Joseph Barna v. Preston Law Group, P.C. ( 2009 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
July 8, 2009 Session
JOSEPH BARNA v. PRESTON LAW GROUP, P.C. ET AL.
Appeal from the Circuit Court for Davidson County
No. 07C-580 Joe P. Binkley, Jr., Judge
No. M2008-02560-COA-R3-CV - Filed August 25, 2009
The plaintiff appeals the summary dismissal of his legal malpractice action against his former
attorney. In the Complaint, the plaintiff alleges that the defendants, the attorney and his law firm,
represented themselves to be “competent in securities law related matters,” and that the defendants
breached their duty by failing to utilize the requisite skill and competency while representing him
in a claim against a brokerage firm in arbitration before a panel of the National Association of
Securities Dealers. The defendants moved for summary judgment, which was supported by the
affidavit of the attorney who represented the plaintiff in arbitration. The trial court granted the
motion, finding that the plaintiff had failed to present evidence sufficient to create a genuine issue
of material fact regarding damages and causation. We have determined that the defendants’ motion
and supporting affidavit failed to either affirmatively negate an essential element of the plaintiff’s
claim or establish that the plaintiff cannot prove an essential element of his claim at trial. Having
failed to shift the burden of production to the plaintiff, the defendants’ motion for summary
judgment should have been denied without consideration of the sufficiency of the affidavits of the
plaintiff’s expert witnesses. Accordingly, we reverse the grant of summary judgment.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed
FRANK G. CLEMENT , JR., J., delivered the opinion of the court, in which RICHARD H. DINKINS, J.,
joined. PATRICIA J. COTTRELL, P.J., M.S., filed a concurring opinion.
Phillip L. Davidson, Nashville, Tennessee, for the appellant, Joseph C. Barna.
C. Bennett Harrison, Jr., and J. Cole Dowsley, Jr., for the appellees, Preston Law Group, P.C., and
G. Kline Preston, IV.
OPINION
The matters before the court arise from the Complaint filed in this action by Joseph Barna
(“Plaintiff”) against attorney G. Kline Preston, IV, and the Preston Law Group, PC (collectively
1
“Defendants”) for damages allegedly resulting from Defendants’ negligent representation of Plaintiff
during an arbitration before a panel of the National Association of Securities Dealers (“NASD”).
In January 2003, Plaintiff filed a pro se claim with the NASD against Firstrade Securities,
Inc. (“Firstrade”), alleging Firstrade had violated its own rules and Internal Revenue Service rules.
On June 11, 2005, Plaintiff entered into a representation agreement with Defendants in which
Defendants agreed to represent Plaintiff in the arbitration proceeding before the NASD panel.
Defendants represented Plaintiff in preparation for and throughout the arbitration proceedings with
Firstrade. The arbitration panel found in favor of Firstrade on all issues, awarding no damages to
Plaintiff. Thereafter, Plaintiff filed this action against Defendants.
In the Complaint, Plaintiff asserted that he suffered extensive losses in IRA and brokerage
accounts in 2000 and 2001, which losses were attributable to the negligence and misconduct of
Firstrade, that he filed an arbitration proceeding against Firstrade seeking to recover his losses, that
Defendants represented themselves to Plaintiff “as competent in securities law related matters,” and
that Defendants breached their duty in that they failed to utilize the skill and competency in the
representation of Plaintiff that a reasonably prudent attorney competent in such matters would utilize
under similar circumstances. In paragraph 11 of the Complaint, Plaintiff alleged with particularity
how Defendants breached their duty:
a. They failed to revise the statement of claim. Plaintiff requested that the
Defendants prepare a new and corrected statement of claim.
b. They failed to obtain an expert witness for the hearing.
c. They failed to recognize and present at the hearing the violations
committed by Firstrade and failed to provide documentation about the
NASD/NYSE rule violations.
d. They failed to take reasonable steps to obtain the presence of all the
persons needed as witnesses at the hearing.
e. They failed to prepare and research the case adequately.
f. They failed to present at the hearing that Firstrade had not followed New
York Stock Exchange rules and its own rules in connection with the
Grossover extension of credit.
g. They failed to subpoena the required documents needed for the hearing.
h. They failed to recognize and present at the hearing that Firstrade had not
followed the IRS rules and its own rules in connection with using the IRA
account to cover margin calls and the IRA rollover within a 12-month period.
