Petition — Molever v. Preiser

IN THE

Supreme Court of the United States

OcrosER TERM, 1979

No. 79-235

—_=>

I. M. MoLever; Mopern Marts, Inc., a Pennsylvania

corporation; PIrTsBURGH AND West VIRGINIA INVEST-

MENT COMPANY, a Pennsylvania corporation; Brrry

BERNSTEIN, SHIRLEY Z. WEINBERGER, as custodian;

Don D. Brooks; and JEAN C. Paris

Petitioners,

V.

STANLEY E. PREISER and JoHN F. Brown

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

B. Micuae,t Dann

CHARLES D. RousH

TREON, WARNICKE, Dann & Roush, P.A.

919 North First Street

Phoenix, Arizona 85004

July 12, 1979

Press oF Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C.

—

BaMMa distance oe eT

INDEX

Page

CITaTIONS To THE Oprnions BELow ...............545. 1

I IIS AS EOE 2

CoNSTITUTIONS AND STATUTES INVOLVED .............. 2

ee aca c des bs neceececcecce 2

Rau e sc aca ccccccccess 3

Reasons FoR GRANTING THE WRIT ..............-000:: 8

ew yis cnc ecevecccce 16

ee ee GETS fines ccccceseece la

eG Ga gine kc enececceses 37a

CITATIONS

CasEs:

Appleyard v. Transamerican Press, Inc., 539 F.2d 1026

tise Ge ececcscces 15

Baylis v. Travelers Ins. Co., 113 U.S. 320, 5 S. Ct. 494,

Ne de ee cnc escccece 10, 11

Chambers v. State of Florida, 309 U.S. 227, 60 S. Ct.

eee 9

Curtis Publishing Co. v. Butts, 388 U.S. 130, 87 S. Ct.

eS 14

Dorn v. United States, 195 U.S. 138, 24 S. Ct. 808, 49

NE EE 15

Fountain v. Filson, 336 U.S. 681, 69, S. Ct. 754, 93

Nees ec cectcessces 10, 11

Gelman v. State of Maryland, 538 F.2d 603 (4th Cir.

ER NEES EES eee 11

Johnson v. RAC Corporation, 491 F.2d 510 (4th Cir.

EN SET 11

ii Citations Continued

Page

Mims v. Keys, 516 F.2d 21 (4th Cir. 1975) ........... 11

Molever v. Levenson, 539 F.2d 996 (4th Cir. 1976) .. 2,4, 14

Nave v. City of Seattle, 68 Wash. 2d 721, 415 P.2d 93

(1966) appeal dismissed, 385 U.S. 450, 87 S. Ct.

614, 17 L. Ed. 2d 513, rehearing denied, 386 U.S.

929, 87 S. Ct. 853, 17 L. Ed. 2d 808 .............. 11

Plante v. Shivar, 540 F.2d 1233 (4th Cir. 1976) ...... 11

Tot v. United States, 319 U.S. 463, 63 S. Ct. 1241, 87

St Gs SRS UME C45 0654 Coe bake as veka ee

Utility Control Corp. v. Prince Williams Const. Co.,

GOO Wime FEO (GGR Ole, BOTT) oiais Sons cic cvcscs een 11

CONSTITUTIONAL Provisions AND RULEs:

Seventh Amendment to the Constitution ............. 9,2

Fourteenth Amendment to the Constitution .......... 2

Federal Rules of Civil Procedure, Rule 12(b)(6) ..... 5, 2

Federal Rules of Civil Procedure, Rule 56 ........... 2

Federal Rules of Evidence, Rule 201 ................ 12, 2

Federal Rules of Evidence, Rule 605 ................ 12, 2

MISCELLANEOUS:

Re CUE ON re tree ge 5

American Bar Association, A.B.A. Journal, Vol. 64,

Fi BAP CERI OE bse ak Coie eR ees i 9

Securities and Exchange Act of 1934, 410(b) ........ 3

IN THE

Supreme Court of the United States

OcrosER TERM, 1979

No.

