Lentz v. Morgan Drexen, Inc. et al

Filing 2

ORDER: Ordered that the Proposed Findings of Fact and Conclusions of Law in Support of Defendants Motion for Summary Judgment by the United States Bankruptcy Court for the Southern District of MS are ADOPTED by this Court, and Plaintiffs objections a re OVERRULED; and Ordered that the BankruptcyCourts grant of summary judgment in favor of Defendants on Plaintiffs state law claims for unjust enrichment and breach of fiduciary duty is AFFIRMED. Signed by Chief District Judge Louis Guirola, Jr. on 7/24/15 (RLW)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
IN RE: HERMAN L. FAIRLEY
Debtor

BANKRUPTCY CASE NO. 13-52526-KMS
ADVERSARY. PRO. NO. 14-05006-KMS

KIMBERLY R. LENTZ, as Chapter 7
Trustee for the Estate of Herman L.
Fairley
v.

PLAINTIFF

CAUSE NO. 1:15CV144-LG-RHW

MORGAN DREXEN, INC.; WALTER J.
LEDDA; and TAMI L. MUNSCH

DEFENDANTS

ORDER ADOPTING PROPOSED FINDINGS OF FACT AND
CONCLUSIONS OF LAW IN SUPPORT OF DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT AND AFFIRMING GRANT OF SUMMARY
JUDGMENT BY THE UNITED STATES BANKRUPTCY COURT
BEFORE THE COURT is the [1-2] Proposed Findings of Fact and
Conclusions of Law in Support of Defendants’ Motion for Summary Judgment by
the United States Bankruptcy Court for the Southern District of Mississippi, which
were entered in the above-referenced adversary proceeding on March 31, 2015. The
adversary proceeding concerns the legal representation of Herman L. Fairley, who
filed for bankruptcy in 2013. Plaintiff Kimberly R. Lentz, as Chapter 7 Trustee for
the Estate of Mr. Fairley, objected to the Findings of Fact and Conclusions of Law
pursuant to Federal Rule of Bankruptcy Procedure 9033. Specifically, Lentz argues
that the bankruptcy judge erred in granting Defendant Tami L. Munsch’s Motion
for Summary Judgment as to Plaintiff’s “claim for breach of fiduciary duty and
related discovery.” (Pl’s. Obj. 1, ECF No. 1-4).

Having conducted the required de novo review, the Court is of the opinion
that there are no genuine issues of material fact with respect to Plaintiff’s breach of
fiduciary duty claim against Munsch. Accordingly, the Court adopts the Findings of
Fact and Conclusion of Law entered by the bankruptcy judge and affirms the grant
of summary judgment in favor of all Defendants.
BACKGROUND
On February 3, 2014, Plaintiff, in her capacity as Chapter 7 Trustee for the
Estate of Herman L. Fairley, brought an adversary proceeding against Defendants
in the United States Bankruptcy Court for the Southern District of Mississippi.
Plaintiff claims that Defendants “collectively operate a debt relief/legal services
scheme wherein they prey on desperate consumers despite their duty to serve these
consumers/clients.” (Compl. 3 (¶18), Lentz v. Morgan Drexen, Inc. et al., No. 1405006-KMS (Bankr. S.D. Miss. Feb. 3, 2014), ECF No. 1). According to Plaintiff,
prior to filing for bankruptcy, Defendants promised to provide certain debt relief
services to Fairley in exchange for monthly payments, but failed to do so. Plaintiff’s
Complaint alleged claims for turnover of estate property accounting, bankruptcy
claims under 11 U.S.C. §§ 329 and 526, and claims pursuant to Mississippi state
law for breach of fiduciary duty and unjust enrichment.
On December 1, 2014, Defendants moved for summary judgment, including
as to the state law claims. On March 31, 2015, the bankruptcy judge entered
Proposed Findings of Fact and Conclusions of Law recommending to this Court that
summary judgment be granted in favor of Defendants on the state law claims. On
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April 10, 2015, Plaintiff filed her Objections to the Findings of Fact and Conclusions
of Law. Plaintiff does not object to the bankruptcy judge’s factual findings or
challenge the grant of summary judgment in favor of all Defendants on her unjust
enrichment claim or in favor of Defendants Morgan Drexen, Inc. and Walter J.
Ledda on the breach of fiduciary duty claim. The only portion of the Findings of
Fact and Conclusions of Law with which she takes issue is the bankruptcy judge’s
conclusion that there was no genuine issue of material fact with respect to the claim
for breach of fiduciary duty and related discovery against Munsch.
THE LEGAL STANDARD
This Court reviews proposed findings of fact and conclusions of law by a
bankruptcy judge de novo with respect to “any portion of the bankruptcy judge’s
findings of fact or conclusions of law to which specific written objection has been
made . . . .” Fed. R. Bankr. P. 9033. In doing so, the Court “may accept, reject, or
modify the proposed findings of fact or conclusions of law, receive further evidence,
or recommit the matter to the bankruptcy judge with instructions.” Id.
In conducting its de novo review, the Court applies the summary judgment
standard of Federal Rule of Civil Procedure 56, made applicable to bankruptcy
adversary proceedings through Federal Rule of Bankruptcy Procedure 7056. A
motion for summary judgment shall be granted “if the movant shows that there is
no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). In reviewing a motion for summary
judgment, the Court views the evidence in the light most favorable to the non3

