Inland Am. Winston Hotels, Inc. v. Winston

Inland Am. Winston Hotels, Inc. v. Winston, 2010 NCBC 19.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE

SUPERIOR COURT DIVISION

COUNTY OF WAKE 08 CVS 021786

INLAND AMERICAN WINSTON HOTELS,

INC.,

Plaintiff,

v.

ROBERT W. WINSTON, III, ORDER & OPINION

KENNETH R. CROCKETT,

WINSTON HOSPITALITY, INC.,

WILLIAM W. BUNCH, III and

BROWN & BUNCH, PLLC,

Defendants.

{1} THIS MATTER is before the Court on Defendants William W.

Bunch, III and Brown & Bunch, PLLC’s Motion for Summary Judgment

pursuant to Rule 56 of the North Carolina Rules of Civil Procedure. After

considering the briefs submitted, other submissions of counsel, and oral

argument, the court concludes that Defendants William W. Bunch III and

Brown & Bunch, PLLC’s Motion for Summary Judgment should be

GRANTED.

Moore & Van Allen, PLLC by Scott M. Tyler and Karin M. McGinnis

and DLA Piper, LLP by Jeffrey D. Herschman and Melissa R. Roth for

Plaintiff Inland American Winston Hotels, Inc.

Cranfill Sumner & Hartzog, LLP by Richard Boyette for Defendants

William W. Bunch, III and Brown & Bunch, PLLC.

Tennille, Judge.

I.

PROCEDURAL BACKGROUND

{2} This action was filed in Wake County on December 12, 2008. The

matter was designated a mandatory complex business case by order of the

Chief Justice of the Supreme Court of North Carolina dated December 22,

2008 and subsequently assigned to the undersigned Special Superior Court

Judge for Complex Business Cases by order of the Chief Special Superior

Court Judge for Complex Business Cases dated December 22, 2008.

{3} By order dated May 5, 2009, this action was consolidated with a

related case, Crockett Capital Corp. v. Inland Am. Winston Hotels, Inc., No.

08 CVS 000691 (N.C. Super. Ct. filed Jan. 16, 2008), for discovery purposes

only. Defendants William W. Bunch, III (“Mr. Bunch” or “Bunch”) and Brown

& Bunch, PLLC are not parties in the related case. In this action, Plaintiff

filed suit against Defendants Kenneth R. Crockett and Robert W. Winston for

breach of contract and usurpation of corporate opportunity, against

Defendant Winston Hospitality, Inc. for tortious interference with prospective

advantage, and against Defendants Bunch and Brown & Bunch, PLLC for

legal malpractice, breach of fiduciary duty, and tortious interference with

prospective advantage. 1

{4} Defendants Bunch and Brown & Bunch, PLLC filed a Motion for

Summary Judgment pursuant to Rule 56 of the North Carolina Rules of Civil

Procedure on June 16, 2010. Plaintiff filed a responsive brief on July 19,

2010. Defendants Bunch and Brown & Bunch, PLLC filed a reply brief on

August 2, 2010. The Court heard oral arguments on the Motion on

September 23, 2010. This Order and Opinion only addresses the Bunch and

Brown & Bunch, PLLC Motion.

1 No independent claims are asserted against the law firm other than those based upon the

actions of Mr. Bunch. References to the claims against Mr. Bunch in this Order and Opinion

also apply to the claims against Brown & Bunch, PLLC.

II.

FACTUAL BACKGROUND

A.

THE PARTIES

{5} Plaintiff Inland American Winston Hotels, Inc. (“Inland”) is a

corporation organized under the laws of the state of Delaware, with its

principal office and place of business in Oak Brook, Illinois. Inland is the

successor by merger to Winston Hotels, Inc. (“Winston Hotels”), a North

Carolina corporation. The merger became effective on July 1, 2007 when

Inland acquired all of the capital stock of Winston Hotels. (Defendants

William W. Bunch, III and Brown & Bunch, PLLC’s Br. in Supp. of Mot. for

Summ. J. (“Defs.’ Summ. J. Br.”) 3.) On that date Inland also became the

general partner of Winn Limited Partnership (“Winn LP”), a North Carolina

Limited Partnership previously owned by Winston Hotels. (Mem. of Law in

Opp. to the Mot. for Summ. J. Filed by Defs. William W. Bunch, III and

Brown & Bunch, PLLC (“Pl.’s Resp. Br.”) 3; Dep. of Kenneth R. Crockett

(“Crockett Dep.”) 302:17−303:1.)

