    [a plaintiff] ‘must present more than unsupported conclusions and speculative
    statements, which do not raise a genuine issue of fact.’” 
    Id.
     (citations and internal
    alterations omitted).
    Hamilton’s claim that his injuries resulted from the negligence of his counsel
    requires agreeing to a series of conclusions. First, after the original Klein-Cadotte
    verdict, Hamilton’s company suffered a judgment against it for $4.1 million. As a
    result of this verdict, Hamilton and his company were the subject of negative news
    coverage. As a result of this bad publicity, Barker & Little and Hamilton were unable
    to get credit from banks and lenders. Unable to secure further credit, Barker & Little
    -7-
    defaulted on its loans. Since Hamilton was the personal guarantor of Barker & Little,
    Hamilton lost his entire net worth of at least $21 million. Hamilton argues that this
    series of unfortunate events could all have been avoided if Hurd had counseled
    Hamilton to buy Klein-Cadotte’s claim from the bankruptcy trustee or if Hurd had
    taken a different approach during the course of the trial.5 If Hurd had bought the
    claims out of bankruptcy, Hamilton surmises, the case would never have gone to trial,
    Hamilton’s company would have avoided bad press, and financing would have
    remained in full supply. This best-case scenario presupposes that the bankruptcy
    trustee would have allowed Hurd to buy the claim and that Hamilton would have been
    otherwise able to secure financing.
    Even if we remanded the case for further discovery and Hamilton was able to
    present evidence supporting his theory of the case, we agree with the district court that
    any negligent action by Hurd is too attenuated to be a proximate cause of the loss of
    Hamilton’s net worth. A foreseeable result of Hurd’s alleged negligence was that an
    adverse money judgment would be returned against Hamilton. Yet no judgment was
    rendered against Hamilton individually during the Klein-Cadotte litigation.6
    Although the South Dakota Supreme Court has not previously dealt with a tort
    case with similar facts, we believe the court would decline to find that Hurd’s alleged
    negligence was a proximate cause of Hamilton’s harm. See Goff, 296 N.W.2d at 730
    (holding to establish proximate causation, “‘the defendant’s conduct [must have] such
    an effect in producing the harm as to lead reasonable men to regard it as a cause’ of
    the plaintiff’s injury” (quoting Mulder, 186 N.W.2d at 887)). Here, the negative
    5
    Hurd’s alleged negligence at trial included: failing to object to inflammatory
    statements by Klein-Cadotte’s counsel during opening argument; failing to block the
    reading of a memorandum addressed to Hamilton that was protected by attorney-client
    privilege; and stipulating to Hamilton’s net worth without a limiting instruction.
    6
    An adverse judgment was returned against Barker & Little, but Barker & Little
    is not a party in this action.
    -8-
    publicity received after the verdict was not a natural and probable consequence of any
    action taken by Hurd at trial. Cf. Wattigny v. Lambert, 
    408 So.2d 1126
    , 1139 (La. Ct.
    App. 1981) (finding attorney who filed judicial pleading containing statements which
    were clearly defamatory and which were then widely disseminated by newspapers and
    radio was liable for negligence); Wissore v. Alvey, 
    562 N.E.2d 978
    , 984-85 (Ill. Ct.
    App. 1990) (finding sufficient allegation of attorney malpractice where attorneys’
    incorrect advice to client resulted in contempt citation against client). Instead,
    Hamilton received public attention for his own actions, actions which he had taken
    prior to being represented by counsel and which were the basis of the sexual
    harassment lawsuit. Cf. Weiss v. Van Norman, 
    562 N.W.2d 113
    , 117 (S.D. 1997)
    (finding plaintiff was not liable in breach of contract action as a result of any advice
    from his attorney; instead, “[t]he obligation was contractual and established long
    before” plaintiff sought his attorney’s advice). Even if we agreed that Hurd’s actions
    in a continual sequence led Hamilton to receive negative publicity, ruling in
    Hamilton’s favor would require us to go even further to find a causal link between the
    bad press and Hamilton’s inability to secure financing. This is not the kind of result
    that can legally be expected for failing to settle a lawsuit, proceeding to trial, and
    securing a verdict in a client’s favor. We find that Hamilton’s loss of net worth is too
    attenuated from any negligence by appellees.
    Any negligence or breach of fiduciary duty by appellees did not proximately
    cause Hamilton’s injuries. The district court correctly granted summary judgment in
    favor of appellees on this basis. We therefore decline to address Hamilton’s
    additional claim of error based on the district court’s dismissal of his claims for lack
    of expert evidence on the requisite standard of care.
    -9-
    III.
    We affirm.
    ______________________________
    -10-