Chase v. LOP Capital LLC et al

Filing 147

ORDER RULING ON REPORT AND RECOMMENDATION 116 . The Report and Recommendation is adopted in full and incorporated herein by reference, and the Plaintiffs Second Motion for Partial Summary Judgment on Defendants Counterclaims (ECF No. 89) is DENIED. Signed by Honorable Bruce Howe Hendricks on 10/2/2014. (kric, )

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
Civil Action No.: 2:13-cv-162-BHH-KFM
Nelson S. Chase, Esq.,

)
)
Plaintiff, )
vs.
)
)
LOP Capital, LLC, Strategic Lending )
Solutions, LLC, Brian Knight, and
)
Michael Loprieno,
)
)
Defendants. )
______________________________ )

Opinion and Order

This matter is before the Court on the Report and Recommendation (ECF
No. 116) of United States Magistrate Judge Kevin F. McDonald recommending
that the plaintiff’s second motion for partial summary judgment on the
defendant’s counterclaims (ECF No. 89) be denied. After carefully reviewing the
Report and Recommendation and the plaintiff’s objections thereto (ECF No.
117), the Court adopts the Report and Recommendation in full.
BACKGROUND
The plaintiff, Nelson S. Chase (“Chase”), is a licenced South Carolina
attorney, but because he is representing himself, the action is considered pro se
and was automatically referred to a United States Magistrate Judge pursuant to
28 U.S.C. § 636(b)(1)(A) and Local Civil Rule 73.02(B)(2)(e).

The “Facts

Presented” section of the Report and Recommendation thoroughly sets forth the
facts and procedural history of this matter and is incorporated by reference and
summarized in relevant part below.

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Chase, an attorney from Mount Pleasant, filed this action in state court
against his former clients, LOP Capital, LLC (“LOP Capital”), Strategic Lending
Solutions, LLC (“Strategic”), Brian Knight (“Knight”), and Michael Loprieno
(“Loprieno”) (collectively the “LOP Defendants”). The LOP Defendants removed
the case to this Court on January 15, 2013, on the basis of diversity jurisdiction.
(ECF No. 1.) Chase’s second amended complaint (ECF No. 48), which is the
operative complaint in this action, alleges that the LOP Defendants owe him
$272,431.31 for his representation of them in several South Carolina lawsuits.
Defendants LOP Capital, Knight, and Loprieno filed C.A. No. 2009-CP-426973 (the “2009 Civil Action”) in the Spartanburg County Court of Common Pleas
seeking to satisfy a Georgia deficiency judgment against a real estate developer
who had defaulted on a loan from the LOP Defendants. The 2009 Civil Action
was dismissed without prejudice because, according to the Master-in-Equity,
LOP Capital, Knight, and Loprieno had failed to respond to counterclaims filed in
that action and had failed to join an indispensable party (Strategic). LOP Capital,
Knight, and Loprieno, with Chase acting as their attorney, appealed the dismissal
of the 2009 Civil Action. The LOP Defendants allege that shortly thereafter,
without their knowledge and without their informed consent, Chase filed C.A. No.
2011-CP-42-4876 (the “2011 Civil Action) on their behalf, which was nearly
identical to the 2009 Civil Action, but added Strategic as an additional plaintiff
and added an additional cause of action. The LOP Defendants allege that as a
result of Chase’s decision to file the 2011 Civil Action, the appeal of the 2009
Civil Action was dismissed as moot.

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While these cases were pending, a dispute arose between the parties
regarding the fees owed to Chase. While Chase obviously claims that the LOP
Defendants failed to pay him for his services, Loprieno allegedly believed that
Chase was representing the LOP Defendants pursuant to a flat fee agreement
and was shocked to receive a bill for $81,526.37 for services rendered in a
period of over two years between August of 2008 and February of 2011. (ECF
No 96-2 and ECF No. 96-3.) Loprieno further attests that Chase never provided
a written fee agreement. (ECF No. 96-2.)
While the 2009 Civil Action was pending, Chase also filed a legal
malpractice action on behalf of LOP against one of its former attorneys, F. Scott
Pfeiffer (“Pfeiffer”).1

