Bearden et al v. McNeal & Douglas, LLC et al

Filing 18

MEMORANDUM OPINION AND ORDER DENYING defendants' 6 MOTION TO DISMISS, as further set out in order. Signed by Chief Judge William Keith Watkins on 9/26/12. (Attachments: # 1 civil appeals checklist)(djy, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
EASTERN DIVISION
JAMES M. BEARDEN and
SUSAN J. BEARDEN,
Plaintiffs,
v.
McNEAL & DOUGLAS, LLC,
MARRELL J. McNEAL,
ATTORNEY AT LAW, P.C.,
MARRELL J. McNEAL, and
JAMES BOYD DOUGLAS, JR.,
Defendants.

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CASE NO. 3:11-CV-1115-WKW
[WO]

MEMORANDUM OPINION AND ORDER
Before the court are the Motion to Dismiss of Defendants Marrell J. McNeal,
Attorney at Law, P.C., Marrell J. McNeal, and McNeal & Douglas, LLC (Doc. # 6),
and Plaintiffs’ Response in Opposition (Doc. # 14). After careful consideration of the
arguments and the relevant law, Defendants’ motion is due to be denied.
I. JURISDICTION AND VENUE
Subject matter jurisdiction is exercised pursuant to 28 U.S.C. § 1332. Personal
jurisdiction and venue are not contested, and there are adequate allegations in support
of both.

II. STANDARD OF REVIEW
A Rule 12(b)(6) motion tests the sufficiency of the complaint against the legal
standard articulated by Rule 8: “a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To survive a motion to
dismiss brought under Rule 12(b)(6), a complaint must contain sufficient factual
allegations, “accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). The standard requires the plaintiff to plead “enough fact to
raise a reasonable expectation that discovery will reveal evidence” of the plaintiff’s
claim. Twombly, 550 U.S. at 556.
III. BACKGROUND
When considering a motion to dismiss for failure to state a claim, the court must
accept “the factual allegations in the complaint as true and construe them in the light
most favorable to the plaintiff.” Pielage v. McConnell, 516 F.3d 1282, 1284 (11th
Cir. 2008). Thus, construing the facts alleged in the light most favorable to Plaintiffs,
the pertinent factual background is as follows.
Plaintiffs James and Susan Bearden are former residents of Auburn, Alabama,
and former clients of Defendants. Plaintiffs have asserted claims against four
Defendants. Two are individuals: Mr. James Boyd Douglas, Jr. and Mr. Marrell J.
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McNeal. Mr. Douglas and Mr. McNeal were formerly law partners in the law firm
McNeal & Douglas, LLC (“McNeal & Douglas”). McNeal & Douglas is the third
Defendant, and the fourth is the professional corporation under which Mr. McNeal
now practices law, Marrell J. McNeal, Attorney at Law, P.C.
For several years before the incidents giving rise to this claim, Plaintiffs used
Defendants as their attorneys for a variety of legal matters, including various business
transactions, employment matters, and a bankruptcy filing. (Doc. # 1, ¶ 15.) In May
2008, Plaintiffs moved to Georgia but continued to call upon Defendants for legal
work. (Doc. # 1, ¶ 16.)
When Plaintiffs sold their home in Auburn, Alabama (the “Home”) in May
2008, Defendants served as the closing attorneys for the sale. (Doc. # 1, ¶ 19.)1
Defendant McNeal & Douglas was the settlement agent. (Doc. # 1, ¶ 20; Doc. # 12,
¶ 19.) The Home’s sale price was $715,000, and approximately $663,000 of that sale
price was to retire the single mortgage held by Bank of America (the “Bank”) under
which Plaintiffs were indebted on the Home. (Doc. # 1, ¶ 18.) Defendants
represented that necessary actions had been taken to pay off the mortgage. (Doc. #
1, ¶ 23.)
In fact, the mortgage was not paid out of the proceeds of closing. Defendant

