Wells Fargo Bank, N.A., v. Stephen A. Ablitt et al.
Filing
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Judge Allison D. Burroughs: ORDER entered. MEMORANDUM AND ORDER. For the reasons stated herein, defendants motions to dismiss [ECF Nos. 48, 50, 52] are granted in part. Count II of the Complaint is dismissed, but Count I is not. Wells Fargo may amend the Complaint within 14 days to bring a breach of contract claim against CGA&W. The parties should continue to follow the existing discovery schedule. [ECF No. 43].(Folan, Karen)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
WELLS FARGO BANK, N.A., AS
TRUSTEE FOR OPTION ONE
MORTGAGE LOAN TRUST 2007-FXD1
ASSET-BACKED CERTIFICATES,
SERIES 2007-FXD1,
Plaintiff,
v.
STEPHEN A. ABLITT, LAWRENCE F.
SCOFIELD, JOHN CONNOLLY, JR.,
KEVIN D. GEANEY and RACHELLE D.
WILLARD,
Defendants.
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Civil Action No. 15-CV-40027-ADB
MEMORANDUM AND ORDER
June 15, 2016
BURROUGHS, D.J.
This legal malpractice case arises from an allegedly defective mortgage foreclosure.
Plaintiff Wells Fargo Bank, N.A., as Trustee for Option One Mortgage Loan Trust 2007-FXD1
Asset-Backed Certificates, Series 2007-FXD1 (“Plaintiff” or “Wells Fargo”), alleges that
attorneys at Connolly, Geaney, Ablitt & Willard, P.C (“CGA&W”) committed legal malpractice
while attempting to prosecute a foreclosure on its behalf. Wells Fargo’s Complaint names five
defendants—Stephen A. Ablitt, Lawrence F. Scofield, John Connolly, Jr., Keven D. Geaney, and
Rachelle D. Willard—all of whom, upon Wells Fargo’s information and belief, were previously
shareholders and/or officers of CGA&W.
Currently pending are defendants’ motions to dismiss the Complaint for failure to state a
claim on which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6) and for failure to join
indispensable parties pursuant to Fed. R. Civ. P. 12(b)(7) and 19. [ECF Nos. 48, 50, 52]. For the
reasons stated herein, defendants’ motions are granted in part. The motions are denied with
respect to Count I but granted with respect to Count II. Wells Fargo may amend the Complaint
within 14 days to bring a breach of contract claim against CGA&W.
I.
Factual Background
Wells Fargo alleges the following facts in its Complaint.
CGA&W is a Rhode Island professional corporation engaged in the practice of law in the
Commonwealth of Massachusetts. [ECF No. 1 (“Compl.”) ¶ 7].1 Wells Fargo retained CGA&W,
which at the time was known as Ablitt Law Offices, in 2011, to execute a foreclosure on
property located in Millbury, Massachusetts, to which Wells Fargo held a note and mortgage. Id.
¶¶ 14, 21, 24, 28. CGA&W conducted a foreclosure sale on the property in November 2011 and
Wells Fargo was the highest bidder. Id. ¶ 36. Subsequent to the auction and recordation of the
foreclosure deed in Wells Fargo’s favor, it was discovered that proper notice of the auction had
not been given to a junior-lien holder with an interest in the property. Id. ¶ 38. CGA&W
attempted to secure a Waiver of Notice from the junior lienholder but was unsuccessful in doing
so. Id. ¶ 40. Acting on one or more of the defendants’ advice, in February 2012, Wells Fargo
executed a deed to the mortgagor, for nominal consideration, as a means to effectuate a
rescission of the foreclosure sale so that Wells Fargo could conduct a new foreclosure sale that
would extinguish all recorded interests junior to its interest. Id. ¶ 42. Rather than effectuating
such a rescission, Wells Fargo’s execution of a deed to the mortgagor for nominal consideration
caused a quitclaim deed to be recorded with the Registry of Deeds, and ultimately purported to
divest Wells Fargo of its loan collateral. Id. ¶¶ 43-44.
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CGA&W was formerly known as Ablitt Scofield and Ablitt Law Offices. Compl. ¶ 7.
