Justia Professional Malpractice & Ethics Opinion Summaries

Sanowicz and Bacal are licensed real estate salespersons. Sanowicz alleges that he and Bacal agreed to share commissions earned by either of them on certain sales of real property, but that Bacal breached that agreement. The two did share some commissions. The trial court dismissed, based on Business and Professions Code section 10137,4 which provides that it is unlawful for a real estate agent to accept compensation from any person other than the real estate broker under whom he or she is licensed. The court of appeal reversed, holding that licensed real estate agents may agree to share commissions earned under certain circumstances. In stating that an agent may pay commission to another licensee, the Legislature did not limit the payee to a licensed broker; instead it required that any such payment be made “through the broker” thus permitting payments to be made to licensed real estate professionals, whether agents or brokers. View "Sanowicz v. Bacal" on Justia Law

Northern Maine Transport, LLC (NMT), a Maine limited liability company with only two members, including Paul Beaudry, was administratively dissolved in 2009. In 2012, Beaudry filed this action, individually and purportedly on behalf of NMT, against Alan Harding and Hardings Law Offices for professional negligence and breach of fiduciary duty in 2010 when Harding represented NMT and possibly Beaudry in facilitating a settlement with a third party. The superior court granted Harding’s motion for summary judgment, concluding (1) Beaudry lacked the legal capacity to bring suit on behalf of the administratively dissolved LLC or derivatively, and (2) Beaudry had no individual claim because he suffered no personal harm. The Supreme Court affirmed, holding that Maine law did not permit Beaudry to proceed on behalf of the administratively dissolved LLC under these circumstances, either through a derivative action or individually. View "Beaudry v. Harding" on Justia Law

This case was a permissive appeal of an order denying the appellants' motions for summary judgment. The central issue was whether an attorney who, as counsel for a corporation, issued an opinion letter stating that a stock redemption agreement did not violate the law, could be held liable to the shareholder whose stock was redeemed if the opinion was incorrect and the redemption agreement was later declared void as violating state law. The Supreme Court held that the claim against appellant Richard Riley was barred by res judicata and that there could be a claim against the remaining appellants where the opinion letter was addressed to respondent and stated that he could rely upon it. View "Taylor v. Riley" on Justia Law

Tommy Sundy petitioned for a writ of mandamus to direct the circuit court to dismiss third-party claims asserted against him by accounting firm Frost Cummings Tidwell Group, LLC ("FCT"). Adams Produce Company, Inc. ("APCI"), purchased Crestview Produce of Destin, Inc., from Sundy. As part of the transaction, APCI and Sundy executed a promissory note in the amount of $850,000, and Sundy became an employee of APCI. FCT alleges that, based on representations from APCI and Sundy, certain budget and bonus projections were set for APCI, but those goals were not met. Because of that failure, Sundy was not entitled to bonuses that had been paid to him throughout 2009. With the alleged help and direction of FCT, APCI recharacterized the bonuses as repayments of principal on the promissory note. The nonpayment of certain amounts to Sundy in the context of this action effectively increased APCI's income and decreased its indebtedness. APCI also allegedly entered into an oral, undocumented agreement with Sundy stipulating that it would make him whole in future years for the forfeited bonus payments. In 2009, APCI's shareholders decided to sell the company to API Holdings, LLC. API Holdings alleges that it discovered that, contrary to representations made by FCT in an audit report, APCI's financial statements were fraudulent, causing API Holdings to believe that APC was worth more than it actually was. API Holdings sued FCT asserting claims of negligent misrepresentation, auditing malpractice, fraud, and other claims of professional malfeasance. Among several other claims, API Holdings alleged that FCT had failed to uncover misrepresentations by Sundy and APCI and that FCT had acted fraudulently in confirming the recharacterization of Sundy's bonuses as payments on principal of the promissory note. A few months later, APC filed for Chapter 11 bankruptcy protection. APC filed an adversarial complaint in FCT's bankruptcy case, alleging that FCT's audit work had painted a false financial picture of APC upon which APC had relied in continuing to operate its business even after reaching the point of insolvency. FCT filed a third-party complaint with the bankruptcy court against Sundy and others. FCT's complaint alleged various theories under Alabama law as bases for FCT to "recover over" against Sundy. Sundy subsequently moved to dismiss FCT's third-party complaint on the basis of 6-5-440, Ala. Code 1975, Alabama's abatement statute. The circuit court denied the motion, and Sundy then filed his petition for a writ of mandamus seeking to have the Supreme Court direct the circuit court to vacate its judgment denying his motion to dismiss and to order the circuit court to dismiss FCT's claims against Sundy asserted in its third-party complaint at circuit court. The Supreme Court concluded that FCT's third-party claims against Sundy were not barred by the abatement statute. The circuit court properly declined to dismiss those claims. Therefore, the Court denied the petition for a writ of mandamus. View "In re: API Holdings, LLC v. Frost Cummings Tidwell Group, LLC" on Justia Law