The action (the “Pfeiffer Matter”) alleged that the loan

documents Pfeiffer had drafted for LOP were defective and advanced claims for
legal malpractice, breach of fiduciary duty, and several fraud and conspiracy
claims. The legal malpractice and breach of fiduciary duty claims (the “Pfeiffer
Malpractice Claims”) were dismissed for failure to submit the affidavit of merit
that is required to be provided alongside the complaint in malpractice actions
under South Carolina Code § 15-36-100. The Pfeiffer Malpractice Claims were
dismissed without prejudice, but because LOP had delayed filing the Pfeiffer
Matter until the statute of limitations had almost expired, the dismissal effectively
foreclosed LOP’s ability to pursue the Pfeiffer Malpractice Claims,2 and LOP
ultimately dismissed the remaining causes of action against Pfeiffer. Chase has
alleged that it was LOP’s decision not to submit the affidavit and has provided
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Pfeiffer was subsequently disbarred and convicted of securities fraud.
Loprieno alleges that Chase advised LOP to delay filing of the Pfeiffer matter. (See
ECF No. 96-2 ¶ 6.)
2

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emails from Loprieno, the principal of LOP, acknowledging as much. Loprieno,
however, contends that Chase never advised him that an expert affidavit was
required by statute. (ECF No. 96-2.)
After the 2011 Civil Action was removed to federal court, and Chase was
discharged as the LOP Defendants’ counsel, Chase sued the LOP Defendants to
recover fees he alleges he is owed for his services. After removing the case to
this Court, the LOP Defendants answered and asserted counterclaims against
Chase for legal malpractice.

The LOP Defendants also contend that Chase

improperly interfered with proceedings and settlement negotiations in the 2011
Civil Action in an effort to ensure that his bills were paid.
On April 9, 2014, Chase filed a timely objection to the Report and
Recommendation (ECF No. 117), which this Court will review. Chase also filed a
“Supplemental Memorandum for Partial Summary Judgment” (ECF No. 144) on
September 2, 2014. The supplemental memorandum is not a timely response to
the Report and Recommendation and will not be considered by the Court.
STANDARD OF REVIEW
The Magistrate Judge makes only a recommendation to this court. The
recommendation has no presumptive weight. The responsibility for making a
final determination remains with this court. Mathews v. Weber, 423 U.S. 261,
270 (1976). Parties are allowed to make a written objection to a Magistrate
Judge’s report within fourteen days after being served a copy of the Report. 28
U.S.C. § 636(b)(1). The court may accept, reject, or modify, in whole or in part,

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the recommendation made by the Magistrate Judge or may recommit the matter
to the Magistrate Judge with instructions. See 28 U.S.C. § 636(b)(1).
DISCUSSION
Chase’s first objection is a “general objection” to the Report and
Recommendation as a whole, which Chase states is made “in an effort to avoid
waiver of the right to appeal from a judgment of the District Court based up the
Recommendation.” The Court is obligated to conduct a de novo review of every
portion of the Report to which specific objections have been filed. Mathews, 423
U.S. at 270–71. However, the Court need not conduct a de novo review when a
party makes only “general and conclusory objections that do not direct the court
to a specific error in the magistrate’s proposed findings and recommendations.”
Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir.1982) ( “[D]e novo review [is]
unnecessary in . . . situations when a party makes general and conclusory
objections that do not direct the court to a specific error in the magistrate’s
proposed findings and recommendation.”).

In the absence of a timely filed,

specific objection, the Magistrate Judge’s conclusions are reviewed only for clear
error. See Diamond v. Colonial Life & Accident Ins. Co., 416 F.3d 310, 315 (4th
Cir. 2005). The Court has reviewed the Report and Recommendation as a whole
and finds no clear error, thus Chase’s general objection is without merit.
Turning to Chase’s specific objections, the Court finds them to be without
merit as well. Chase’s first specific objection is that the Magistrate Judge erred
in finding that the LOP Defendants have raised issues of material fact as to
whether Chase breached his duty to the LOP Defendants under the Attorney-

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Client Agreements.

