Joseph Barna v. Preston Law Group, P.C.

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

July 8, 2009 Session

JOSEPH BARNA v. PRESTON LAW GROUP, P.C. ET AL.

Appeal from the Circuit Court for Davidson County

No. 07C-580 Joe P. Binkley, Jr., Judge

No. M2008-02560-COA-R3-CV - Filed August 25, 2009

The plaintiff appeals the summary dismissal of his legal malpractice action against his former

attorney. In the Complaint, the plaintiff alleges that the defendants, the attorney and his law firm,

represented themselves to be “competent in securities law related matters,” and that the defendants

breached their duty by failing to utilize the requisite skill and competency while representing him

in a claim against a brokerage firm in arbitration before a panel of the National Association of

Securities Dealers. The defendants moved for summary judgment, which was supported by the

affidavit of the attorney who represented the plaintiff in arbitration. The trial court granted the

motion, finding that the plaintiff had failed to present evidence sufficient to create a genuine issue

of material fact regarding damages and causation. We have determined that the defendants’ motion

and supporting affidavit failed to either affirmatively negate an essential element of the plaintiff’s

claim or establish that the plaintiff cannot prove an essential element of his claim at trial. Having

failed to shift the burden of production to the plaintiff, the defendants’ motion for summary

judgment should have been denied without consideration of the sufficiency of the affidavits of the

plaintiff’s expert witnesses. Accordingly, we reverse the grant of summary judgment.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed

FRANK G. CLEMENT , JR., J., delivered the opinion of the court, in which RICHARD H. DINKINS, J.,

joined. PATRICIA J. COTTRELL, P.J., M.S., filed a concurring opinion.

Phillip L. Davidson, Nashville, Tennessee, for the appellant, Joseph C. Barna.

C. Bennett Harrison, Jr., and J. Cole Dowsley, Jr., for the appellees, Preston Law Group, P.C., and

G. Kline Preston, IV.

OPINION

The matters before the court arise from the Complaint filed in this action by Joseph Barna

(“Plaintiff”) against attorney G. Kline Preston, IV, and the Preston Law Group, PC (collectively

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“Defendants”) for damages allegedly resulting from Defendants’ negligent representation of Plaintiff

during an arbitration before a panel of the National Association of Securities Dealers (“NASD”).

In January 2003, Plaintiff filed a pro se claim with the NASD against Firstrade Securities,

Inc. (“Firstrade”), alleging Firstrade had violated its own rules and Internal Revenue Service rules.

On June 11, 2005, Plaintiff entered into a representation agreement with Defendants in which

Defendants agreed to represent Plaintiff in the arbitration proceeding before the NASD panel.

Defendants represented Plaintiff in preparation for and throughout the arbitration proceedings with

Firstrade. The arbitration panel found in favor of Firstrade on all issues, awarding no damages to

Plaintiff. Thereafter, Plaintiff filed this action against Defendants.

In the Complaint, Plaintiff asserted that he suffered extensive losses in IRA and brokerage

accounts in 2000 and 2001, which losses were attributable to the negligence and misconduct of

Firstrade, that he filed an arbitration proceeding against Firstrade seeking to recover his losses, that

Defendants represented themselves to Plaintiff “as competent in securities law related matters,” and

that Defendants breached their duty in that they failed to utilize the skill and competency in the

representation of Plaintiff that a reasonably prudent attorney competent in such matters would utilize

under similar circumstances. In paragraph 11 of the Complaint, Plaintiff alleged with particularity

how Defendants breached their duty:

a. They failed to revise the statement of claim. Plaintiff requested that the

Defendants prepare a new and corrected statement of claim.

b. They failed to obtain an expert witness for the hearing.

c. They failed to recognize and present at the hearing the violations

committed by Firstrade and failed to provide documentation about the

NASD/NYSE rule violations.

d. They failed to take reasonable steps to obtain the presence of all the

persons needed as witnesses at the hearing.

e. They failed to prepare and research the case adequately.

f. They failed to present at the hearing that Firstrade had not followed New

York Stock Exchange rules and its own rules in connection with the

Grossover extension of credit.

g. They failed to subpoena the required documents needed for the hearing.

h. They failed to recognize and present at the hearing that Firstrade had not

followed the IRS rules and its own rules in connection with using the IRA

account to cover margin calls and the IRA rollover within a 12-month period.