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As early as December 2012, defendants or associate attorneys working under their
direction made efforts, including through an offer of compensation to be paid by CGA&W, to
secure a deed of the property from the homeowner to Wells Fargo. Id. ¶ 48. Throughout 2013
and 2014, defendants or associate attorneys acting under their direction continued efforts to
negotiate with the homeowner and/or his attorney for a deed conveying the property back to
Wells Fargo. Id. ¶¶ 49, 58. During that time, defendants failed to disclose to Wells Fargo or its
loan servicer the extent of the problem created by the errant quitclaim deed, failed to disclose to
Wells Fargo that the quitclaim deed had not accomplished the intended rescission of the
November foreclosure nor positioned Wells Fargo to conduct a new foreclosure sale of the
property, and failed to initiate any legal action against the homeowner. Id. ¶ 49.
Wells Fargo filed its Complaint on February 13, 2015, bringing claims for legal
malpractice (Count I) and breach of contract (Count II) against the five defendants. [ECF No. 1].
Defendants answered the Complaint by May 2015. [ECF Nos. 12-16]. The parties appeared for a
scheduling conference in July 2015 and agreed to refer the case to mediation. [ECF No. 22]. In
March 2016, after an unsuccessful mediation, the Court held an additional scheduling conference
and set a fact discovery deadline of July 29, 2016. [ECF Nos. 33, 43]. Subsequent to that
conference, in March and April 2016, each of the defendants moved to dismiss the complaint for
failure to state a claim and failure to join an indispensable party. [ECF Nos. 48, 50, 52]. Wells
Fargo filed an omnibus opposition to defendants’ motions on April 20, 2016. [ECF No. 55].
II.
Discussion
As an initial matter, defendants’ motions to dismiss are untimely. A motion asserting any
of the seven enumerated defenses in Rule 12(b) must be made “before pleading if a responsive
pleading is allowed.” Fed. R. Civ. P. 12(b). Here, defendants filed their motions to dismiss nearly
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a year after answering the Complaint. Nonetheless, because the defenses of failure to state a
claim and failure to join may be raised in a motion for judgment on the pleadings, Fed. R. Civ. P.
12(h)(2), and a motion for judgment on the pleading may be made “[a]fter the pleadings are
closed—but early enough not to delay trial,” Fed. R. Civ. P. 12(c), the Court will treat
defendants’ motions as motions for judgment on the pleadings. “A motion for judgment on the
pleadings [under Rule 12(c)] is treated much like a Rule 12(b)(6) motion to dismiss, with the
court viewing the facts contained in the pleadings in the light most favorable to the nonmovant
and draw[ing] all reasonable inferences therefrom.” In re Loestrin 24 Fe Antitrust Litig., 814
F.3d 538, 549 (1st Cir. 2016) (internal quotations and citation omitted).
The crux of defendants’ pending motions is that because Wells Fargo retained CGA&W,
and not the individual defendants, the law firm should be the named defendant. Defendants
further argue that since they were not actively involved in the Wells Fargo representation, they
cannot be held personally liable for the conduct of other attorneys at the firm. This argument is
foreclosed by SJC Rule 3:06(3)(b). SJC Rule 3.06(3)(b) imposes vicarious liability on all of the
owners of a professional corporation “at the time of any negligent or wrongful act, error, or
omission of any owner or employee of said entity which occurred in the performance of legal
services.” See Yeomans v. Stackpole, No. MICV201101702F, 2013 WL 1729213, at *3 (Mass.
Super. Apr. 13, 2013) (“[V]icarious liability exists when any partner in a partnership commits a
‘negligent or wrongful act, error or omission . . . in the performance of legal services by said
entity.’”) (citing S.J.C. Rule 3:06(3)(b)). Under this rule, all of the owners of a professional
corporation are jointly and severally liable, up to a cap that depends on the size of the firm and
the firm’s insurance, for any legal malpractice committed by any other owner or employee of the
corporation. See Fitzsimmons v. Soutter, No. 921036H, 1994 WL 879599, at *4 (Mass. Super.
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June 9, 1994) (“As a shareholder in Soutter & Kertzman, P.C. from 1981 to 1985, Kertzman’s
liability for the negligent or wrongful conduct of Soutter is governed by Supreme Judicial Court
Rule 3:06(3)(b). . . . The Rule goes on to place dollar limits on a shareholder’s liability for the
acts of others in the corporation.”).