{6} Defendant Bunch is an attorney duly licensed to practice law in the

state of North Carolina and at all material times has been a member of

Brown & Bunch, PLLC. Mr. Bunch is a real estate transactional lawyer and

a founding partner of Brown & Bunch, PLLC.

{7} Brown & Bunch, PLLC is a professional limited liability company

organized under the laws of the state of North Carolina and engaged in the

practice of law in this state, with offices in Wake and Orange Counties.

{8} Defendant Kenneth R. Crockett (“Mr. Crockett”) resides and/or

regularly conducts business in Wake County, North Carolina.

{9} Defendant Robert W. Winston, III (“Mr. Winston”) resides and/or

regularly conducts business in Wake County, North Carolina.

{10} Winston Hospitality, Inc. (“Winston Hospitality”) is a corporation

organized under the laws of the state of North Carolina, with its principal

place of business in Raleigh, North Carolina. At all times relevant to this

lawsuit, Messrs. Crockett and Winston have been officers of Winston

Hospitality, each owning an equity interest therein.

B.

LEGAL MALPRACTICE, BREACH OF FIDUCIARY DUTY, TORTIOUS

INTERFERENCE CLAIMS

{11} The claims against Mr. Bunch and Brown & Bunch, PLLC arise out

of a proposed development project in Durham County near the Research

Triangle Park called the “RTP Westin.” The RTP Westin is one of thirteen

potential developments contemplated by an agreement between Inland, Winn

LP, and Crockett Capital Corporation (“Crockett Capital”) 2 , which was signed

on or about July 30, 2007 and made effective July 1, 2007. (Defs.’ Summ. J.

Br. 2, Ex. 26: Agreement Regarding Development Projects (“Master

Agreement”); Pl.’s Resp. Br. 4.)

{12} Prior to July 1, 2007, Winston Hotels was engaged in the business of

acquiring, developing and constructing hotels. (Compl. ¶ 9.) At that time,

Mr. Crockett served as Winston Hotels’ Executive Vice President and Chief

Development Officer, and Mr. Winston served as its Chief Executive Officer.

(Defs.’ Summ. J. Br. 3.) Mr. Crockett had been working to acquire the RTP

Westin site since early 2007. (Crockett Dep. 300:7−11.) On July 1, 2007,

Inland acquired all the capital stock of Winston Hotels. (Defs.’ Summ. J. Br.

3.)

{13} From 1994 until the merger with Inland, Mr. Bunch served as legal

counsel to Winston Hotels and its related entities, including Winn LP. (Dep.

of William W. Bunch, III (“Bunch Dep.”) 6:22−5; Pl.’s Resp. Br. 1.) Mr.

2 Crockett Capital is a North Carolina corporation formed on July 11, 2007. Messrs. Crockett

and Winston each own a 50% share of the business. (Pl.’s Resp. Br. 3 n.1.)

Crockett was one of Mr. Bunch’s primary contacts in connection with his

representation of Winston Hotels. (Bunch Dep. 7:1−4.)

{14} As part of the acquisition of Winston Hotels, Inland acquired the

ownership of hotel properties then under construction and the right to

develop other properties, including the RTP Weston, which “may be suitable

for development as hotel projects . . . .” (Master Agreement, Recital A.)

These properties were identified as “Pipeline Properties” and listed in Exhibit

B of the Master Agreement. (Master Agreement, Ex. B.) After the merger,

Inland continued to engage in the business of acquiring, developing and

constructing hotels. (Compl. ¶ 9.)

{15} In conjunction with the merger, Inland, Winn LP, and Crockett

Capital entered into the Master Agreement, pursuant to which Crockett

Capital would use its “expertise in the development, construction, and

management of hotel properties” to perform various development services for

Inland. (Master Agreement, Recital B.) Crockett Capital was to provide

Inland with development proposals for each of the thirteen proposed projects.

(Pl.’s Resp. Br. 4−5.)

{16} If Inland agreed to a final proposed development plan for a

particular property in the pipeline, the parties would pursue the project

further by negotiating and entering into a succession of preset contractual

agreements to develop it. (Master Agreement ¶¶ 3−4.) If Inland rejected a

particular property, then Crockett Capital could develop it on its own or with

a third party, provided Crockett Capital paid Inland the acquisition costs

Inland incurred for that property. (Master Agreement ¶ 5.) Inland would

transfer its rights in any such property to Crockett Capital or its assignee

and would execute all documentation reasonably necessary to accomplish the

transfer. (Master Agreement ¶ 5.)

{17} In June 2007, Mr. Bunch understood from Messrs. Crockett and

Winston that Winston Hotels was in merger talks with Inland’s parent, and

that as a result of a pending merger, a joint venture was to be formed

between the surviving entity (Inland) and various entities owned by Messrs.