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i. They failed to present the case at the hearing. They told Plaintiff 15

minutes before the hearing that they were going to make the opening

statement, but Plaintiff would have to present the case because he knows

more about the case than they do.

j. They failed to develop the case around the following violations:

“Know Your Customer Rule”

“Margin Disclosure Rule”

“Suitability Rules and Regulations”

“Sec. T + 3 Days Requirements” (must liquidate securities)

“Churning Rules and Regulations”

“NYSE Rule Regarding Discount Brokers Duty”

k. They failed to recognize and present at the hearing that Firstrade was

negligent by not following the NASD and its own rules in connection with

the selling of the securities immediately to protect its customers’ financial

interest and satisfy the margin requirements. The customer does not have a

right to an extension of time on a margin call.

After filing an Answer, in which they denied any liability to Plaintiff, Defendants filed a

motion for summary judgment. In support of their motion, Defendants filed a supporting affidavit

of G. Kline Preston, IV, in which he states that he is familiar with the standards of care for a

practicing attorney in Tennessee and that at all times he exercised proper skill and care.

Furthermore, the affidavit states that Defendants’ acts or omissions in no way caused Plaintiff

damages. In response, Plaintiff filed affidavits of two attorneys, Mr. Michael J. Betts and Mr.

Michael K. Radford. Mr. Radford is licensed in Tennessee, and Mr. Betts is licensed in

Pennsylvania. The trial court excluded the affidavit of Mr. Betts because it found Mr. Betts was not

familiar with the standard of care in Tennessee. In his affidavit, Mr. Radford states that Defendants

were negligent and that had they acted within the appropriate standard of care, the likelihood of

Plaintiff succeeding before the NASD panel would have been “much greater.”

Without stating whether Defendants’ motion that was supported by one affidavit had shifted

the burden of production to Plaintiff, the trial court found that Plaintiff presented sufficient proof to

create a genuine issue of material fact regarding Defendants’ breach of the duty of care, but that

Plaintiff had failed to present evidence that he would have succeeded before the NASD panel “but

for” Defendants’ negligence, and granted Defendants’ motion for summary judgment. This appeal

followed.

ANALYSIS

This appeal arises from the grant of summary judgment. Summary judgment is appropriate

when a party establishes that there is no genuine issue as to any material fact and that a judgment

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may be rendered as a matter of law. Tenn. R. Civ. P. 56.04; Stovall v. Clarke, 113 S.W.3d 715, 721

(Tenn. 2003). It is appropriate in virtually all civil cases that can be resolved on the basis of legal

issues alone. Pendleton v. Mills, 73 S.W.3d 115, 121 (Tenn. Ct. App. 2001) (citing Byrd v. Hall, 847

S.W.2d 208, 210 (Tenn. 1993)). It is not appropriate when genuine disputes regarding material facts

exist. See Tenn. R. Civ. P. 56.04. The party seeking summary judgment bears the burden of

demonstrating that no genuine disputes of material fact exist and that the party is entitled to

judgment as a matter of law. Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn. 2002). To be entitled to

summary judgment, the moving party must affirmatively negate an essential element of the

nonmoving party’s claim or show that the moving party cannot prove an essential element of the

claim at trial. Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 83 (Tenn. 2008).

Summary judgments do not enjoy a presumption of correctness on appeal. BellSouth Adver.