movant. Abarca v. Metro. Transit Auth., 404 F.3d 938, 940 (5th Cir. 2005). The
movant bears the initial burden of identifying those portions of the pleadings and
discovery on file, together with any affidavits, which she believes demonstrate the
absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,
323-25 (1986). If the movant carries this burden, the burden shifts to the nonmovant to show that summary judgment should not be granted. Id.
DISCUSSION
The parties do not dispute that Munsch and Fairley were in an attorneyclient relationship and that, as his attorney, Munsch owed Fairley fiduciary duties
“of confidentiality and of candor and disclosure.” See Singleton v. Stegall, 580 So.
2d 1242, 1245 (Miss. 1991). Plaintiff thus had to establish (1) the acts constituting
a violation of Munsch’s fiduciary duty; (2) that the breach of fiduciary duty caused
Fairley an injury; and (3) the fact and extent of the injury. See Crist v. Loyacono, 65
So. 3d 837, 842-43 (Miss. 2011).
Plaintiff claims that “[a] genuine issue of material fact exists regarding a
breach of fiduciary duty by Munsch, based upon, inter alia, Fairley’s testimony that
he never spoke to Munsch and did not receive the advice and counseling promised in
the [applicable legal services] contract despite paying her $1,530.00.” (Pl’s. Obj. 1,
ECF No. 1-4). Fairley’s testimony that he did not receive the advice and counseling
promised him was based on the undisputed fact that he never personally spoke to
Munsch, and it is on this fact that Plaintiff hinges her objection.

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The bankruptcy judge found that, while Munsch never personally spoke with
Fairley, “[i]t is undisputed that Morgan Drexen and attorney Samuel Tucker,1 while
operating under Munsch’s supervision, provided Fairley with all of the pre-petition
services he was entitled to under his contract with Munsch prior to her termination
of her services.” (Findings of Fact and Conclusions of Law 12, ECF No. 1-2).
Plaintiff objects to this finding based on the language of the applicable Bankruptcy
Fee Agreement, which states, in pertinent part:
The law firm of Tami Munsch . . . shall provide Client with the
following services:
c.

Counsel you on the appropriateness of and planning for the
filing of a petition[;] provide advice as to jurisdictional amount
eligibility, prior or concurrentness, eligibility for discharge,
median income test, means test, consumer/business percentages,
. . . , tax return and tax filing requirements, asset valuation and
protection, analysis of equities, debts, exemptions, contacts [sic],
leases, accounts receivable, co-debtor obligations, intentions
with regard to collateral, reaffirmation, roles of the Court,
trustees and United States Trustee, issues related to [various
Bankruptcy Code provisions]; . . . counseling you regarding
preservation or surrender of estate assets . . . .

...
You understand and agree that the Attorneys may utilize the services
of Morgan Drexen, Inc., an outside company that is not a law firm, to
assist the Attorneys in performing non-legal services under this
Agreement. You hereby consent to such utilization, including any
necessary disclosure of confidential information to Morgan Drexen,
Inc. The Attorneys utilize Morgan Drexen to handle administrative
matters, which include administrative communications, mailing
services, routine correspondence with You and Creditors, petition
preparation based upon your Attorney’s instructions, account