I. M. Motever; Mopern Marts, Inc., a Pennsylvania

corporation; PrrrsBuRGH AND WEsT VIRGINIA INVEST-

MENT CoMPANY, a Pennsylvania corporation; Berry

BERNSTEIN, SHIRLEY Z. WEINBERGER, as custodian;

Don D. Brooxs; and JEAN C. Paris _

Petitioners,

V.

STaNLEY E. PREISER and JoHN F. Brown

Respondents.

ee

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Petitioner prays that a Writ of Certiorari issue to

review the judgment of the United States Court of

Appeals for the Fourth Circuit entered in the above-

entitled case on March 8, 1979.

CITATIONS TO THE OPINIONS BELOW

The opinion of Judge Robert E. Maxwell granting

defendants’ motions to dismiss appears in Appendix

2

A, infra. It is unreported. The opinion of the Circuit

Court of Appeals is unreported and appears in Ap-

pendix A, infra, A related opinion is published sub

nom Molever v. Levenson, 539 F.2d 996 (4th Cir.

1976).

JURISDICTION

The judgment of the Circuit Court of Appeals was

entered on March 8, 1979. A petition for rehearing was

timely filed and denied by the Circuit Court of Ap-

peals apparently on April 13, 1979, though the order

is undated. The jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1).

CONSTITUTIONS AND STATUTES INVOLVED

The federal constitutional provisions and statutes

involved include the Seventh and Fourteenth Amend-

ments to the Constitution, the Federal Rules of Civil

Procedure, Rules 12(b)(6) and 56, and the Federal

Rules of Evidence, Rules 201 and 605.

QUESTIONS PRESENTED

1) Whether a District Court may, in a legal mal-

practice action, circumvent the Seventh Amendment

right to jury trial, the Federal Rules of Evidence and

the Federal Rules of Civil Procedure by simply re-

viewing the record of prior proceedings in the same

court, without request, notice or opportunity to be

heard and then dismissing the malpractice action on

the basis that, in the opinion of the District Court

Judge, there was no malpractice.

2) Whether a District Court may properly use ju-

dicial notice as a vehicle to dismiss a legal malpractice

ee eee

Ae A ae

3

ease where the matter noticed is the entire proceed-

ings in a four week trial and appeal and where:

a.) no request for notice was made;

b.) the motions pending attacked only the suffi-

ciency of the pleadings;

c.) the pleadings disclosed that major portions of

the neglect alleged occurred outside of the

record before the court;

d.) no reference was ever made as to what por-

tions of the record were reviewed nor what

portions demonstrated that no neglect existed ;

and

e.) the matter noticed was not a matter of fact,

but of opinion.

3) Whether this Court will permit the creation of

a ‘‘preferred”’ class of litigants—lawyers.

STATEMENT

In 1967, I. M. Molever and others (‘‘Molever’’) sued

Robert and Donald Levenson (‘‘Levensons’’) for defa-

mation.’ The defamations (there were several) occurred

when bank examiners discovered serious irregularities

regarding a “floor plan’ arrangement between the bank

1A total of three cases were actually filed by Molever and other

stockholders of the Bank of Wheeling, W. Va.: an action under

§10(b) of the Securities and Exchange Act of 1934; a share-

holder’s derivative action; and a defamation action. For space

and convenience, only the defamation action will be discussed, as

representative of the issues; and only Molever will be referenced,

as representative of the plaintiff petitioners. Other parties were

joined as defendants, but dismissed prior to trial. These factual

allegations are taken from the Circuit Court decisions, 539 F.2d

996 (4th Cir. 1976), which is found in Appendix A.

+

and the Levensons, and additional irregularities regard-

ing certain loans authorized by an employee named

Dennis. In essence, the Levensons (who were board

members of the bank) accused Molever (who was the

bank president) publicly and privately of criminal

conduct in connection with these transactions though

they knew that they, not Molever, had arranged and

authorized the illegal floor plan arrangement, and

knew that they, not Molever, were implicated in the

Dennis loans and that Dennis had admitted fault in

the loans and had absolved Mo'ever of any knowledge

or complicity.