As alleged in the Complaint, all five defendants were owners and/or shareholders of
CGA&W at some time between 2011 and 2014. Compl. ¶¶ 7-11. Because the allegedly negligent
services were provided from 2011 through 2014, all of the defendants can be held liable, even if
they had no involvement in the Wells Fargo matter. The extent of their liability, if any, will
depend on whether they were directly involved in the matter2 and what misconduct, if any, took
place while they were actually owners and/or shareholders of CGA&W.
Defendants claim that because Wells Fargo retained CGA&W, and not the individual
defendants, CGA&W is a necessary party that must be joined under Fed. R. Civ. P. 19. They
don’t provide any legal support for this argument, and ignore SJC Rule 3:06(3) entirely. “Under
a motion pursuant to Rule 12(b)(7), the moving party carries the burden of showing why an
absent party should be joined.” Raytheon Co. v. Cont’l Cas. Co., 123 F. Supp. 2d 22, 32 (D.
Mass. 2000). Defendants have not met this burden. Though CGA&W may also be liable to Wells
Fargo, defendants have not explained why CGA&W is a required party for purposes of this suit,
given that the individual defendants, as owners and/or shareholders of CGA&W, can provide
complete relief to Wells Fargo. See Pujol v. Shearson Am. Exp., Inc., 877 F.2d 132, 137 (1st Cir.
1989) (“[A] person potentially liable as a joint tortfeasor is not a necessary or indispensable
party, but merely a permissive party subject to joinder under Rule 20”); Sullivan v. Starwood
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If they actually provided negligent legal services, SJC Rule 3:06(3)(a) applies and there is no
liability cap.
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Hotels & Resorts Worldwide, Inc., 949 F. Supp. 2d 324, 330-31 (D. Mass. 2013) (“Typically,
joint tortfeasors . . . are not necessary parties under Fed. R. Civ. P. 19(a)(1).”). Even if the
defendants intend to eventually seek indemnity from CGA&W, that does not require CGA&W to
be added as a defendant in this action. See Charest v. Fed. Nat. Mortgage Ass’n, 9 F. Supp. 3d
114, 131 (D. Mass. 2014) (“Because Rule 19(a)(1) is concerned only with those who are already
parties, the fact that an existing party’s dispute with the absent party is left unresolved does not
make the absent party a required party.”).3
Despite the foregoing, the Court agrees with the defendants that Count II of the
Complaint should be dismissed. Count I, for legal malpractice, fits squarely within SJC Rule
3:06(3) and can proceed against all of the defendants. Count II, for breach of contract, however,
fails to state a claim, because the only contract that existed was between Wells Fargo and
CGA&W. To maintain a claim for breach of contract under Massachusetts law, a party must
demonstrate that a contract actually existed between the parties. Selski, Inc. v. Bassett, No. 030381A, 2004 WL 2424300, at *2-3 (Mass. Super. Oct. 18, 2004). “As a general matter, contracts
do not bind nonparties.” City of Revere v. Boston/Logan Airport Assocs., LLC, 416 F. Supp. 2d
200, 208 (D. Mass. 2005). Furthermore, “an agent is not ordinarily liable for his principal’s
breach of contract.” McCarthy v. Azure, 22 F.3d 351, 360 (1st Cir. 1994); see also Union Mut.
Life Ins. Co. v. Chrysler Corp., 793 F.2d 1, 11-12 (1st Cir. 1986) (“In the absence of malice, one
who knowingly and voluntarily contracts with a corporation must look to the corporation, not to
its officers, for redress, even for ‘obvious’ failures to perform contractual promises.”).
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Defendants also argue that the Complaint should be dismissed for failing to name the
homeowner as a defendant. Because Wells Fargo is seeking damages for legal malpractice, and
is not attempting to recover the underlying property, there is no reason to join the homeowner as
a party.
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Accordingly, the breach of contract claim, which is largely duplicative of the legal malpractice
claim anyway, may only be brought against CGA&W. Wells Fargo may amend the Complaint
within 14 days to bring a breach of contract claim against CGA&W.
III.
Conclusion
For the foregoing reasons, defendants’ motions to dismiss [ECF Nos. 48, 50, 52] are
granted in part. Count II of the Complaint is dismissed, but Count I is not. Wells Fargo may
amend the Complaint within 14 days to bring a breach of contract claim against CGA&W. The
parties should continue to follow the existing discovery schedule. [ECF No. 43].
So ordered.
Dated: June 15, 2016
/s/ Allison D. Burroughs
ALLISON D. BURROUGHS
U.S. DISTRICT COURT JUDGE
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