2
i. They failed to present the case at the hearing. They told Plaintiff 15
minutes before the hearing that they were going to make the opening
statement, but Plaintiff would have to present the case because he knows
more about the case than they do.
j. They failed to develop the case around the following violations:
“Know Your Customer Rule”
“Margin Disclosure Rule”
“Suitability Rules and Regulations”
“Sec. T + 3 Days Requirements” (must liquidate securities)
“Churning Rules and Regulations”
“NYSE Rule Regarding Discount Brokers Duty”
k. They failed to recognize and present at the hearing that Firstrade was
negligent by not following the NASD and its own rules in connection with
the selling of the securities immediately to protect its customers’ financial
interest and satisfy the margin requirements. The customer does not have a
right to an extension of time on a margin call.
After filing an Answer, in which they denied any liability to Plaintiff, Defendants filed a
motion for summary judgment. In support of their motion, Defendants filed a supporting affidavit
of G. Kline Preston, IV, in which he states that he is familiar with the standards of care for a
practicing attorney in Tennessee and that at all times he exercised proper skill and care.
Furthermore, the affidavit states that Defendants’ acts or omissions in no way caused Plaintiff
damages. In response, Plaintiff filed affidavits of two attorneys, Mr. Michael J. Betts and Mr.
Michael K. Radford. Mr. Radford is licensed in Tennessee, and Mr. Betts is licensed in
Pennsylvania. The trial court excluded the affidavit of Mr. Betts because it found Mr. Betts was not
familiar with the standard of care in Tennessee. In his affidavit, Mr. Radford states that Defendants
were negligent and that had they acted within the appropriate standard of care, the likelihood of
Plaintiff succeeding before the NASD panel would have been “much greater.”
Without stating whether Defendants’ motion that was supported by one affidavit had shifted
the burden of production to Plaintiff, the trial court found that Plaintiff presented sufficient proof to
create a genuine issue of material fact regarding Defendants’ breach of the duty of care, but that
Plaintiff had failed to present evidence that he would have succeeded before the NASD panel “but
for” Defendants’ negligence, and granted Defendants’ motion for summary judgment. This appeal
followed.
ANALYSIS
This appeal arises from the grant of summary judgment. Summary judgment is appropriate
when a party establishes that there is no genuine issue as to any material fact and that a judgment
3
may be rendered as a matter of law. Tenn. R. Civ. P. 56.04; Stovall v. Clarke, 113 S.W.3d 715, 721
(Tenn. 2003). It is appropriate in virtually all civil cases that can be resolved on the basis of legal
issues alone. Pendleton v. Mills, 73 S.W.3d 115, 121 (Tenn. Ct. App. 2001) (citing Byrd v. Hall, 847
S.W.2d 208, 210 (Tenn. 1993)). It is not appropriate when genuine disputes regarding material facts
exist. See Tenn. R. Civ. P. 56.04. The party seeking summary judgment bears the burden of
demonstrating that no genuine disputes of material fact exist and that the party is entitled to
judgment as a matter of law. Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn. 2002). To be entitled to
summary judgment, the moving party must affirmatively negate an essential element of the
nonmoving party’s claim or show that the moving party cannot prove an essential element of the
claim at trial. Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 83 (Tenn. 2008).
Summary judgments do not enjoy a presumption of correctness on appeal. BellSouth Adver.
