Bain et al v. Continental Title Holding Company, Inc. et al

Filing 99

MEMORANDUM AND ORDER granting in part and denying in part 88 Defendants' Motion for Summary Judgment. The motion is granted as unopposed with respect to plaintiffs' claims of breach of fiduciary duty and negligence and their claim for punitive damages, and judgment is awarded to defendants on those claims. The motion is denied with respect to plaintiffs' claim of negligent misrepresentation. Signed by District Judge John W. Lungstrum on 02/14/2018. (ses)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

JERRY BAIN and JENNIFER BAIN,

)
)
Plaintiffs,
)
)
v.
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)
PLATINUM REALTY, LLC and
)
KATHRYN SYLVIA COLEMAN,
)
)
Defendants.
)
)
_______________________________________)

Case No. 16-2326-JWL

MEMORANDUM AND ORDER
This matter comes before the Court on defendants’ motion for summary judgment
(Doc. # 88). For the reasons set forth below, the motion is granted in part and denied
in part. The motion is granted as unopposed with respect to plaintiffs’ claims of breach
of fiduciary duty and negligence and their claim for punitive damages, and judgment is
awarded to defendants on those claims. The motion is denied with respect to plaintiffs’
claim of negligent misrepresentation.

I.

Background

This case arises from plaintiffs’ purchase of a house. Defendant Kathryn Sylvia
Coleman (hereafter referred to as “Ms. Sylvia”) acted as the sellers’ real estate agent, and
she was employed by defendant Platinum Realty, LLC (“Platinum”). The title company

for the transaction was Continental Title Company (“CTC”). Prior to the closing of the
transaction, plaintiffs had their bank wire the purchase amount to a particular bank
account owned not by the sellers, but by some unknown party, and the funds were never
recovered. Plaintiffs had acted pursuant to wiring instructions attached to an email to
plaintiff Jerry Bain’s email account purportedly sent from Ms. Sylvia’s email account.
In this suit, plaintiffs contend that the unknown party (referred to by the parties as “the
hacker”) intercepted an email from CTC to Ms. Sylvia that contained the intended wiring
instructions, changed the wiring instructions, created an email address similar to the CTC
address, and sent the changed wiring instructions to Ms. Sylvia by email, who then
forwarded those instructions to Mr. Bain. Plaintiffs seek to recover damages in the
amount of $196,622.67, the amount wired to the wrong account. By the pretrial order,
plaintiffs assert claims against Ms. Sylvia and Platinum for breach of fiduciary duty,
negligence, and negligent misrepresentation.1

II.

Summary Judgment Standards

Summary judgment is appropriate if the moving party demonstrates that there is
“no genuine dispute as to any material fact” and that it is “entitled to a judgment as a

1

The Court exercises supplemental jurisdiction over these claims pursuant to 28
U.S.C. § 1367. Plaintiffs originally asserted claims also against CTC and their bank,
including a claim under federal law that permitted this Court to exercise original
jurisdiction, but plaintiffs subsequently dismissed the claims against those two
defendants, leaving only the claims against Ms. Sylvia and Platinum.
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matter of law.” Fed. R. Civ. P. 56(a). In applying this standard, the court views the
evidence and all reasonable inferences therefrom in the light most favorable to the
nonmoving party. Burke v. Utah Transit Auth. & Local 382, 462 F.3d 1253, 1258 (10th
Cir. 2006). An issue of fact is “genuine” if “the evidence allows a reasonable jury to
resolve the issue either way.” Haynes v. Level 3 Communications, LLC, 456 F.3d 1215,
1219 (10th Cir. 2006). A fact is “material” when “it is essential to the proper disposition
of the claim.” Id.
The moving party bears the initial burden of demonstrating an absence of a
genuine issue of material fact and entitlement to judgment as a matter of law. Thom v.
Bristol-Myers Squibb Co., 353 F.3d 848, 851 (10th Cir. 2003) (citing Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986)). In attempting to meet that standard, a movant
that does not bear the ultimate burden of persuasion at trial need not negate the other
party’s claim; rather, the movant need simply point out to the court a lack of evidence
for the other party on an essential element of that party’s claim. Id. (citing Celotex, 477
U.S. at 325).
If the movant carries this initial burden, the nonmovant may not simply rest upon
the pleadings but must “bring forward specific facts showing a genuine issue for trial as
to those dispositive matters for which he or she carries the burden of proof.” Garrison
v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005). To accomplish this, sufficient
evidence pertinent to the material issue “must be identified by reference to an affidavit,
a deposition transcript, or a specific exhibit incorporated therein.” Diaz v. Paul J.
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Kennedy Law Firm, 289 F.3d 671, 675 (10th Cir. 2002).
Finally, the court notes that summary judgment is not a “disfavored procedural
shortcut;” rather, it is an important procedure “designed to secure the just, speedy and
inexpensive determination of every action.” Celotex, 477 U.S. at 327 (quoting Fed. R.
Civ. P. 1).