Crockett and Winston. (Bunch Dep. 24:2−19.) Mr. Crockett advised Mr.

Bunch that after the merger, he and Mr. Winston would be “in essence, the

development arm” under the joint venture, and that Mr. Bunch would deal

with Mr. Crockett in the same way as he did before the merger. (Bunch Dep.

89:18−25, 90:1−5.) It would be “business as usual” with respect to Mr.

Bunch’s work on the developments. (Bunch Dep. 89:18−25, 90:1−5.)

{18} As set forth in the Master Agreement and acknowledged by Inland’s

representative, John Brown, Mr. Crockett was to research and evaluate the

Pipeline Properties. (Dep. of John Brown (“Brown Dep.”) 618:14−621:11.) He

was to perform all predevelopment work with regard to the Pipeline

Properties, including: conducting market studies; evaluating sites;

negotiating land contracts (including the RTP Westin contract); and hiring

vendors and lawyers (including Mr. Bunch). (Brown Dep. 618−621.) He also

had the authority to hire and to deal with architects and engineers for those

properties. (Brown Dep. 619:23−620:6.)

{19} The negotiations leading to the execution of the Master Agreement

at times were contentious. For example, on June 28, 2007, Mr. Crockett sent

an email to Mr. Bunch about the ongoing negotiations in which he stated that

Inland had not been treating him very well and was reneging on prior

commitments. (Pl.’s Resp. Br., Ex. 6: Email from Kenneth Crockett to

William Bunch (June 28, 2007, 22:01 EDT).) Mr. Crockett indicated that he

might reassess the situation the following week. (Pl.’s Resp. Br., Ex. 6: Email

from Kenneth Crockett to William Bunch (June 28, 2007, 22:01 EDT).)

{20} After sending the June 28, 2007 email, Mr. Crockett spoke via

telephone to Inland’s Chairman, Dan Goodwin. (Crockett Dep. 310:23−

311:9.) Mr. Crockett believed that Mr. Goodwin had assured him that Inland

intended to go forward with the Agreement. (Crockett Dep. 310:23−311:9.)

Mr. Crockett informed Mr. Bunch of these assurances in early July, prior to

the execution of the RTP Westin contract on July 11th, and Mr. Bunch

understood at that time that the parties wanted to “do as many deals” as they

could. (Bunch Dep. 85:4−87:5.)

{21} In June 2007, Mr. Bunch was working with Mr. Crockett to finalize

the purchase contract for the RTP Westin site. (Defs.’ Summ. J. Br. 5.) Mr.

Crockett was the point of contact for Mr. Bunch with regard to the RTP

Westin contract negotiations. (Defs.’ Summ. J. Br. 5.) Gregory Sanchez, the

seller’s representative, had been in ongoing negotiations with Mr. Crockett to

finalize the RTP Westin contract. (Dep. of Gregory Sanchez (“Sanchez Dep.”)

32:10−23, 33:23−34:4, 35:19−36:20.) Prior to his departure for a family

vacation in June 2007, Mr. Crockett left a signed copy of the purchase

contract for the RTP Westin site with his secretary and instructed Mr. Bunch

to release the signature page upon confirmation that Mr. Sanchez had

obtained his clients’ consent to the final terms. (Defs.’ Summ. J. Br., Ex. 4;

Sanchez Dep. 38:3−39:17; Crockett Dep. 300:1−304:2.) Mr. Crockett signed

the purchase contract in his capacity as an officer of Winston Hotels, which

was at the time the sole general partner of Winn LP. (Bunch Dep.

82:25−83:1.) Although the contract for the sale of the RTP Westin site had

not been executed as of July 1, 2007 (the day Inland acquired all rights to

Winston Hotels’ assets), drafts, all of which named Winston Hotels or Winn

LP as the purchaser, had been prepared and circulated. (Answer of Defs.

Robert W. Winston, III, Kenneth R. Crockett, and Winston Hospitality, Inc.

(“Westin Answer”) ¶ 16; Crockett Dep. 300:1−304:2; Bunch Dep. 80−81.)

{22} As of July 1, 2007, the parties to the RTP Westin contract had not

reached agreement on all of its terms. (Defs.’ Summ. J. Br. 5.) Mr. Sanchez

was putting pressure on Mr. Crockett to execute the contract, because Mr.

Sanchez was under pressure to present it to the seller’s investment

committee contemporaneously with the lease for a proposed office building

that would be adjacent to the RTP Westin. (Defs.’ Summ. J. Br. 5.) Mr.