& Publ’g Co. v. Johnson, 100 S.W.3d 202, 205 (Tenn. 2003). This court makes a fresh determination
that the requirements of Tenn. R. Civ. P. 56 have been satisfied. Hunter v. Brown, 955 S.W.2d 49,
50-51 (Tenn. 1997). We consider the evidence in the light most favorable to the nonmoving party
and resolve all inferences in that party’s favor. Stovall, 113 S.W.3d at 721; Godfrey, 90 S.W.3d at
695. When reviewing the evidence, we first determine whether factual disputes exist. If a factual
dispute exists, we then determine whether the fact is material to the claim or defense upon which the
summary judgment is predicated and whether the disputed fact creates a genuine issue for trial. Byrd,
847 S.W.2d at 215.
A party is entitled to summary judgment only if the “pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine
issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
Tenn. R. Civ. P. 56.04. A properly supported motion for summary judgment must show that there
are no genuine issues of material fact and that the moving party is entitled to judgment as a matter
of law. Staples v. CBL & Assocs., Inc., 15 S.W.3d 83, 88 (Tenn. 2000); see McCarley v. W. Quality
Food Serv., 960 S.W.2d 585, 588 (Tenn. 1998). If the moving party makes a properly supported
motion, then the nonmoving party is required to establish the existence of the essential elements of
the claim. McCarley, 960 S.W.2d at 588; see Byrd, 847 S.W.2d at 215 n.5. If, however, the moving
party does not properly support the motion, then the nonmoving party’s burden to produce either
supporting affidavits or discovery is relieved and the motion must fail. McCarley, 960 S.W.2d at
588; Martin, 271 S.W.3d at 83.
To make this showing and shift the burden of production, a moving party may: 1)
affirmatively negate an essential element of the nonmoving party’s claim; or 2) show that the
nonmoving party cannot prove an essential element of the claim at trial. Martin, 271 S.W.3d at 83;
Hannan v. Alltel Publ’g Co., 270 S.W.3d 1, 5 (Tenn. 2008); Byrd, 847 S.W.2d at 215 n.5. Whichever
approach the moving party takes, both require more than assertions of the nonmoving party’s lack
of evidence. Martin, 271 S.W.3d at 83-84. In addition, the moving party must present evidence that
more than “raises doubts” about the ability of the nonmoving party to prove its claim at trial. Id. at
84. The moving party must produce evidence or refer to previously submitted evidence. Id.; accord
Hannan, 270 S.W.3d at 5. Thus, to negate an essential element of a claim, a moving party must refer
4
to evidence that tends to disprove an essential element of the claim made by the nonmoving party.
Martin, 271 S.W.3d at 84.
Defendants, as the moving party, had the burden to negate an essential element of Plaintiff’s
claim of legal malpractice or establish that Plaintiff cannot prove an essential element of the claim
at trial. See Martin, 271 S.W.3d at 83 (citing Hannan, 270 S.W.3d at 5; McCarley, 960 S.W.2d at
588; Byrd, 847 S.W.2d at 215 n.5). Therefore, Defendants were required to shift the burden of
production to Plaintiff by either affirmatively negating an essential element of Plaintiff’s claim or
showing that Plaintiff cannot prove an essential element of his claim at trial. See Martin, 271 S.W.3d
at 83; see also Hannan, 270 S.W.3d at 8-9; McCarley, 960 S.W.2d at 588. We have determined
Defendants failed to do either; therefore, the motion should have been denied without consideration
of the sufficiency of the expert affidavits attached to Plaintiff’s response to the motion.
To state a prima facie case of legal malpractice, a plaintiff must establish: 1) the defendant
attorney owed a duty to the plaintiff; 2) a breach of that duty; 3) that plaintiff suffered damages as
a result of that breach; 4) that defendant attorney’s breach was the factual cause of those damages;
and 5) that defendant attorney’s breach was the proximate, or legal, cause of the plaintiff’s damages.
Gibson v. Trant, 58 S.W.3d 103, 108 (Tenn. 2001); Shearon v. Seaman, 198 S.W.3d 209, 214 (Tenn.