III.

Abandoned Claims

By the instant motion, defendants seek summary judgment on all claims against
them. In their response, plaintiffs have not addressed defendants’ arguments with
respect to the claims for breach of fiduciary duty, for general negligence, and for
punitive damages. Indeed, plaintiffs’ brief does not refer to those claims at all.
Accordingly, plaintiffs have abandoned any such claims, and the Court grants
defendants’ motion for summary judgment on those claims as unopposed. See Maestas
v. Segura, 416 F.3d 1182, 1190 n.9 (10th Cir. 2005) (party appeared to abandon claim
by failing to address it in its brief); Hinsdale v. City of Liberal, Kan., 19 F. App’x 749,
768-69 (10th Cir. 2001) (unpub. op.) (affirming district court’s ruling that plaintiff
abandoned claim by failing to address it in response to motion for summary judgment)
(citing Coffey v. Healthtrust, Inc., 955 F.2d 1388, 1393 (10th Cir. 1992)).

IV.

Negligent Misrepresentation
A.

Representation to Plaintiffs
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Plaintiffs assert a claim against defendants for negligent misrepresentation.
According to the pretrial order, plaintiffs contend that Ms. Sylvia negligently supplied
false information to plaintiffs “about where to wire the funds” for the purchase of the
house. In that regard, plaintiffs argue that in sending the incorrect wiring instructions
to Mr. Bain, Ms. Sylvia negligently represented that those instructions were correct.
Defendants first seek summary judgment on this claim on the basis of their
argument that Ms. Sylvia never made such a representation to plaintiffs. Defendants
concede that Ms. Sylvia received the fake wiring instructions and attempted to forward
them to Mr. Bain. That email (sent at 11:48 a.m. on February 23, 2016), however, was
sent not to Mr. Bain’s correct email address, but was sent to a very similar address,
presumably created by the hacker, from which Ms. Sylvia had received a prior
communication. Mr. Bain received the fake wiring instructions in an email sent at 11:54
a.m. on February 23, 2016, which on its face appears to have come from Ms. Sylvia’s
actual email address. Ms. Sylvia denies that she sent the 11:54 email that Mr. Bain
actually received. Defendants thus argue that the hacker sent the fake wiring instructions
to Mr. Bain, and that because Ms. Sylvia’s email with the fake instructions went
elsewhere, she never actually sent the fake instructions to Mr. Bain—which would mean
that she did not make any representation to plaintiffs concerning where the money should
be wired, and thus cannot be liable for negligent misrepresentation.
The Court is unable to resolve this issue as a matter of law, however, as there is
at least some evidence that Ms. Sylvia sent the 11:54 email to Mr. Bain. Most significant
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is the fact that the email came from Ms. Sylvia’s actual address, from which she had
previously communicated with Mr. Bain. Ms. Sylvia denies having sent the email, but
the use of her actual address—while fake email addresses were employed to impersonate
CTC and Mr. Bain—provides evidence in plaintiffs’ favor. The credibility of Ms.
Sylvia’s denial thus becomes a matter for the jury to decide. Other evidence also
supports plaintiffs’ claim. For instance, Mr. Bain testified that after discovery of the
theft Ms. Sylvia admitted to him that the loss was her fault and could have been avoided
if she had reviewed the fake wiring instructions, which admission could indicate her
belief that she had sent the fake instructions to Mr. Bain. Mr. Bain also testified that
after he received the fake wiring instructions, Ms. Sylvia confirmed to him on the
telephone that the funds should be wired prior to closing. Mr. Bain also states that none
of his emails to Ms. Sylvia’s account were ever returned as undeliverable. Ms. Sylvia
did intend to forward the incorrect wiring instructions to Mr. Bain (by the 11:48 email,
which she admits sending). Before testifying at her deposition that emails could be
recovered from her computer, Ms. Sylvia first testified that she had deleted any emails
concerning the transactions, which could indicate an initial desire to conceal evidence.
Finally, defendants do not dispute that Ms. Sylvia did nothing after the discovery of the
theft to investigate with her email provider how the unauthorized use of her address
could have occurred.
Defendants offer evidence and various arguments to counter plaintiffs’ evidence.
For instance, defendants argue that telephone records dispute Mr. Bain’s claim that he
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spoke with Ms. Sylvia after he received the wiring instructions. All evidence must be
considered in plaintiffs’ favor at this summary judgment stage, however, and it is for the
jury to weigh any conflicting evidence. Because a question of fact remains for trial, the
Court rejects this argument for summary judgment.
B.