After an interlocutory appeal and interminable de-

lays, the matter was tried to a jury, resulting in ver-

dicts in favor of Molever in excess of five million dol-

lars. The jury held the Levensons liable on the fraudu-

lent ‘‘floor plan’’ for over one million dollars. It held

the Levensons liable on the ‘‘Dennis loans’’ for seven

hundred thousand dollars. (These verdicts were based

upon the derivative claims). The jury then awarded

Molever over three million dollars in general and

punitive damages against Levensons for the defama-

tions.

As the result of a post trial motion for judgment

N.O.V., the trial court set aside the jury verdict on

the defamation claims, stating that the charges of

criminal conduct were ‘‘privileged;’’ but entered judg-

ment on the remaining claims. The Fourth Circuit af-

firmed the judgment N.O.V. and reversed the remain-

ing judgments. Molever v. Levenson, 539 F.2d 996

(4th Cir. 1976). Certiorari was denied by this Court.

429 U.S. 1024, 97 S. Ct. 643, 50 L. Ed. 2d 625 (1976).?

* One claim was returned to the District Court for re-trial—the

derivative claim regarding the Dennis line loans. Although that

5

Molever then sued the respondents, his lawyers in

the trial and appeal against Levensons for neglect in

Pre trial, post-trial and appeal handling of that case.

In essence, the complaint charged that the defendant

lawyers, through neglect, failed to take action during

trial, post-trial and appellate proceedings which would

have prevented the loss of the jury verdicts. A copy of

the complaint is attached in Appendix B. The com-

plaint was filed in the United States District Court for

the District of Arizona—Molever’s home and the lo-

eale of the original contract to render legal services.

The District Court in Arizona denied jurisdictional

attack by the defendant lawyers; but transferred the

ease to the Northern District of West Virginia pur-

suant to 28 U.S.C. § 1404 (a). Appendix B.

Upon transfer, the defendant lawyers filed new mo-

tions to dismiss, this time pursuant to Rule 12(b) (6)

of the Federal Rules of Civil Procedure for, among

other things, ‘‘failure to state any factual basis for a

cause of action.’’ Copies of the motions, which were

filed without supporting memoranda, are attached in

Appendix B.

The motions were ultimately briefed and argued on

September 19, 1977. The sole issues presented were

claim had been tried to a successful conclusion and was reversed

for technical reasons, not on its merits, upon remand the District

Court, on application of the Levensons, ordered Molever to post

a one hundred thousand dollar bond for costs. Although advised

that the plaintiffs’ means did not permit of such a large bond, the

District Court dismissed the cause upon failure to post the bond,

and the Circuit Court affirmed. The decisions are unreported. All

of the trial court decisions affecting this case were made by Judge

Robert E. Maxwell, Chief Judge of the District Court for the

Northern District of West Virginia.

6

whether the complaint stated a claim upon which relief

could be granted and whether the second count of the

complaint was barred by limitations. No affidavits were

submitted. No depositions or other discovery were ref-

erenced.* (Record on Appeal, pp. 37-106) Following

argument, and without any notice or request, the Dis-

trict Court advised covnsel that it would then take ju-

dicial notice of the entire earlier trial proceedings and

the appeal to the Fourth Circuit (which materials were

not and could not have been before the court) and that

it would consider all of that material in deciding wheth-

er to grant the motions to dismiss. It then granted

the motions,’ ruling as a matter of law that the record

of the trial and appeal revealed no evidence of neglect

which was a cause of losing the verdicts. (Appendix

A). In essence, the Distriet Court, without request, of-

fered its opinion that the trial and appeal were ade-

quately handled, and disniissed the case, thus prevent-

ing the introduction of any evidence, opinion or other-

wise, that the case was not adequately handled. Even

further, recognizing that a claim had been made that

*In fact, the District Court had stayed discovery pending the

outcome of these motions. (Record on Appeal, pp. 48-50).

‘It is unclear whether the court granted motions to dismiss,

motions for summary judgment or both. It discussed, at length,

the conversion of Rule 12 motions to Rule 56 motions for summary

judgment, but then ruled that ‘‘for reasons of failure to state a

claim upon which relief can be granted as we measure it under

the more restricted rules as earlier indicated, and under the more

expanded rules and the included material, the Court believes that

the motions to dismiss the first count of the Complaint must be

granted.’’ Additionally, the formal order submitted by the de-

fendant lawyers, and from which appeal was taken, ordered that

‘“Count One of plaintiffs’ amended complaint be dismissed for

failure to state a cause of action upon which relief may be granted.