& Publ’g Co. v. Johnson, 100 S.W.3d 202, 205 (Tenn. 2003). This court makes a fresh determination

that the requirements of Tenn. R. Civ. P. 56 have been satisfied. Hunter v. Brown, 955 S.W.2d 49,

50-51 (Tenn. 1997). We consider the evidence in the light most favorable to the nonmoving party

and resolve all inferences in that party’s favor. Stovall, 113 S.W.3d at 721; Godfrey, 90 S.W.3d at

695. When reviewing the evidence, we first determine whether factual disputes exist. If a factual

dispute exists, we then determine whether the fact is material to the claim or defense upon which the

summary judgment is predicated and whether the disputed fact creates a genuine issue for trial. Byrd,

847 S.W.2d at 215.

A party is entitled to summary judgment only if the “pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine

issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”

Tenn. R. Civ. P. 56.04. A properly supported motion for summary judgment must show that there

are no genuine issues of material fact and that the moving party is entitled to judgment as a matter

of law. Staples v. CBL & Assocs., Inc., 15 S.W.3d 83, 88 (Tenn. 2000); see McCarley v. W. Quality

Food Serv., 960 S.W.2d 585, 588 (Tenn. 1998). If the moving party makes a properly supported

motion, then the nonmoving party is required to establish the existence of the essential elements of

the claim. McCarley, 960 S.W.2d at 588; see Byrd, 847 S.W.2d at 215 n.5. If, however, the moving

party does not properly support the motion, then the nonmoving party’s burden to produce either

supporting affidavits or discovery is relieved and the motion must fail. McCarley, 960 S.W.2d at

588; Martin, 271 S.W.3d at 83.

To make this showing and shift the burden of production, a moving party may: 1)

affirmatively negate an essential element of the nonmoving party’s claim; or 2) show that the

nonmoving party cannot prove an essential element of the claim at trial. Martin, 271 S.W.3d at 83;

Hannan v. Alltel Publ’g Co., 270 S.W.3d 1, 5 (Tenn. 2008); Byrd, 847 S.W.2d at 215 n.5. Whichever

approach the moving party takes, both require more than assertions of the nonmoving party’s lack

of evidence. Martin, 271 S.W.3d at 83-84. In addition, the moving party must present evidence that

more than “raises doubts” about the ability of the nonmoving party to prove its claim at trial. Id. at

84. The moving party must produce evidence or refer to previously submitted evidence. Id.; accord

Hannan, 270 S.W.3d at 5. Thus, to negate an essential element of a claim, a moving party must refer

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to evidence that tends to disprove an essential element of the claim made by the nonmoving party.

Martin, 271 S.W.3d at 84.

Defendants, as the moving party, had the burden to negate an essential element of Plaintiff’s

claim of legal malpractice or establish that Plaintiff cannot prove an essential element of the claim

at trial. See Martin, 271 S.W.3d at 83 (citing Hannan, 270 S.W.3d at 5; McCarley, 960 S.W.2d at

588; Byrd, 847 S.W.2d at 215 n.5). Therefore, Defendants were required to shift the burden of

production to Plaintiff by either affirmatively negating an essential element of Plaintiff’s claim or

showing that Plaintiff cannot prove an essential element of his claim at trial. See Martin, 271 S.W.3d

at 83; see also Hannan, 270 S.W.3d at 8-9; McCarley, 960 S.W.2d at 588. We have determined

Defendants failed to do either; therefore, the motion should have been denied without consideration

of the sufficiency of the expert affidavits attached to Plaintiff’s response to the motion.

To state a prima facie case of legal malpractice, a plaintiff must establish: 1) the defendant

attorney owed a duty to the plaintiff; 2) a breach of that duty; 3) that plaintiff suffered damages as

a result of that breach; 4) that defendant attorney’s breach was the factual cause of those damages;

and 5) that defendant attorney’s breach was the proximate, or legal, cause of the plaintiff’s damages.

Gibson v. Trant, 58 S.W.3d 103, 108 (Tenn. 2001); Shearon v. Seaman, 198 S.W.3d 209, 214 (Tenn.