1

Munsch associated Tucker as bankruptcy counsel.
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updating, and other such non-legal-practice services. You shall expect,
and you understand, that most routine non-legal communication
regarding issues such as the status of your file, ACH amounts, and the
status of your accounts will occur through Morgan Drexen. Another
service that Morgan Drexen provides to the Attorney is to gather
important information and documents from you. All non-legal
questions and correspondence will be handled by paraprofessional
administrative support staff at Morgan Drexen. On the other hand,
you understand, agree, and expect to address all legal issues directly
with the Attorneys and not Morgan Drexen. When you need to discuss
an issue of a legal nature or with legal implications, Morgan Drexen
will facilitate the scheduling or a meeting or conference with the
Attorneys to address those legal needs.
(Bankr. Fee Agmt., Lentz v. Morgan Drexen, Inc. et al., No. 14-05006-KMS (Bankr.
S.D. Miss. Feb. 3, 2014), ECF No. 70-2; see also Pl’s. Obj. 4-9, ECF No. 1-4).
Plaintiff states, based on the above-quoted language, that “Munsch promised
to ‘counsel’ and provide ‘advice’, but described Morgan Drexen as only providing
non-legal services.” (See Pl’s. Obj. 9, ECF No. 1-4). She contends that the
Bankruptcy Fee Agreement provides that Fairley should “expect to address all legal
issues directly with the Attorneys and not Morgan Drexen[,]” but Fairley never
spoke to Munsch or Tucker. (See id. at 6, 9). Therefore, she claims that Fairley did
not receive the counsel and advice for which he paid because it was not provided
directly by an attorney. (See id. at 9).
The bankruptcy judge addressed the same argument Plaintiff now makes:
The Trustee appears to take umbrage with the fact that Munsch
did not personally perform the duties promised under the Bankruptcy
Fee Agreement. . . . But the Trustee cites no authority–nor could the
Court locate any authority–to support the position that the contracting
attorney must perform all of the promised services herself and cannot
outsource any such services to her staff or third parties. Indeed, such a
ruling would prohibit attorneys from utilizing paralegal support staff
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and associated counsel to perform services for their clients.
(Findings of Fact and Conclusions of Law 12, ECF No. 1-2). The Court, after a de
novo review of the relevant evidence, reaches the same conclusion as the
bankruptcy judge.
Specifically, the Court is of the opinion that there is no dispute that Munsch
directed and supervised her support staff in performing all necessary pre-petition
activities, including advising and counseling Fairley regarding filing for bankruptcy
and the bankruptcy process. Plaintiff has never disputed Munsch’s affidavit
testimony, including that “[u]nder my direction and supervision, my staff provided
Mr. Fairley with the required notices regarding bankruptcy and counseling
regarding the appropriateness of planning for the filing for bankruptcy.” (Munsch
Aff., Lentz v. Morgan Drexen, Inc. et al., No. 14-05006-KMS (Bankr. S.D. Miss. Feb.
3, 2014), ECF No. 70-5, at 2 (¶11); see also id. (¶¶ 5-6)). Similarly, she has not
objected to the bankruptcy judge’s factual finding that Munsch’s staff, at Munsch’s
direction, “provided counseling to Fairley regarding the propriety of filing for
bankruptcy.” (See Findings of Fact and Conclusions of Law 4, ECF No. 1-2). Her
sole argument is that these services should have come directly through Munsch.
While the Court certainly believes that it is good practice for an attorney to
personally speak with her client, the fact that Munsch did not do so does not
amount to a breach of fiduciary duty. And, as below, Plaintiff offers no authority to
show that an attorney breaches a fiduciary duty by not providing advice and
counsel directly, but instead opting to act through support staff.
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Plaintiff’s only argument is that the pre-petition advice and counseling
should have come directly from Munsch. The Court acknowledges that the
Bankruptcy Fee Agreement could cause confusion on this point, but this is not a
breach of contract case.2 Even so, while the Agreement contemplates that non-legal
issues will be handled directly by Morgan Drexen, it does not prohibit Munsch from
also providing legal services through her support staff under her direction and
supervision. Plaintiff emphasizes the language that Fairley should “expect to
address all legal issues directly with the Attorneys . . . .” But Plaintiff does not
claim that there was a specific legal issue which Fairley needed addressed by
Munsch directly that was not addressed.3
Plaintiff’s argument, though unclear, appears to be that the Agreement
language about “expecting to address all legal issues directly with the Attorneys”
obligated Munsch to directly provide all legal advice and counsel. Upon review, the
Court does not interpret the language that way. Instead, the Agreement simply
states that if there is a legal issue that the Client needs to discuss or address with
the Attorney, Morgan Drexen will facilitate the scheduling of a meeting or
conference to address those needs. It does not say that all legal advice and counsel
will come directly from Munsch, and not through support staff. Regardless, there is

2

Indeed, under Mississippi law, a lawyer’s fiduciary duties are generally
separate from any duties she may owe by virtue of a contractual agreement with
her client. See, e.g., Singleton, 580 So. 2d at 1244-45.
3

Moreover, under the Agreement, the term “Attorneys” refers to Munsch’s
law firm, and not to Munsch specifically.
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no breach of contract claim, and Plaintiff’s and Fairley’s apparent dissatisfaction by
the services rendered simply does not amount to a breach of fiduciary duty.
Accordingly, the Court is of the opinion that Plaintiff Kimberly R. Lentz’s
objections to the bankruptcy judge’s Proposed Findings of Fact and Conclusions of
Law are not well-taken. Because there are no genuine issues of material fact with
respect to Plaintiff’s breach of fiduciary duty claim against Defendant Tami L.
Munsch, the Court finds that the bankruptcy judge’s grant of summary judgment in
Munsch’s favor should be affirmed.
IT IS THEREFORE ORDERED AND ADJUDGED that the [1-2]
Proposed Findings of Fact and Conclusions of Law in Support of Defendants’ Motion
for Summary Judgment by the United States Bankruptcy Court for the Southern
District of Mississippi are ADOPTED by this Court, and Plaintiff’s objections
thereto are OVERRULED.
IT IS FURTHER ORDERED AND ADJUDGED that the Bankruptcy
Court’s grant of summary judgment in favor of Defendants on Plaintiff’s state law
claims for unjust enrichment and breach of fiduciary duty is AFFIRMED.
SO ORDERED AND ADJUDGED this the 24th day of July, 2015.

s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE

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