Sanchez gave Mr. Crockett an ultimatum: if the contract terms could not be

imminently finalized, he would take the RTP Westin opportunity to another

qualified hotel developer with whom he had a longstanding business

relationship. (Sanchez Dep. 53:17−58:11; Bunch Dep. 131:13−132:15) Mr.

Bunch was aware that Mr. Sanchez was pushing Mr. Crockett to close the

deal. He also was aware of Mr. Sanchez’s threat to present the RTP Westin

opportunity another qualified developer. (Bunch Dep. 131:13−132:15.)

{23} With the merger between Inland and Winston Hotels concluded,

neither Mr. Crockett nor Mr. Winston was an officer or an employee of the

surviving entity. (Defs.’ Summ. J. Br. 6; Pl.’s Resp. Br. 7.) Neither party had

the authority to sign a contract on behalf of Winston Hotels or Inland. Yet,

Mr. Crockett’s involvement in procuring the RTP Westin project for the joint

venture was essential for Inland and Crockett Capital to move forward with

the business opportunity. Mr. Sanchez was under a deadline, and without

Mr. Crockett’s participation, he would have been inclined to recommend

selling the property to another developer with whom he had a previous

relationship rather than to Inland, an organization lead by unknowns.

(Sanchez Dep. 69:25−70:17.) The other developer was a competitor to

Winston Hotels and Inland.

{24} Mr. Crockett had the contract for the RTP Westin site put in the

name of Winston Hospitality, a Winston-Crockett entity. (Defs.’ Summ. J.

Br., Ex. 8: Email from Kenneth Crockett to William Bunch (July 11, 2007,

14:05 EDT); Bunch Dep. 126:7−12, 131:1−7.) Mr. Crockett sent Mr. Bunch a

contract signed by Mr. Winston on behalf of Winston Hospitality on July 12,

2007. (Bunch Dep. 144:20−3; Tr. of Hr’g 97, Inland Am. Winston Hotels, Inc.

v. Winston, No. 08 CVS 21786 (N.C. Super. Ct.) (argued Sep. 23, 2010);

Compl. ¶ 21; Westin Answer ¶ 21.) It was executed by the seller on July 19,

2007. (Compl. ¶ 21; Westin Answer ¶ 21.)

{25} Mr. Crockett explained the reason for the name change in a July 11,

2007 email to Mr. Bunch, which stated,

Bill: You will see that, in my discussions with Greg Sanchez, we

have changed the purchasing entity to Winston Hospitality for

signature by Bob Winston. The change is necessary to maintain

momentum and timeliness in pursuit of this transaction.

Among other things, Greg needs to present a signed contract for

his investment committee tomorrow. Bob and I fully intend to

develop this property under the terms of our joint venture

arrangement being negotiated with Inland. The assignment

provisions within the purchase agreement will allow us to form

the [joint venture] with Inland without further approvals from

seller. Ken.

(Defs.’ Summ. J. Br., Ex. 8: Email from Kenneth Crockett to William Bunch

(July 11, 2007, 14:05 EDT) (emphasis added).)

{26} As of July 11, 2007, Mr. Bunch understood that Mr. Crockett, Mr.

Winston, and Inland had reached an agreement for the development of the

Pipeline Properties, the terms of which were being finalized in the Master

Agreement. (Bunch Dep. 85:4−86:4, 86:23−87:5, 88:7−11, 93:25−94:8,

109:8−17.) Mr. Crockett told Mr. Bunch in July 2007 that it did not matter

which entity ultimately entered into contracts and vendor relationships

because Mr. Crockett and Mr. Winston were pursuing deals for the joint

venture and because the Master Agreement allowed Inland’s pursuit costs to

be “trued up.” (Bunch Dep. 22:20−23:6.) The goal was to get the property

under contract, then proceed in accordance with the joint venture. (Bunch

Dep. 110:20−5.)

{27} Mr. Bunch understood that although Winston Hospitality was

named in the contract to purchase the RTP Westin, Messrs. Crockett and

Winston intended to assign the contract rights to the joint venture with

Inland and negotiated an assignment provision permitting them to do so.

(Defs.’ Summ. J. Br. 7, Ex. 8.) Mr. Bunch made Petula Prolix Development

Company, the seller of the RTP Westin site, aware of this intent in a letter

dated September 13, 2007. (Defs.’ Summ. J. Br., Ex. 11.) He explained that

the proposed insured under the Title Commitment is WINN

Limited Partnership . . . (“WINN”), whose sole general partner is

[Inland] . . . , with WINN or a joint venture entity among WINN

and Purchaser[, Winston Hospitality,] being the intended

assignee of Purchaser as contemplated by Section 19 of the

Contract.