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It is unclear which of the four named defendants served as “closing attorneys.”
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Douglas, by his own admission in his Answer in this case, diverted the mortgage
payoff and “converted the funds for his personal use.” (Doc. # 12, ¶ 25.) Meanwhile,
Plaintiffs believed that the mortgage had been paid off. (Doc. # 1, ¶ 30.) When they
continued to receive mortgage statements from the Bank in the months following the
sale, Plaintiffs contacted Mr. Douglas, who told them that the Bank had erred and that
he was in communication with the Bank to rectify the error. (Doc. # 1, ¶ 31.) More
than a year after the sale, Mr. Douglas told Plaintiffs that he reached a settlement with
Bank of America in the matter of the mortgage payoff. (Doc. # 1, 33.)
In reality, there were no claims against Bank of America, and there was no
settlement. It was all part of the ruse concocted by Mr. Douglas. In December 2009,
Plaintiffs signed a Mutual Release and Receipt purporting to settle claims against the
Bank. (Doc. # 1, ¶ 34; Doc. # 12, ¶ 34.) Mr. Douglas accompanied the release with
$35,000 he later wired into Plaintiffs’ bank account and a check drawn on the escrow
account of McNeal & Douglas, LLC (Doc. # 1, ¶ 35; Doc. # 12, ¶ 35), money he told
them represented the Bank’s settlement of their claims. (Doc. # 1, ¶ 33; Doc. # 12, ¶
33.)
Plaintiffs continued to receive mortgage statements from the Bank – even after
the sham settlement in December 2009 – showing an outstanding mortgage balance
and payments made on the mortgage, despite the fact that Plaintiffs were not making
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any such payments. (Doc. # 1, ¶ 37.) When Plaintiffs contacted Mr. Douglas, the
man they believed had already resolved this issue in their favor, about the situation,
he told them that the Bank had violated the terms of its settlement with Plaintiffs and
that he would file suit against the Bank on Plaintiffs’ behalf to enforce said terms.
(Doc. # 1, ¶ 36.)
In the meantime, Plaintiffs found themselves unable to refinance the mortgages
they carried on their home in Georgia because their mortgage with Bank of America
remained on the books. (Doc. # 1, ¶ 39.) Consequently, Plaintiffs continued to carry
two interest-only mortgages on their home in Georgia as well as the Bank of America
mortgage remaining on the Home they sold in 2008. (Doc. # 1, ¶ 40.) The situation
adversely impacted their credit score. (Doc. # 1, ¶ 40.)
IV. DISCUSSION
A.

Applicability of the ALSLA
Faced with what it perceived as a crisis “threaten[ing] the delivery of legal