...’”’ (See Appendix A).

ea

7

evidence existed which was not in the record and which

would have prevented loss of the verdicts, the court

ruled that ‘‘it would be hard to imagine anything fur-

ther being developed than was developed in the earlier

ease.’’ (Appendix A).

Plaintiffs requested the court to reconsider its ruling

and to permit evidence on the issues of neglect, but the

request was denied. (Appendix A).

On appeal, the Circuit Court affirmed the decision,

thus approving the procedure followed by the District

Court. In fact, the Circuit Court, as well, indulged in

‘‘reviewing the record,’’*® saying: ‘‘The record of the

proceedings in the district court and in the appeal in

the previous case discloses to us no evidence of legal

malpractice sufficient to entitle plaintiffs to a trial or a

verdict.”’ (emphasis added.) (Appendix A).

Thus, in virtual back-to-back cases, the Fourth Cir-

cuit has taken all of Molever’s claims away. It has held

that the Levensons’ criminal conduct, which it de-

scribed as ‘‘inexcusable deception’’, was ‘‘forgiven’’ by

the bank. It has held that the Levensons knowingly

false statements were ‘‘privileged.’’ And finally it has

held, without trial or factual presentation, that the

lawyers were without neglect in causing the loss of ver-

dicts, and that the lawyers could not have presented

evidence or argument which would have changed that

result.

The case, thus, presents a very real public issue: the

erosion of the Seventh Amendment jury right and the

5 It seems unlikely that both the District Court and the Circuit

Court had the entire record of the prior case. It was not made 4

part of the record in the instant case, Thus, the previous record

must have been in one court or the other.

8

preferential treatment of lawyers sued for malpractice.

It also presents very real personal travesty and trag-

edy: the loss of over five million dollars in verdiets and

the total denial of justice to a family which placed its

trust in the court system.

REASONS FOR GRANTING THE WRIT

1) The decision of the Circuit Court is legally inde-

fensible. It declares that none of the panel has any in-

dependent knowledge of the competency of the legal

representation in the prior cases,° yet affirms summary

judgment on the basis that it was competent. It ap-

proves judicial notice of the entire record in another

case and al! of the facts therein in the face of four

Fourth Circuit decisions to the contrary. It approves

judicial notice of contestible opinion matter (negli-

gence). It states that Plaintiffs were given “full oppor-

tunity” to voice objection to the notice, when none was

given. It affirms the granting of summary judgment

without notice contrary to the decisions of this Court

and four Fourth Circuit decisions. And it declares

amazingly, that these ‘‘procedural irregularities’? were

of no prejudice to the plaintiffs. But of most impor-

tance, it condones the practice of pre-trial dismissal of

legal malpractice cases upon the judge’s own perusal

of the ‘‘record’’ of an earlier case and upon his per-

sonal opinion that there was no negligence.

2) The decision of the Circuit Court necessarily re-

sults in the creation of a favored class of litigants:

lawyers charged with neglect in the handling of trials

and appeals. The whole idea of a favored class of liti-

* An apparent acknowledgement of the conflict which occurs

when one is asked to judge the correctness of his own judgment.

In fact, one judge, Russell, was on both panels.

ee ern eer

9

gants—a class treated differently before the bar of jus-

tice—is abhorrent to the Fourteenth Amendment’s

command of equal protection of the laws and the deci-

sions of this Court in respect thereto. Chambers v. State

of Florida, 309 U.S. 227, 60 8. Ct. 472, 84 L. Ed. 716

(1940). No other class of defendants charged with

neglect receives this benefit. No doctor may even re-

quest the court to review his surgery and opine whether

there was neglect. No architect may have his drawings

so reviewed. No engineer his calculations. At a time

when the Chief Justice of this Court has publicly de-

eried the level of competence of lawyers in trial and

appeal matters,’ the Circuit Court has approved a pro-

cedure which will further insulate lawyers’ conduct

from public scrutiny. Unlike medical review panels,

which have sprung into some favor recently,” the proce-

dure approved by the Circuit Court removes the law-

yer’s conduct from any public scrutiny, leaving it solely

to the judge (another lawyer) to say that ‘‘there was

no negligence.’? And unlike medical review panels,

which serve to generate access to courts and which

never prevent access, even when all of the panel mem-

bers feel there is no neglect, the procedure approved by

th Circuit Court totally defeats access to fact finding

and a jury’s determination.