(Defs.’ Summ. J. Br., Ex. 11.)

{28} It is undisputed that the Master Agreement was signed on July 30,

2010 and made retroactive to July 1, 2010, thus ratifying Mr. Crockett’s

actions on behalf of the joint venture during July.

{29} On August 21, 2007, Crockett Capital tendered to Inland an

investment package to develop the RTP Westin. (Reply of William W. Bunch,

III and Brown & Bunch, PLLC in Supp. of Mot. for Summ. J. 3.) Ultimately,

however, the RTP Westin site never was assigned to Inland. Instead, it was

sold to a third party. (Pl.’s Resp. Br. 11.)

{30} Inland claims that Mr. Bunch improperly permitted Winston

Hospitality rather than an entity controlled by Inland to be named the

purchaser in the contract for the RTP Westin site. (Pl.’s Resp. Br. 1.)

{31} Inland has asserted three claims against Mr. Bunch and Brown &

Bunch, PLLC: (1) legal malpractice; (2) breach of fiduciary duty; and (3)

tortious interference with prospective advantage. Inland contends that Mr.

Bunch was liable for malpractice because he failed to protect Inland’s interest

when he allowed Winston Hospitality to be identified as the purchaser in the

contract for the RTP Westin site. Inland’s claims are based upon the fact

that Mr. Bunch took no steps to advise Inland of the change in the name of

the entity purchasing the RTP Westin site or to seek Inland’s permission to

make the change. Inland asserts that as a proximate result of Mr. Bunch’s

actions and omissions, it has been deprived of its rights in the RTP Westin

site.

III.

THE MOTION

{32} Mr. Bunch and Brown & Bunch, PLLC have moved for summary

judgment on all claims against them on the grounds that there is no genuine

issue as to any material fact and that they are entitled to a judgment as a

matter of law.

A.

LEGAL STANDARD

{33} Summary judgment is appropriate “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with affidavits, if

any, show that there is no genuine issue as to any material fact and that any

party is entitled to a judgment as a matter of law.” N.C. R. Civ. P. 56(c). The

moving party bears the burden of showing that there is no genuine issue of

material fact. Pembee Mfg. Corp. v. Cape Fear Constr. Co., Inc., 313 N.C.

488, 491, 329 S.E.2d 350, 353 (1985) (citing Texaco, Inc. v. Creel, 310 N.C.

695, 314 S.E.2d 506 (1984)). The moving party may meet its burden by

showing that an essential element of the non-moving party’s claim is

nonexistent. See Collingwood v. G.E. Real Estate Equities, 324 N.C. 63, 66,

376 S.E.2d 425, 427 (1989). The burden then shifts back to the non-moving

party to establish the existence of a prima facie case. See id.

B.

ANALYSIS

1.

LEGAL MALPRACTICE/BREACH OF FIDUCIARY DUTY

a.

Violation of Standard of Care

{34} In a legal malpractice action based on an attorney’s negligence, the

plaintiff must prove by the greater weight of the evidence that the attorney

breached a duty owed to the client and that the attorney’s negligence is the

proximate cause of the loss suffered. Rorrer v. Cooke, 313 N.C. 338, 355, 329

S.E.2d 355, 366 (1985);Cornelius v. Helms, 120 N.C. App. 172, 175−76, 461

S.E.2d 338, 340 (1995) (citing Summer v. Allran, 100 N.C. App. 182, 184, 394

S.E.2d 689, 690 (1990), disc. rev. denied, 328 N.C. 97, 402 S.E.2d 428 (1991)).

“[A] breach of fiduciary duty claim is essentially a negligence or professional

malpractice claim.” Teague v. Isenhower, 157 N.C. App. 333, 334, 579 S.E.2d

600, 602 n.1 (2003) (quoting Childers v. Hayes, 77 N.C. App. 792, 795, 336

S.E.2d 146, 148 (1985); see also NationsBank v. Parker, 140 N.C. App. 106,

113, 535 S.E.2d 597, 602 (2000) (“Breach of fiduciary duty is a species of

negligence or professional malpractice.”). Thus, the following analysis

controls the claims for legal malpractice and breach of fiduciary duty.

{35} Mr. Bunch argues that Inland has failed to forecast competent

evidence that he breached the applicable standard of care for real estate

attorneys practicing in Wake County, North Carolina or a similar locality and

that Inland cannot establish that any conduct of Mr. Bunch proximately

caused any damages.

{36} The duties an attorney owes to his client are delineated in Hodges v.