services to the people of Alabama,” the Alabama Legislature enacted the Alabama
Legal Services Liability Act (“ALSLA”) “to establish a comprehensive system
governing all legal actions against legal services providers.” Ala. Code. § 6-5-570.
In so doing, the legislature created a single claim under Alabama law that plaintiffs
may bring against legal services providers for damages arising out of the provision of
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legal services: a legal service liability action. Ala. Code. § 6-5-573. A legal service
liability action applies to “any action against a legal service provider in which it is
alleged that some injury or damage was caused in whole or in part by the legal service
provider’s violation of the standard of care applicable to a legal services provider.”
Ala. Code § 6-5-572(1).
The ALSLA covers all claims, “whether in contract or in tort and whether based
on an intentional or unintentional act or omission.” It embraces every legal theory of
recovery, “whether common law or statutory.” Id. In short, it applies wherever there
is an attorney-client relationship and the client brings a claim regarding services
provided pursuant to that relationship. See Fogarty v. Parker, Poe, Adams &
Bernstein, L.L.P., 961 So. 2d 784, 788 (Ala. 2006) (holding that the ALSLA applies
to “claims against legal-service providers that arise from the performance of legal
services”); Brackin v. Trimmier Law Firm, 897 So. 2d 207, 229 (Ala. 2004) (“An
attorney-client relationship is an essential element of a claim under the [ALSLA] . .
. .”). It does not, however, preclude claims against attorneys not arising out of legal
services. For example, in Line v. Ventura, 38 So. 3d 1, 11 (Ala. 2009), the defendant
– an attorney – undertook a fiduciary obligation entirely separate from any legal
representation when he agreed to participate in a conservatorship by cosigning checks
and helping manage conservatorship funds. Thus, the ALSLA did not preclude claims
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of negligence, wantonness, and breach of fiduciary duty brought against the defendant
for his conduct relating to the conservatorship. Id.
Based on the pleadings alone, it is not clear whether and between which parties
an attorney-client relationship existed. Similarly, it is not clear when such a
relationship existed and whether, if such a relationship did exist, the subject of the
claim arises from one continuous representation or a series of representations on
discrete matters. Plaintiffs allege that at all relevant times there was an attorney-client
relationship between Plaintiffs and Defendants (Doc. # 1, ¶ 25) and that a contract
existed between them (Doc. # 1, ¶ 19), yet the terms of that contract and whether it
involved only legal services remain unclear.
It is plausible – based on Plaintiffs’ allegations – that an attorney client
relationship existed between Plaintiffs and any combination of the individual
Defendants and the business entity Defendants. It is also plausible that certain claims
in this case against certain Defendants arise out of a fiduciary obligation entirely
separate from any legal representation, as in Line v. Ventura, even if the parties were
once engaged in an attorney-client relationship. In light of Defendant Douglas’s
admissions to the underlying criminal conduct and the factual allegations supporting
both Plaintiffs’ claims under the ALSLA and those at common law, continuing to
discovery is appropriate. Cf. Sessions v. Espy, 854 So. 2d 515, 523–24 (Ala. 2002)
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(finding a genuine issue of material fact precluding summary judgment in an ALSLA
case where record evidence conflicted as to whether an attorney-client relationship
existed). Plaintiffs have pleaded facts raising “a reasonable expectation that discovery
will reveal evidence” of their claims. Twombly, 550 U.S. at 556. The suggestions
raised by Plaintiffs’ allegations make their complaint legally sufficient with respect
both to the ALSLA claim (Count XIII) and the common law claims, and this court
must therefore deny the motion to dismiss.
B.

Operation of the ALSLA Statute of Limitations
Defendants also argue that Plaintiffs’ claims are due to be dismissed because

they were brought after the ALSLA’s statute of limitations had expired. As set forth
above, Plaintiffs have pleaded facts sufficient at this stage to support claims under
both common law and the ALSLA, and Defendants raise no argument that a statute
of limitations applies to the common law claims. Thus, the court construes the statute
of limitations argument as applying only to Count XIII. Because Plaintiffs have
pleaded facts sufficient to suggest that the ameliorative discovery provision applies,
the motion to dismiss Plaintiffs’ ALSLA claim is due to be denied.
The ALSLA incorporates by reference the saving provision for fraud actions
found in Ala. Code § 6-2-3. Ala. Code § 6-5-574(b). Under the saving provision, if
a defendant has acted fraudulently to conceal a claim, the statute of limitations
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applicable to that claim will not begin to run until the plaintiff discovers, or should
have discovered, the claim. Ala. Code § 6-2-3; see also Dennis v. Northcutt, 887 So.
2d 219, 221 n.4 (Ala. 2004) (acknowledging that the saving provision applies to
actions under the ALSLA).
Defendants’ argument that the statute of limitations bars Plaintiffs’ claim cannot
support granting the motion to dismiss. If indeed the ALSLA applies based on the
existence of an attorney-client relationship, Plaintiffs’ allegations – particularly those
concerning the concocted claims against Bank of America – plausibly suggest that
Defendants fraudulently concealed the admitted conversion of Plaintiffs’ funds. (Doc.
# 12, ¶¶ 25–29.)
V. CONCLUSION
For the foregoing reasons, Plaintiffs’ complaint alleging both common law and
statutory causes of action is legally sufficient. Accordingly, it is ORDERED that
Defendants’ Rule 12(b)(6) Motion to Dismiss (Doc. # 6) is DENIED.
DONE this 26th day of September, 2012.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE

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