3) The decision of the Circuit Court violates the Sev-

enth Amendment’s guarantee of the right to jury trial

and this Court’s rulings thereon. For one hundred and

ninety years the supreme law of our land has compelled

that:

In Suits at common law, where the value in con-

troversy shall exceed twenty dollars, the right of

™See, Comments of Chief Justice Warren Burger before the

American Bar Association, A.B.A. Journal, Vol. 64, P. 313 (1978).

® See, e.g., Arizona Revised Statutes § 12-567.

10

trial by jury shall be preserved, and no fact tried

by a jury, shall be otherwise reexamined in any

Court of the United States, than according to the

rules of the common law. (Amendment VII)

With the stroke of a wide brush, and without citation

of authority, the Circuit Court has held this mandate of

our Constitution not to apply to lawsuits against law-

yers. This Court has held that a court errs whenever,

without consent, it passes upon evidence, finds facts

and renders judgment, thereby substituting itself for

the jury. Baylis v. Travelers Ins. Co., 113 U.S. 320, 5

S. Ct. 494, 28 L.Ed. 989 (1885). The decision of the

Circuit Court not only permits such substitution as to

facts, but as to matters of opinion: whether the lawyers’

conduct fell below acceptable levels of practice. The

Cireuit Court opinion, in stating that there was no evi-

dence of neglect ‘sufficient to entitle plaintiffs to a trial

or a verdict,’’ implies there was evidence of neglect.

Thus, both the Distriet Court and the Cireuit Court

passed upon that evidence, weighed it, and found the

issue in favor of the respondent lawyers.

4) The decision of the Circuit Court violates the letter

and intent of Rule 56 of the Federal Rules of Civil

Procedure. Summary judgment can be entered only if

there is no dispute as to any material fact. Fountain v.

Filson, 336 U.S. 681, 69, S. Ct. 754, 93 L. Ed. 971

(1949). Since both the District Court and the Circuit

Court ‘‘reviewed the record”’ in the blind—that is, with-

out any indication, before or after as to what was being

considered—it is impossible to determine what facts

are in issue. That is precisely why Rule 56 requires the

motion to contain reference to the facts that are

claimed to be undisputed, whether by affidavit or other-

wise, and requires notice and opportunity to demon-

oan tlie a sae er neti

11

strate that the facts are in dispute. Rule 56(c). The

District Court gave no notice that it intended to con-

sider or judicially notice the underlying ‘‘record”’. It

gave no notice that it intended, if it did, to treat the

motions to dismiss as motions for summary judgment.

It afforded no opportunity to present evidence, by affi-

davit or otherwise, showing a disputed material fact

before entering its order dismissing the case. In the

face of numerous of its own decisions, the Circuit Court

affirmed that procedure. Utility Control Corp. v. Prince

Williams Const. Co., 558 F.2d 716 (4th Cir. 1977);

Plante v. Shivar, 540 F.2d 1233 (4th Cir. 1976) ; Gel-

man V. State of Maryland, 538 F.2d 603 (4th Cir. 1976) ;

Mims v. Keys, 516 F.2d 21(4th Cir. 1975) ; Johnson v.

RAC Corporation, 491 F.2d 510 (4th Cir. 1974).