Carter, 239 N.C. 517, 80 S.E.2d 144 (1954).

Ordinarily when an attorney engages in the practice of the law

and contracts to prosecute an action on behalf of his client, he

impliedly represents that (1) he possesses the requisite degree of

learning, skill, and ability necessary to the practice of his

profession and which others similarly situated ordinarily

possess; (2) he will exert his best judgment in the prosecution of

the litigation entrusted to him; and (3) he will exercise

reasonable and ordinary care and diligence in the use of his skill

and in the application of his knowledge to his client’s cause.

Hodges, 239 N.C. at 519, 80 S.E.2d at 145−6. The standard for reasonable

and ordinary care and diligence is that of “members of the profession in the

same or similar locality under similar circumstances.” Rorrer, 313 N.C. at

356, 329 S.E.2d at 366.

{37} In an effort to demonstrate a breach of the duty of care by Mr.

Bunch, Inland offers the testimony of Thomas Metzloff, a Duke University

law professor with a background in ethics. Mr. Metzloff determined that Mr.

Bunch “violated the standard of care by assisting Winston, Crockett, or

entities controlled by them with respect to the [RTP Westin] development

project.” 3 (Inland’s Designation of Expert Witness, Opinions Section ¶ 9.)

Mr. Metzloff is not a practicing attorney. (Dep. of Thomas Metzloff (“Metzloff

Dep.”) 21:17−23:3.) He has not been licensed to practice law for over twenty-

five (25) years, and he has never been licensed to practice law in North

Carolina. (Metzloff Dep. 21:17−23:3.) He has never conducted any real

estate transactions as a lawyer or represented any individual, partnership,

joint venture, LLC, or corporation in any real estate transaction. (Metzloff

Dep. 26:12−8.) He does not consider himself to be an expert in the practice of

real estate development or the practice of law related to real estate

developments. (Metzloff Dep. 60:11−25.) He does not know everything that a

real estate lawyer does in representing a developer, putting together deals,

and seeing them through to closing. (Metzloff Dep. 60:11−25.) Mr. Metzloff

concedes, for example, that he does “not know for sure” what the standard of

care is for written engagement letters for an attorney handling the type of

transaction at issue in this case. (Metzloff Dep. 122:1−10.)

{38} Mr. Metzloff lacks the qualifications to give a competent opinion as

to whether Mr. Bunch’s actions with regard to the RTP Westin contract were

within the applicable standard of care for a commercial real estate

transactional attorney practicing in the Research Triangle area or a similar

community. Mr. Metzloff does claim expertise in the North Carolina Rules of

Professional Conduct, and those rules are Mr. Metzloff’s only articulated

basis for his opinion that Mr. Bunch’s actions or omissions fell short of the

standard. (Inland’s Designation of Expert Witness 3−8.)

{39} Yet, North Carolina appellate courts repeatedly have rejected the

use of the Rules of Professional Conduct to establish attorney liability. See

Baars v. Campbell Univ. Inc., 148 N.C. App. 408, 421, 558 S.E.2d 871, 879

(2002); Webster v. Powell, 98 N.C. App. 432, 439, 391 S.E.2d 204, 208 (1990),

3 In making his determination, Mr. Metzloff did not consider facts that indicate Inland

clothed Mr. Crockett with the actual and/or apparent authority to change the name on the

contract to preserve the deal for the joint venture. (See Inland’s Designation of Expert

Witness 3−8.)

aff’d, 328 N.C. 88, 399 S.E.2d 113 (1991); McGee v. Eubanks, 77 N.C. App.

369, 374, 335 S.E.2d 178, 181 (1985). In Baars, the Court of Appeals held, “a

breach of a provision of the Code of Professional Responsibility is not in and

of itself . . . a basis for civil liability . . . . ” 148 N.C. App. at 421, 558 S.E.2d

at 879 (internal quotations removed).

{40} This rule of law has been incorporated into Rule 0.2[7] of the Rules

of Professional Conduct. Id.

Violation of a Rule should not give rise itself to a cause of action

against a lawyer nor should it create any presumption in such a

case that a legal duty has been breached . . . . The rules are

designed to provide guidance to lawyers and to provide a

structure for regulating conduct through disciplinary agencies.

They are not designed to be a basis for civil liability . . . .

Accordingly, nothing in the Rules should be deemed to augment

any substantive legal duty of lawyers or the extra-disciplinary

consequences of violating such a Rule.