Ct. App. 2005). The trial court found that Defendants owed a duty to Plaintiff and that there was a

genuine issue of material fact regarding whether Defendants breached that duty. Thus, the only

grounds upon which Defendants could prevail on summary judgment were that Plaintiff did not

suffer damages as a result of that breach; or, if Plaintiff suffered damages, that Defendants’ breach

was not the factual cause or the legal cause of Plaintiff’s damages.

Defendants’ motion for summary judgment is supported by one affidavit, that of Kline

Preston. We must therefore examine the affidavit to determine whether Defendants shifted the

burden of production to Plaintiff. In the first three paragraphs of the affidavit Mr. Preston states inter

alia that he is a licensed attorney in Tennessee, that his license has never been suspended or revoked,

and that on June 11, 2005, Plaintiff engaged him to represent him in the arbitration proceedings

involving Firstrade. The first three paragraphs do nothing to shift the burden of production.

Therefore, we will focus our analysis on the four remaining paragraphs, which read as follows:

4. After reviewing Mr. Barna’s materials and speaking with him, I contacted a

licensed securities broker, Ray West, to review the file and render an opinion on Mr.

Barna’s claims against Firstrade. After reviewing the file, including the margin

brokerage account information, Mr. West rendered an unfavorable opinion of Mr.

Barna’s claims against Firstrade. Because of his unfavorable opinion, I decided that

Mr. West could not be used as an expert witness at the arbitration and, in fact, Mr.

West’s opinions would work against Mr. Barna. I could not retain an expert to

support Mr. Barna’s claims, because Mr. Barna simply did not have a case against

Firstrade and I could not get an expert to give an opinion supporting Mr. Barna’s

claims. I informed Mr. Barna of these facts.

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5. I then readied Mr. Barna’s case for the arbitration and prepared detailed trial

exhibits concerning Mr. Barna’s brokerage and IRA accounts. On February 9, 2006,

the arbitration was held before a panel of NASD arbitrators. I presented Mr. Barna’s

case and successfully submitted all of my client’s evidence and proof to the panel.

During the arbitration, I was surprised to learn for the first time about at least one

other securities dispute that Mr. Barna arbitrated before the NASD and lost. I believe

that Mr. Barna’s prior record before the NASD significantly affected the panel in this

case, and because Mr. Barna had not informed me about these cases, I was

unprepared to address this issue. The NASD arbitration award was issued on

February 23, 2006. The panel found in favor of Firstrade and all of Mr. Barna’s

claims were denied with prejudice.

6. I am familiar with the standard of care in this legal community applying to

attorneys representing clients in an NASD arbitration. At all times during my

representation of Mr. Barna, I diligently and competently represented Mr. Barna. At

all times during the engagement, I exercised the care, skill and diligence which is

commonly possessed and exercised by attorneys practicing in Tennessee. Throughout

my representation of Mr. Barna, I abided by the standard of care owed by attorneys

to clients and fulfilled my duty by providing the diligent representation to Mr. Barna

in the particular circumstances of the arbitration proceeding.

7. I was not negligent and did not deviate from the applicable standard of care in

providing legal services to Mr. Barna. Anything that I did, or allegedly failed to do,

in representing Mr. Barna did not cause or will not cause Mr. Barna to incur any

injury or damages. Any injuries or damages allegedly suffered by Mr. Barna were

not caused by any negligent act or omission on my part.

Without specifying the applicable standard of care for NASD arbitration, Mr. Preston

summarily stated that he is “familiar with the standard of care in this legal community applying to

attorneys representing clients in an NASD arbitration.” He further stated he “diligently and

competently represented Mr. Barna,” he “fulfilled his duty to Mr. Barna,” he “was not negligent,”

he “did not deviate from the applicable standard of care,” and any damages suffered “were not

caused by any negligent act or omission” of his. Mr. Preston also opined, without providing a factual

basis upon which his opinion was based, that “Mr. Barna simply did not have a case against

Firstrade.”