Ct. App. 2005). The trial court found that Defendants owed a duty to Plaintiff and that there was a
genuine issue of material fact regarding whether Defendants breached that duty. Thus, the only
grounds upon which Defendants could prevail on summary judgment were that Plaintiff did not
suffer damages as a result of that breach; or, if Plaintiff suffered damages, that Defendants’ breach
was not the factual cause or the legal cause of Plaintiff’s damages.
Defendants’ motion for summary judgment is supported by one affidavit, that of Kline
Preston. We must therefore examine the affidavit to determine whether Defendants shifted the
burden of production to Plaintiff. In the first three paragraphs of the affidavit Mr. Preston states inter
alia that he is a licensed attorney in Tennessee, that his license has never been suspended or revoked,
and that on June 11, 2005, Plaintiff engaged him to represent him in the arbitration proceedings
involving Firstrade. The first three paragraphs do nothing to shift the burden of production.
Therefore, we will focus our analysis on the four remaining paragraphs, which read as follows:
4. After reviewing Mr. Barna’s materials and speaking with him, I contacted a
licensed securities broker, Ray West, to review the file and render an opinion on Mr.
Barna’s claims against Firstrade. After reviewing the file, including the margin
brokerage account information, Mr. West rendered an unfavorable opinion of Mr.
Barna’s claims against Firstrade. Because of his unfavorable opinion, I decided that
Mr. West could not be used as an expert witness at the arbitration and, in fact, Mr.
West’s opinions would work against Mr. Barna. I could not retain an expert to
support Mr. Barna’s claims, because Mr. Barna simply did not have a case against
Firstrade and I could not get an expert to give an opinion supporting Mr. Barna’s
claims. I informed Mr. Barna of these facts.
5
5. I then readied Mr. Barna’s case for the arbitration and prepared detailed trial
exhibits concerning Mr. Barna’s brokerage and IRA accounts. On February 9, 2006,
the arbitration was held before a panel of NASD arbitrators. I presented Mr. Barna’s
case and successfully submitted all of my client’s evidence and proof to the panel.
During the arbitration, I was surprised to learn for the first time about at least one
other securities dispute that Mr. Barna arbitrated before the NASD and lost. I believe
that Mr. Barna’s prior record before the NASD significantly affected the panel in this
case, and because Mr. Barna had not informed me about these cases, I was
unprepared to address this issue. The NASD arbitration award was issued on
February 23, 2006. The panel found in favor of Firstrade and all of Mr. Barna’s
claims were denied with prejudice.
6. I am familiar with the standard of care in this legal community applying to
attorneys representing clients in an NASD arbitration. At all times during my
representation of Mr. Barna, I diligently and competently represented Mr. Barna. At
all times during the engagement, I exercised the care, skill and diligence which is
commonly possessed and exercised by attorneys practicing in Tennessee. Throughout
my representation of Mr. Barna, I abided by the standard of care owed by attorneys
to clients and fulfilled my duty by providing the diligent representation to Mr. Barna
in the particular circumstances of the arbitration proceeding.
7. I was not negligent and did not deviate from the applicable standard of care in
providing legal services to Mr. Barna. Anything that I did, or allegedly failed to do,
in representing Mr. Barna did not cause or will not cause Mr. Barna to incur any
injury or damages. Any injuries or damages allegedly suffered by Mr. Barna were
not caused by any negligent act or omission on my part.
Without specifying the applicable standard of care for NASD arbitration, Mr. Preston
summarily stated that he is “familiar with the standard of care in this legal community applying to
attorneys representing clients in an NASD arbitration.” He further stated he “diligently and
competently represented Mr. Barna,” he “fulfilled his duty to Mr. Barna,” he “was not negligent,”
he “did not deviate from the applicable standard of care,” and any damages suffered “were not
caused by any negligent act or omission” of his. Mr. Preston also opined, without providing a factual
basis upon which his opinion was based, that “Mr. Barna simply did not have a case against
Firstrade.”