Chase’s second specific objection is that the Magistrate

Judge erred in finding that the LOP Defendants have raised genuine issues of
material fact as to whether Chase’s alleged breach of his duty to the LOP
Defendants proximately caused the harm for which they seek to recover. The
Court will address the issues of breach and proximate causation together and will
organize its discussion around the various actions in which the LOP Defendants
contend that Chase committed malpractice.
Chase does not dispute that the Magistrate Judge applied the correct
standard for legal malpractice in South Carolina. To establish legal malpractice a
party must establish “(1) the existence of an attorney-client relationship; (2)
breach of duty by the attorney; (3) damage to the client; and (4) proximate
causation of client's damage by the breach.” Holy Loch Distrib., Inc. v. R.L.
Hitchcock, 531 S.E.2d 282, 285 (S.C. 2000) (citing Smith v. Haynsworth, Marion,
McKay & Guerard, 472 S.E.2d 612 (1996)).
1. The Pfieffer Matter
Chase seeks to dismiss the LOP Defendants’ counterclaims for legal
malpractice arising out of his representation in the Pfeiffer Matter. As noted
above, the Pfeiffer Malpractice Claims were dismissed because Chase and LOP
failed to submit the expert affidavit required under South Carolina law. Chase
argues that he is entitled to summary judgment because he “advised
Defendant[s] that in failing to attain an expert affidavit, the legal malpractice claim
would likely be dismissed by the court.” (ECF No. 117 at 4.) In support of this
argument, Chase attached to his Objections to the Report and Recommendation
emails from Loprieno, indicating that Loprieno had decided not to obtain an
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expert witness at the outset of the case against Mr. Pfeiffer. (See ECF No. 1172.)
The first email from Loprieno to Chase is dated November 15, 2011, with
a subject line, “Why Expert’s Affidavit Was Not in Initial Filing” and reads:
Nelson: We did not include the expert’s affidavit initially in LOP
Capital v. Pfieffer because we had another suit ongoing against
Cosimo and additional facts were coming to light everyday, so we
wanted to have all our facts together to give our expert witness so
he could form an accurate opinion as to what had transpired.
Thanks
The second email, also from Loprieno to Chase, is dated December 20, 2011,
with no subject line, and reads:
Nelson: It was my decision not to hire an expert at the onset of the
LOP v. Pfieffer case. Thanks.
Chase claims that he discharged his duty to his clients by advising them that,
without an expert, the legal malpractice claim would probably be dismissed, and
that the emails above show that it was the client’s decision to forego the expert.
He contends further that once the LOP Defendants made the decision not to
obtain an expert, he was bound by the Rules of Professional Conduct to abide by
their decision.
The emails cited by Chase in his Objection were also presented to
Magistrate Judge McDonald; however, Magistrate Judge McDonald cited a
number of additional facts that led him to conclude that the emails were not the
last word on the matter. As the Report and Recommendation explains:
[D]efendant Loprieno states in his affidavit that the plaintiff never
informed him or the other defendants that an expert's affidavit was
necessary in South Carolina in order to file a claim for attorney
malpractice (doc. 96-2, Loprieno aff. ¶ 7). The defendants cite an
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email dated five days prior to the plaintiff filing the complaint in the
Pfeiffer Matter in which the plaintiff stated, “If an expert witness is
called, which I anticipate, you will be responsible for that cost as
well” (doc. 96-13, Chase email), which implies that the plaintiff
regarded expert testimony as something the defendants could do
without, at least for the immediate future.
The Court agrees with Judge McDonald that the emails provided by
Chase do not, as a matter of law, foreclose the LOP Defendants’ malpractice
claims against Chase. Chase may have advised the LOP Defendants that if they
failed to obtain an expert affidavit, “the legal malpractice claim would likely be
dismissed by the court,” but Chase has not claimed that he advised his clients
that an expert affidavit was required by statute to be submitted with the complaint
and that without such an affidavit the legal malpractice claim would most certainly
be dismissed. Moreover, the November 15, 2011 email from Loprieno to Chase
suggests that Loprieno was laboring under the misperception that the expert’s
affidavit could be submitted at a later date without any adverse consequences,
and that it was preferable to wait for additional facts before submitting the
affidavit. This suggests that Loprieno, who is a resident of Illinois, was unaware
that such an affidavit was required to be filed with the complaint under South
Carolina law. Indeed, as noted, Loprieno explicitly attested that Chase failed to
advise him that an expert affidavit was required to file a claim for legal
malpractice. (ECF No. 96-2.) Thus while Chase may have advised his clients
that they were unlikely to succeed without an expert, there is arguably a
meaningful distinction between the advice he provided and the advice he should
have provided regarding the absolute necessity of the affidavit and the time at