Positive Assertion

For their second argument for summary judgment on this claim, defendants argue
that the 11:54 email, by which the fake wiring instructions were forwarded to plaintiffs,
did not contain any positive assertion of fact. That email stated:
Jerry, see attached. Once the wire is sent kindly forward me a copy of the
confirmation slip for my file.
Thank you,
Kathy Sylvia
Platinum Realty
Defendants argue that, assuming Ms. Sylvia sent this email, she merely forwarded the
wiring instructions without making any particular assertion concerning those
instructions. Defendants rely solely on a California case, OCM Principal Opportunities
Fund v. CIBC World Markets Corp., 68 Cal. Rptr. 3d 828 (Cal. Ct. App. 2007), in which
the court stated that, under California law, negligent misrepresentation requires a
“positive assertion” and that an implied assertion or representation is not enough. See
id. at 847.
Kansas law governs the claim in this case, however, and Kansas has adopted
Section 552 of the Restatement with respect to this tort. See Mahler v. Keenan Real

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Estate, Inc., 255 Kan. 593, 604-05 (1994).2 By the terms of Section 552, one may be
liable for negligent misrepresentation if she “supplies false information” in particular
circumstances. See Restatement (Second) of Torts § 552(1). The comments to the
Restatement provide as follows:
“Misrepresentation” is used in this Restatement to denote not only words
spoken or written but also any other conduct that amounts to an assertion
not in accordance with the truth. Thus, words or conduct asserting the
existence of a fact constitute a misrepresentation if the fact does not exist.
See id. § 525 cmt. b; see also id. §§ 525 cmts. e-g (discussing certain implied
representations), 527 (speaker liable for ambiguous representation if she is indifferent
to how it will be understood), 529 (liability for misleadingly incomplete representation).
In forwarding wiring instructions, Ms. Sylvia could only have intended that plaintiffs
would use those instructions to purchase her clients’ house. Moreover, the email’s
reference to “the attached” could also have referred to the forwarded email purportedly
from CTC, which stated that the wire instructions were attached and were to be
forwarded to the buyers. The jury must decide which facts Ms. Sylvia asserted in the
11:54 email, and the jury could reasonably find in this case that, in supplying wiring
instructions to Mr. Bain, Ms. Sylvia was asserting that those were the correct instructions
to be used by plaintiffs in that transaction. Accordingly, a question of fact remains for

2

Both sides cite Kansas law for the elements of this tort, and thus they appear to
agree that this claim is governed by the law of Kansas, where plaintiffs reside and thus
suffered any financial harm. See O’Bryan v. Wendy’s Old Fashion Hamburgers of New
York, Inc., 1997 WL 158296, at *4 n.2 (D. Kan. Mar. 19, 1997) (Lungstrum, J.).
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trial, and the Court rejects this argument for summary judgment.
C.

Justifiable Reliance

Finally, defendants argue as a matter of law that plaintiffs did not justifiably rely
on the alleged misrepresentation. See id. § 552 (liability for negligent misrepresentation
for loss caused by the plaintiff’s justifiable reliance on the false information).
Defendants argue that Mr. Bain is an experienced real estate investor who should have
recognized particular red flags in the emails he received. The Court concludes, however,
that a reasonable jury could find that Mr. Bain acted reasonably and justifiably in
assuming that the 11:54 email, which appeared to come from the actual email address
of the sellers’ agent, contained the correct wiring instructions. Because a question of fact
remains for trial on this element of the tort, the Court rejects this final argument for
summary judgment.

IT IS THEREFORE ORDERED BY THE COURT THAT defendants’ motion
for summary judgment (Doc. # 88) is hereby granted in part and denied in part. The
motion is granted as unopposed with respect to plaintiffs’ claims of breach of fiduciary
duty and negligence and their claim for punitive damages, and judgment is awarded to
defendants on those claims. The motion is denied with respect to plaintiffs’ claim of
negligent misrepresentation.

IT IS SO ORDERED.

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Dated this 14th day of February, 2018, in Kansas City, Kansas.

s/ John W. Lungstrum
John W. Lungstrum
United States District Judge

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