Generally, an expert witness may render an opinion based on facts or data known to the

expert; nevertheless, the expert who testifies in terms of opinion may be required to disclose the

underlying facts. Tenn. R. Evid. 702, 705. For purposes of shifting the burden of proof in a motion

for summary judgment, an expert’s conclusory affidavit neither negates an essential element of a

claim nor does it establish an affirmative defense. See Hannan, 270 S.W.3d at 8. In the context of

summary judgment, our Supreme Court has stated that conclusory opinions that are not supported

by or based upon identified facts are not sufficient to shift the burden of production to the

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nonmoving party. See Hannan, 270 S.W.3d at 8; see also Blanchard v. Kellum, 975 S.W.2d. 522,

525 (Tenn. 1998) (reversing summary judgment because the defendant’s conclusory affidavit did

not trigger the plaintiff’s burden in the motion for summary judgment). Therefore, we find that Mr.

Preston’s conclusory “opinions” regarding Mr. Barna’s case against Firstrade and the causation of

Mr. Barna’s damages, without providing supporting facts, were insufficient to negate an essential

element of Mr. Barna’s legal malpractice claim – damages or causation – and shift the burden of

production.

We will now address the few statements of fact incorporated into Mr. Preston’s affidavit.

Of the eleven allegations of professional negligence stated in paragraph 11 of the Complaint, the

only one Mr. Preston specifically addressed in his affidavit was the failure to obtain an expert

witness for the NASD arbitration hearing. Mr. Preston testified that he consulted an expert in

securities who rendered an unfavorable opinion, and was unable to find an expert who would support

Mr. Barna’s case against Firstrade. Mr. Preston’s affidavit specifically addressed the factual claim

concerning the lack of an expert witness; however, Defendants failed to establish that this fact

negates an essential element of Plaintiff’s claim against Defendants for malpractice. Unlike claims

of professional negligence against doctors and lawyers for which expert testimony is required,

Defendants failed to establish that expert testimony was required in Plaintiff’s claim against

Firstrade. Further, Defendants failed to establish that Plaintiff could not recover damages from

Firstrade without an expert witness. Thus, the inability to engage an expert witness for the arbitration

proceedings does not negate an essential element of Plaintiff’s claim in this action.

Another fact upon which Defendants rely in Mr. Preston’s affidavit is the statement that Mr.

Preston was not prepared to deal with the surprise development that Plaintiff had filed a prior

grievance. We are unable to ascertain how this circumstance, or fact, is relevant. More importantly,

Defendants failed to establish that this fact negates an essential element of Plaintiff’s claim of

malpractice against Defendants. If the last minute revelation has any relevance to these proceedings,

it merely raises a doubt about Plaintiff’s ability to prove damages, which is not sufficient, in the

context of a motion for summary judgment, to shift the burden of production to the nonmoving party.

See McCarley, 960 S.W.2d at 588.

IN CONCLUSION

In order for the sufficiency of the affidavits of Plaintiff’s expert witnesses to be put at issue,

Defendants needed to shift the burden of production to Plaintiff by either affirmatively negating an

essential element of Plaintiff’s claim or showing that Plaintiff cannot prove an essential element of

his claim at trial. Martin, 271 S.W.3d at 83; Hannan, 270 S.W.3d at 8-9; McCarley, 960 S.W.2d at

588. We have determined that Defendants failed to shift the burden of production to Plaintiff;

therefore, Defendants’ motion for summary judgment should have been denied without consideration

of the sufficiency of the affidavits attached to Plaintiff’s response to the motion. See Martin, 271

S.W.3d at 83.

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Therefore, the judgment of the trial court is reversed and this matter is remanded for further

proceedings consistent with this opinion. Costs of appeal are assessed against the Preston Law

Group, P.C., and G. Kline Preston, IV, individually.

___________________________________

FRANK G. CLEMENT, JR., JUDGE

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