While this Court has affirmed that the summary

judgment procedure does not violate the Seventh

Amendment, Nave v. City of Seattle, 68 Wash. 2d 721,

415 P.2d 93 (1966), appeal dismissed, 385 U.S. 450, 87

S. Ct. 614, 17 L. Ed. 2d 513, rehearing denied, 386 U.S.

929, 87 S. Ct. 853, 17 L. Ed. 2d 803, the decisions in

Baylis v. Travelers’ Ins. Co., and Fountain v. Filson,

supra, make it abundantly clear that the safeguards

which prevents violation of the jury trial right in sum-

mary judgment procedures are notice and the oppor-

tunity to present contrary evidence. [f one can present

such evidence, no matter how insignificant, summary

judgment will yield to trial by jury. Here, those safe-

guards were eliminated; and the District Court substi-

tuted itself for the jury—substituted its opinion for

those of properly qualified experts—thus effectively

denying the jury trial right.

12

2) The Cireuit Court decision approves the violation

of Rules 201 and 605 of the Federal Rules of Evidence.

Those rules provide:

Rule 201. Judicial Notice of Adjudicative Fucts

_(a) Scope of rule. This rule governs only judi-

cial notice of adjudicative facts.

(b) Kinds of facts. A judicially noticed fact must

be one net subject to reasonable dispute in that it

is either (1) generally known within the territoriai

Jurisdiction of the trial court or (2) capable of ae-

curate and ready determination by resort to

Ppexe whose accuracy cannot reasonably be ques-

ioned.

_(c) When discretionary. A court may take judi-

cial notice, whether requested or not.

_(d) When mandatory. A court shall take judi-

cial notice if requested by a party and supplied

with the necessary information.

(ec) Opportunity to be heard. A party is entitled

upon timely request to an opportunity to be heard

as to the propriety of taking judicial notice and

the tenor of the matter noticed. In the absence of

prior notification, the request may be made after

judicial notice has been taken.

Rule 605. Competency of Judge as Witness

_ The judge presiding at the trial may not testify

in that trial as a witness. No objection need be

made in order to preserve the point.

These rules also safeguard the Seventh Amendment

jury trial right. They assure that the judge will con-

sider, as fact, only such matters as are beyond reason-

able dispute. Key to the rule on judicial notice is that

only facts may be noticed—not opinions. Here, the Dis-

13

trict Court violated the rule and the Circuit Court ap-

proved that violation in four regards: First by attempt-

ing to notice an entire record, including the conflicting

evidence, conflicting inferences and conflicting opinions

stated therein and possible to be drawn therefrom ; sec-

ond, by failing to give notice of its intent to take notice;

third, by failing to give notice concerning what facts

were ‘noticed’? and thereby finding; and finally, by

failing to give opportunity to be heard as to the pro-

priety of taking judicial notice and the tenor of the

matter noticed.

Congress undoubtedly has authority to prescribe

what evidence will be received in courts of the United

States. Tot v. United States, 319 U.S. 463, 63 S. Ct.

1241, 87 L. Ed. 1519 (1943). Both Congress’ rule, and

the Seventh Amendment’s jury trial guarantee are

violated when courts are permitted to ‘‘notice’’ matters

which are neither generally known nor capable of accu-

rate and ready determination. When this is done to

benefit a lawyer, Congress’ concern seems all the more

warranted.

Congress also made it abundantly clear that it did

not want judges testifying in the cases coming before

them (Rule 605). While at first blush the rule may not

seem applicable, on closer analysis it clearly is. What

happened in this case, and what the Circuit Court ap-

proved, was the submission of the trial judge’s (albeit

unsworn) opinion regarding the conduct of the lawyers

based upon his review of the record of the trial they

conducted. The judge offered, as witness, and thus ac-

cepted as judge, his own opinion that what he reviewed

did not show actionable neglect. He then entered judg-

ment based upon his opinion. The evil therein is potent

—so potent that Congress provided that no objection

14

need even be made thereto. Again, the jury trial right

has been sacrificed to the opinion of one man, one judg e

one lawyer, about the eonduct of his fellow lawyer Add

to that the apparent conflict whereby the judge to find

neglect, must admit the possibility of an erroneous de-

cision on his own part in the earlier proceeding, and

the seales of justice are heavily wei

the lawyers. y weighted—in favor of

6) The Cireuit Court decision is wrong regardin

the underlying neglect. The Circuit Court affirmed the

District Court ruling that nowhere in the record of

that four week trial and appeal—nowhere in those

thousands of pages of testimony—nowhere in those

hundreds of pages of briefs, memoranda and exhibits

is there even one inference of neglect which might

have affected the outeome. There was. The Court -

referred to eight trial exhibits (in the Levenson trial)