R. Prof. Conduct N.C. St. B. 0.2[7].

{41} The plain language of this provision, like that of McGee and its

progeny, establishes that the North Carolina Rules of Professional Conduct

cannot be used to establish civil liability. Furthermore, the Court in Webster

held that evidence offered to show a lawyer violated certain rules of

professional conduct was properly excluded by the trial court. 98 N.C. App.

at 439, 391 S.E.2d at 208; see also Baars, 148 N.C. App. at 421, 558 S.E.2d at

879 (“[E]vidence of purported rules violations is properly excluded when a

case is subject to dismissal.”)

{42} The purpose of putting on evidence as to the standard of care in a

malpractice lawsuit is to determine whether the defendants’ actions meet the

applicable standard. Progressive Sales, Inc. v. Williams, Willeford, Boger,

Grady & Davis, 86 N.C. App. 51, 56, 356 S.E.2d 372, 376 (1987). When a

plaintiff fails to offer testimony or affidavits of attorneys in the area of

practice in the defendant’s legal community, dismissal is proper. See id.;

Laws v. Priority Tr. Services of N.C., L.L.C., 610 F. Supp. 2d 528, 530−31

(W.D.N.C. 2009), aff’d, No. 09-1432 (4th Cir. Apr. 28, 2010) (per curium)

(unpublished opinion) (dismissal of a legal malpractice complaint that failed

to identify a formal legal duty independent of those articulated in the Rules

of Professional Conduct or the corresponding State Bar ethics opinions).

{43} The circumstances of this case and the complexities of the

relationships between the parties are such that a determination of a breach

of the standard of care cannot be determined by an ethics professor who does

not practice law in commercial real estate. Likewise, the applicable standard

of care cannot be determined, as Plaintiff suggests, by lay persons. Inland

must have a competent expert to provide evidence of a breach of the standard

of care.

{44} There is no admissible evidence from Inland of the standard by

which Mr. Bunch’s actions and alleged omissions are to be weighed. Thus,

Inland has failed to forecast competent evidence that Mr. Bunch violated the

applicable standard of care.

{45} Because the Court finds that Plaintiff failed to forecast any evidence

of breach, it is not necessary to reach the causation issue.

b. Actual Authority

{46} Based on the facts Mr. Bunch knew on July 11, 2007, it was

reasonable for him to believe that Mr. Crockett had the actual authority from

Inland to change the name on the contract to purchase the RTP Westin from

Winn LP or Winston Hotels to Winston Hospitality in order to get the deal

closed.

{47} “Actual authority is that authority which the agent reasonably

thinks he possesses, conferred either intentionally or by want of ordinary

care by the principal.” Harris v. Ray Johnson Constr. Co., 139 N.C. App. 827,

830, 534 S.E.2d 653, 655 (2000).

{48} Mr. Crockett had been pursuing the RTP Westin site since early

2007. Before Inland and Winston Hotels merged, he had conducted

negotiations with the seller, and he already had a valuable business

relationship with Mr. Sanchez, the seller’s agent. Inland wanted the benefit

the predevelopment work Mr. Crockett had done on the RTP Westin leading

up to the date of the merger. For this reason, when Inland, Mr. Crockett, and

Mr. Winston entered into the Master Agreement at the end of July, the

parties made it retroactive to July 1, 2007. As a result of that Mr. Crockett

possessed the actual authority to act to preserve the RTP Westin opportunity

for the joint venture.

{49} Though Mr. Bunch could not have known on July 11, 2007 that the

Master Agreement would be made retroactive to July 1, 2007, Mr. Bunch did

understand on July 11th that the parties to the Master Agreement had

agreed in principle to form a joint venture and were actively negotiating the

agreement’s terms. He knew that Inland expected Mr. Crockett to engage

and direct lawyers in their work on the RTP Westin and on other

development opportunities that were in various stages of investigation and

pursuit. He knew the joint venture would develop additional hotel properties

and would do as many deals as possible. He knew that Mr. Crockett was a

necessary party to the RTP Westin deal and that Inland would lose the

opportunity to develop it if the contract was not executed quickly. Also, Mr.

Crockett informed Mr. Bunch that he was pursuing the property for the joint

venture the parties were forming. Mr. Bunch’s letter of September 13, 2010

to the seller demonstrates his belief that the opportunity was being pursued

for the joint venture. There is no evidence that Mr. Bunch knew that Mr.

Crockett was acting in any capacity other than as agent for Inland, and no

evidence that Mr. Bunch knew or understood that Mr. Crockett, Mr. Winston,

and Winston Hospitality were acting in their own interests.