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which it needed to be filed. At the very least, there is a genuine dispute of
material fact regarding the sufficiency of the advice given.
Additionally, Chase argues that the fact that the LOP Defendants
voluntarily dismissed their remaining claims against Pfeiffer after the legal
malpractice claims were dismissed precludes them from recovering against
Chase for malpractice in connection with the Pfeiffer Matter. Judge McDonald
accepted the LOP Defendants’ argument that the remaining claims against
Pfeiffer were not worth pursuing once the legal malpractice claims had been
dismissed. As set forth in the Report and Recommendation:
[The] defendants argue that the remaining claims (fraud, negligent
misrepresentation, constructive fraud, and civil conspiracy) were
more difficult to establish than the malpractice and breach of
fiduciary duty claims, as they included elements such as intent or
the complicity of actors other than Mr. Pfeiffer (resp. m.s.j. at 22-23)
(citing Vaught v. Waites, 387 S.E.2d 91, 95 (S.C. Ct. App.1989)
(more than one actor required to prove conspiracy); Quail Hill, LLC,
v. County of Richland, 692 S.E.2d 499, 508 (S.C. 2010) (greater
number of elements required to prove negligent misrepresentation
and added difficulty of establishing duty apart from attorney-client
relationship); Armstrong v. Collins, 621 S.E.2d 368, 375 (S.C. Ct.
App. 2005) (greater number of elements required to prove fraud
(nine elements including intent) and constructive fraud (eight
elements); no right to rely in constructive fraud case absent
fiduciary relationship)).
This Court agrees with Magistrate Judge McDonald that the LOP
Defendants’ failure to pursue the remaining causes of action does not, as a
matter of law, preclude them from proceeding against Chase for malpractice in
connection with the dismissal of the Pfeiffer Malpractice Claims.

Chase’s

argument is based on the assumption that Defendants could have obtained the
relief they sought in the Pfeiffer Malpractice Claims through the remaining claims.

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The evidence before the Court regarding the likelihood of success on the
remaining claims or their strength relative to the Pfeiffer Malpractice Claims is
limited; however, it suggests that the remaining claims were not as strong as the
Pfeiffer Malpractice Claims and would have required the LOP Defendants to
have established additional elements that would not have been required to
prevail on the malpractice claims.
2. The 2009 Civil Action and the 2011 Civil Action
Finally, Chase objects to the Magistrate Judge’s finding that genuine
issues of material fact preclude summary judgment on the LOP Defendants’
counterclaims related to the 2009 Civil Action and the 2011 Civil Action. Again,
the Court agrees with the findings of the Magistrate Judge:
[T]he undersigned finds that the defendants have raised issues of
material fact as to whether the plaintiff's alleged breach of his duty
caused them harm. Specifically, the defendants have presented
evidence that the plaintiff's decision to file the 2011 Civil Action
without consulting them resulted in the dismissal of their appeal of
the 2009 Civil Action. The plaintiff asserts in his motion for
summary judgment that his decision to file the 2011 Civil Action
was motivated by the need (1) to prevent collateral from being
alienated and (2) to preserve favorable rulings (doc. 89, m.s.j. at 910). However, the defendants have presented evidence that the
decision served neither purpose and actually thwarted the latter
purpose. They argue that, given the pending appeal of the 2009
Civil Action, title to the Spartanburg Property was impaired, and the
collateral was in no real danger of alienation. Furthermore, the
filing of the 2011 Civil Action resulted in the dismissal of the appeal
of the 2009 Civil Action as moot, which cost the defendants the
favorable rulings they had obtained in the 2009 Civil Action, along
with legal fees associated with filing another lawsuit.
Chase objects to the Magistrate Judge’s finding, arguing that because the 2009
Civil Action was dismissed without prejudice, the LOP Defendants were not
precluded from seeking the same recovery in a subsequent case, which Chase
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ultimately filed on their behalf. As the Magistrate Judge correctly pointed out, the
alleged harm to the Defendants was not necessarily the loss of the remedy
sought in the 2009 and 2011 Civil Actions, but the loss of favorable rulings in the
2009 Civil Action and the additional expense of the 2011 Civil Action. It is also
significant that the LOP Defendants have alleged that Chase filed the 2011 Civil
Action without their permission.

This Court agrees with Magistrate Judge

McDonald that genuine issues of material fact preclude summary judgment on
the LOP Defendants’ counterclaims related to the 2009 and 2011 Civil Actions.
CONCLUSION
The Court has carefully reviewed Chase’s objections and conducted a de
novo review of the portions of the Report and Recommendation to which he
specifically objects.

The Court has also reviewed the entire Report and

Recommendation for plain error in response to Chase’s general objections. After
considering the motion, the record, and the Report and Recommendation of the
Magistrate Judge, this Court agrees with the thorough analysis of the Magistrate
Judge. The Report and Recommendation is adopted in full and incorporated
herein by reference, and the Plaintiff’s Second Motion for Partial Summary
Judgment on Defendants’ Counterclaims (ECF No. 89) is DENIED.
IT IS SO ORDERED.
/s/Bruce Howe Hendricks
United States District Judge
October 2, 2014
Greenville, South Carolina

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