and many pages of testimony which showed that Mo-

lever had denied the false charges prior to publication

and that others had admitted the charges and excul-

pated Molever prior to publication of the defamation

( Appellants’ brief, pp. 43-45). Petitioners pointed out

to the Circuit Court that such evidence would su ort

the Jury verdict on the basis that Levensons Ga sas

lished the defamation in ‘‘reckless disregard’”’ of ier

evidence (including the denials and exculpations) or

with “Known falsity,’’ thereby overcoming any priv-

ilege which may have attended the publication Cur

tis Publishing Co. v. Butts, 388 U.S. 130, 87 8 Ct.

1975, 18 L. Ed. 2d 1094 (1967).° Petitioners also pointed

‘ ,

Dah i ray as — Pointed out to the Cireuit Court (Petition for

eee Pe. ), it had decided almost simultaneously with the

Paige - Levenson appeal that testimony from a plaintiff suin

efamation that he had denied the defamatory charges ae

15

out that the respondent lawyers had totally failed to

brief this issue to either the District Court or the Cir-

euit Court in the prior case or to refer either of those

courts to the evidence in the record establishing the

‘reckless disregard’? or ‘‘known falsity.”’ Similarly,

it was pointed out that the respondent lawyers failed

to brief, argue or refer to evidence which showed that

that the Levensons ‘embellished’? upon the report

which they relied upon in making the defamatory

statements, thus, again defeating any privilege. Dorn

+. United States, 195 U.S. 138, 24 8. Ct. 808, 49 L. Kd.

128 (1904). (Appellants’ brief, pp. 44-49). Additional

evidence of neglect was pointed out.

Finally, Molever’s affidavit was submitted to the

District Court in a last-minute effort to change the

result. That affidavit, which may be found in the joint

abstract at page 130, affirmed, under oath, that the re-

spondent lawyers admitted to Molever, that they never

read the trial transcript in preparing the appeal. Thus,

the Circuit Court has held, as law, that absolutely no

inference of neglect arises from uncontroverted evi-

dence that a lawyer has not read any of the trial tran-

script in preparing an appeal, concerning contested

issues of fact, to a Cireuit Court of Appeals. There

were inferences of neglect—in the record noticed, and

supplemental to it.

to publication was alone sufficient to support a jury verdict of

‘‘known falsity’’ or ‘‘reckless disregard.’’ See Appleyard v. Trans-

american Press, Inc., 539 F.2d 1026 (4th Cir. 1976) It is virtually

inconceivable that the court which made that decision would have

sustained the judgment N.O.V. on the basis of privilege if the

lawyers had briefed the issue and pointed out the evidence of

denial and exculpation.

16

CONCLUSION

Petitioners recognize that this Court does not exist

to correct errors. However the Circuit Court decision

does not represent mere error. It is a flagrant, inde-

fensible departure from the decisions of this Court and

the supreme law of our land. It marks a singular de-

parture from the Constitutional, Statutory and Fed-

eral Rule provisions guaranteeing all citizens a jury

trial in Federal Courts. It also marks, for the first

time in this country, the creation of a favored class of

litigants—lawyers. For both reasons, it is respectfully

submitted that the Petition for a Writ of Certiorari

should be granted.

Respectfully submitted,

B. Micuart DANN

CHARLES D. RousH

TREON, WARNICKE, Dann & Rovusu, P.A.

919 North First Street

Phoenix, Arizona 85004

July 12, 1979

APPENDIX A

pve

la

[159]

IN THE UNITED STATES DISTRICT COURT FOR THE

NORTHERN DISTRICT OF WEST VIRGINIA

Civil Action No. 77-183-E

Movern Marts, Inc., a Pennsylvania Corporation; Pitts-

puRGH & West Virainia INvestMENT Co., a Pennsylvania

Corporation; Berry Bernstein: Suirtey L. WEINBERGER,

as custodian; Don D. Brooxs; I. M. Motever; and JEAN

B. Paris, Plaintiffs,

v.