Generally, an expert witness may render an opinion based on facts or data known to the
expert; nevertheless, the expert who testifies in terms of opinion may be required to disclose the
underlying facts. Tenn. R. Evid. 702, 705. For purposes of shifting the burden of proof in a motion
for summary judgment, an expert’s conclusory affidavit neither negates an essential element of a
claim nor does it establish an affirmative defense. See Hannan, 270 S.W.3d at 8. In the context of
summary judgment, our Supreme Court has stated that conclusory opinions that are not supported
by or based upon identified facts are not sufficient to shift the burden of production to the
6
nonmoving party. See Hannan, 270 S.W.3d at 8; see also Blanchard v. Kellum, 975 S.W.2d. 522,
525 (Tenn. 1998) (reversing summary judgment because the defendant’s conclusory affidavit did
not trigger the plaintiff’s burden in the motion for summary judgment). Therefore, we find that Mr.
Preston’s conclusory “opinions” regarding Mr. Barna’s case against Firstrade and the causation of
Mr. Barna’s damages, without providing supporting facts, were insufficient to negate an essential
element of Mr. Barna’s legal malpractice claim – damages or causation – and shift the burden of
production.
We will now address the few statements of fact incorporated into Mr. Preston’s affidavit.
Of the eleven allegations of professional negligence stated in paragraph 11 of the Complaint, the
only one Mr. Preston specifically addressed in his affidavit was the failure to obtain an expert
witness for the NASD arbitration hearing. Mr. Preston testified that he consulted an expert in
securities who rendered an unfavorable opinion, and was unable to find an expert who would support
Mr. Barna’s case against Firstrade. Mr. Preston’s affidavit specifically addressed the factual claim
concerning the lack of an expert witness; however, Defendants failed to establish that this fact
negates an essential element of Plaintiff’s claim against Defendants for malpractice. Unlike claims
of professional negligence against doctors and lawyers for which expert testimony is required,
Defendants failed to establish that expert testimony was required in Plaintiff’s claim against
Firstrade. Further, Defendants failed to establish that Plaintiff could not recover damages from
Firstrade without an expert witness. Thus, the inability to engage an expert witness for the arbitration
proceedings does not negate an essential element of Plaintiff’s claim in this action.
Another fact upon which Defendants rely in Mr. Preston’s affidavit is the statement that Mr.
Preston was not prepared to deal with the surprise development that Plaintiff had filed a prior
grievance. We are unable to ascertain how this circumstance, or fact, is relevant. More importantly,
Defendants failed to establish that this fact negates an essential element of Plaintiff’s claim of
malpractice against Defendants. If the last minute revelation has any relevance to these proceedings,
it merely raises a doubt about Plaintiff’s ability to prove damages, which is not sufficient, in the
context of a motion for summary judgment, to shift the burden of production to the nonmoving party.
See McCarley, 960 S.W.2d at 588.
IN CONCLUSION
In order for the sufficiency of the affidavits of Plaintiff’s expert witnesses to be put at issue,
Defendants needed to shift the burden of production to Plaintiff by either affirmatively negating an
essential element of Plaintiff’s claim or showing that Plaintiff cannot prove an essential element of
his claim at trial. Martin, 271 S.W.3d at 83; Hannan, 270 S.W.3d at 8-9; McCarley, 960 S.W.2d at
588. We have determined that Defendants failed to shift the burden of production to Plaintiff;
therefore, Defendants’ motion for summary judgment should have been denied without consideration
of the sufficiency of the affidavits attached to Plaintiff’s response to the motion. See Martin, 271
S.W.3d at 83.
7
Therefore, the judgment of the trial court is reversed and this matter is remanded for further
proceedings consistent with this opinion. Costs of appeal are assessed against the Preston Law
Group, P.C., and G. Kline Preston, IV, individually.
___________________________________
FRANK G. CLEMENT, JR., JUDGE
8