Wade Tucker and Wendell Cook Testamentary Trust, on behalf of shareholders of HealthSouth Corporation brought a shareholder-derivative action against Ernst & Young, LLP ("E&Y"), asserting claims of "audit malpractice" based on E&Y's failure to discover and, if discovered, to report accounting fraud. The "audit malpractice" claims included various claims of negligence, breach of contract, and fraud. The action was referred to arbitration, and an arbitration award was entered in favor of E&Y. HealthSouth filed a motion in the Circuit Court seeking to vacate the award. The circuit court denied the motion to vacate and entered a final judgment in favor of E&Y based on the award. HealthSouth appeals. Finding no reversible error, the Supreme Court affirmed. View "Tucker v. Ernst & Young LLP " on Justia Law

Plaintiffs, Joint Official Liquidators of the SPhinX Funds, filed suit against defendants, alleging that defendants aided and abetted fraud and breached their fiduciary duty to Refco, the brokerage and financial services firm that entered bankruptcy in 2005, and whose demise led to the bankruptcies of SPhinX and its investment manager, PlusFunds. The court concluded that the claims against defendants were properly dismissed for failure of the Amended Complaint to contain sufficient allegations that defendants had actual knowledge of Refco's fraud and breach of fiduciary duty. The district court did not abuse its discretion by dismissing the claims without leave to amend where amendment could not cure the absence of factual allegations as to actual knowledge on the part of defendants sufficient to state a claim against them for aiding and abetting Refco's fraud and breach of fiduciary duty. Accordingly, the court affirmed the judgment of the district court and denied the request for leave to amend the Amended Complaint. View "Krys v. Pigott" on Justia Law

Longview Energy Company filed a complaint against William Huff, Richard D'Angelo, and Riley-Huff Energy Group as a result of a breach of fiduciary duty committed by Huff and D'Angelo in connection with their usurpation of a corporate opportunity. The corporate opportunity belonging to Longview related to property interests in a large area of land in south Texas called Eagle Ford. A Texas court entered a judgment against Defendants and imposed a constructive trust in favor of Longview on the profits and ownership of Riley-Huff's interests in Eagle Ford and a damage award against Huff and D'Angelo. Huff and D'Angelo appealed and sought indemnification from Longview, a Delaware corporation they served on as directors. The Court of Chancery granted Longview's motion to dismiss the complaint because it did not state a ripe claim.View "Huff v. Longview Energy Co." on Justia Law

Shareholders of a closely held corporation brought a derivative suit against a shareholder-director and the corporation's former attorneys for fiduciary fraud, fraudulent conveyance, legal malpractice, and civil conspiracy. After an evidentiary hearing, the superior court ruled all the claims were time-barred. Upon review of the matter, the Supreme Court affirmed the superior court's dismissal of most claims, but reversed its dismissal of two and remanded those claims for further proceedings. View "Gefre v. Davis Wright Tremaine, LLP" on Justia Law

Chicago Title Insurance Company (CTIC) appointed Land Title Insurance Company as its agent for the purpose of soliciting and effectuating CTIC's insurance policies. Land Title violated the anti-inducement laws. The Supreme Court held that CTIC was responsible for Land Title's regulatory violations, pursuant to statutory and common-law theories of agency. "When the statute forbids the insurer or its agent from certain conduct, it means that the insurer may not do indirectly-through its agent-what it may not do directly." View "Chi. Title Ins. Co. v. Office of Ins. Comm'r" on Justia Law

Starr, AIG's former principal shareholder, filed suit against the FRBNY for breach of fiduciary duty in its rescue of AIG during the fall 2008 financial crisis. The district court dismissed Starr's claims and Starr appealed. The suit challenged the extraordinary measures taken by FRBNY to rescue AIG from bankruptcy at the height of the direst financial crisis in modern times. In light of the direct conflict these measures created between the private duties imposed by Delaware fiduciary duty law and the public duties imposed by FRBNY's governing statutes and regulations, the court held that, in this suit, state fiduciary duty law was preempted by federal common law. Accordingly, the court affirmed the judgment of the district court. View "Starr Int'l Co. v. Federal Reserve Bank of New York" on Justia Law