{50} Inland’s representative, John Brown, stated in his testimony that

Mr. Crockett had the authority to do what was necessary for the

predevelopment work, including the authority to negotiate contracts and hire

lawyers. Mr. Brown’s testimony proved consistent with Mr. Crockett’s

comments to Mr. Bunch about his authority and with Mr. Bunch’s

understanding that Mr. Crockett was his point of contact for Inland with

respect to the joint venture’s development opportunities, including the RTP

Westin.

{51} Under the circumstances, Mr. Bunch had a reasonable belief that

Mr. Crockett had the actual authority to change the buyer to Winston

Hospitality.

c. Apparent Authority

{52} While it is clear that Mr. Bunch believed Mr. Crockett had the

actual authority to direct him to change the name of the purchaser, at a

minimum, insofar as Mr. Bunch was concerned, Mr. Crockett also possessed

the apparent authority to do so.

{53} Apparent authority “is that authority which the principal has held

the agent out as possessing or which he has permitted the agent to represent

that he possesses.” Zimmerman v. Hogg & Allen, P.A., 286 N.C. 24, 31, 209

S.E.2d 795, 799 (1974).

{54} In late June or early July 2007, Mr. Crockett informed Mr. Bunch

that Mr. Goodwin, Inland’s Chairman, assured him that though the Master

Agreement had not yet been executed, the parties would form a joint venture

as planned. (Bunch Dep. 85:16−88:11.) Based on Mr. Crockett’s

representations, Mr. Bunch believed that the parties would finalize the

Master Agreement. (Bunch Dep. 88:7−11.) Based on Mr. Crockett’s

representations, Mr. Bunch understood that Crockett Capital’s goal was to

get the Pipeline Properties under contract in order to preserve the business

opportunities for the joint venture, and then proceed in accordance with

future agreements for the individual properties. (Bunch Dep. 110:20−5.)

{55} Mr. Crockett communicating Mr. Goodwin’s assurances to Mr.

Bunch gave Mr. Bunch a reasonable and actual belief that Inland had

granted Mr. Crockett the authority to change the name on the RTP Westin

contract to Winston Hospitality in order to close the deal. Even if Mr.

Crockett had no actual authority to change the name, he had the apparent

authority to act to preserve the opportunity for the joint venture.

{56} Inland was aware of Mr. Crockett’s efforts to get the Pipeline

Properties under contract. Inland allowed Mr. Crockett to act on its behalf.

Inland took no action which would have communicated in any way that Mr.

Crockett did not have the authority he exercised in securing the RTP Westin

site.

{57} From Mr. Bunch’s standpoint, Mr. Crockett had the apparent

authority to change the name of the purchaser on the contract.

{58} Based upon Mr. Crockett’s actual and apparent authority, Mr.

Bunch did not violate any standard of care in following Mr. Crockett’s

instructions.

2.

TORTIOUS INFERENCE WITH PROSPECTIVE

BUSINESS ADVANTAGE

{59} To support a claim for tortious interference with prospective

economic advantage, a plaintiff must put forth evidence that a defendant

interfered with a trade or business by maliciously inducing a person not to

enter into a contract with a third person, which he would have entered into

but for the interference. Spartan Equip. Co. v. Air Placement Equip. Co., 263

N.C. 549, 559, 140 S.E.2d 3, 11 (1965). The plaintiff must further show

damages and that the interference was not done “in the legitimate exercise of

the interfering person’s rights, but with a malicious design to injure the third

person or gain some advantage at his expense.” Id.

{60} Inland has not forecast evidence to support its claim that Mr. Bunch

tortiously interfered with Inland’s prospective economic advantage with

respect to the RTP Westin transaction. First, Inland has forecast no evidence

that Mr. Bunch acted with malicious design to injure Inland. Indeed, the

evidence indicates to the contrary—that Mr. Bunch’s intent was to further

the opportunity for the benefit of the joint venture, which included Inland.

Second, the uncontroverted evidence shows that Mr. Crockett handled the

negotiations with the seller, and that Mr. Crockett made the decision with

Mr. Sanchez to change the name of the contract purchaser with no input or

consultation from Mr. Bunch. It was Mr. Crockett who changed the name on

the contract. Third, the evidence indicates that the seller likely would not

have entered into the contract with Inland absent the participation of Messrs.

Crockett and Winston.

{61} Thus, Inland cannot present evidence to satisfy a claim against Mr.

Bunch for tortious interference with prospective business advantage.

IV.

CONCLUSION

{62} Based on the foregoing, it is hereby ORDERED, ADJUDGED, and

DECREED that: Defendants William W. Bunch, III and Brown & Bunch,

PLLC’s Motion for Summary Judgment is GRANTED.

IT IS SO ORDERED, this 24th day of November, 2010.

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