Sran.ey E. Preiser and Joun F. Brown, Jr.,

Defendants

September 18, 1977

Elkins, WV

Berore: The Honorable Ropert EK. Maxwett, Chief Judge

APPEARANCES:

For the Plaintiffs:

Charles D. Roush, Esq., Phoenix, AZ

For the Defendants:

Mr. Herbert G. Underwood, Esq., Clarksburg, WV

Mr. Edward W. Eardley, Esq., Charleston, WV

Whereupon, the above styled matter came on for a

hearing on motions on the 19th day of September, 1977

2a

in the United States District Court, and the following

findings and conclusions were given by the Court, to-wit:

[160]

PROCEEDINGS

‘THe Court: The litigation before the Court overlaps

with several claims and to reach the issues that are ap-

parent in this litigation today on the motions that are here

and now, it perhaps would suffice us and be profitable to

us to go into a brief overview of what we are dealing with.

.This would certainly keep our record straight and would

tend to our bookkeeping in this matter because of the sev-

eral motions that are pending, such as the motions to dis-

miss that have been cast as we might say in the second

priority position.

The amended complaint, which we are dealing with here

was filed in the United States District Court for the District

of Arizona and this was on April 13th of 1977. And this

yep back, of course, to the original complaint of April

, 1977. :

|

Count 1 of that Complaint is representative of all the

plaintiffs in the case and it is directed against both of the

named defendants. In essence, Count 1 charges the mis-

handling of the litigation as was called in the Fourth Cir-

cuit, ‘*Molever v. Levenson’’, and which have been referred

to in the pleadings of this case and which has been carried

on our Court file as Civil Action No. 74-2W. This was a

consolidation of three separate and distinct causes of action.

[161] Count number 2, while it incorporates certain ini-

tial paragraphs of Count number 1, and which by reference

would incorporate both of the defendants, is by virtue of

its more particularized allegations, directed toward and

against the defendant Preiser alone.

Number 4 of Count 2 particularizes the defendant Preiser

and the Court does not recall other than the referenced

)

— whee ee

3a

paragraphs, the involvement of the defendant Brown in

that matter.

The second Count charges that the defendant Preiser

failed to prosecute a cause of action that the plaintiff Mol-

ever had. It also charges him with improperly advising

and causing Molever, the plaintiff Molever, to dismiss a

cause of action that he had instituted. It also accuses the

defendant Preiser of failing to amend Civil Action 74-2-W

so as to inelude a cause of action on a letter which was

written by—allegedly written by—Abraham Pinsky, an At-

torney in March of 1971. The point of reference we have

on the litigation in Count No. 2 is March of 1971.

There was no particular date assigned but the entirety

of Count 2 goes to March of 1971, that month and that year.

The defendants have responded with a counter claim

and first of all, defendant Preiser secks attorney fees in

the sum of $298,066. He also alleges malicious prosecution

[162] and abuse of civil process arising out of the allega-

tions that are set forth in the complaint and in the

Amended Complaint that is now before this Court; this

matter having been transferred here by the District Court

of Arizona to the Northern District of West Virginia.

The third count of the Preiser counter claim is one of

libel, slander, and defamation arising out of the allega-

tions of the Complaint and Amended Complaint now be-

fore the Court first and secondly; two other persons. A

conversation apparently was carried on which has not

been otherwise particularized.

The defendant Preiser seeks the sum of $298,066 in the

first cause of action and $1,000,000 plus fees and costs in

the malicious prosecution cause of action, and $1,000,000

compensatory damages and $1,000,000 punitive damages in

the dafamation counterclaim, the third cause of action.

Og E ES FEES apnea

4a

We have the counter claim of the defendant Brown. He

seeks Attorney fees in the first cause of action in the

counter claim in the total sum of $51,114.47.

Ile, too, alleges malicious prosecution and abuse of civil

process, and he seeks compensatory damages in the sum

of $1,151,114 and punitive damages in the sum of $1,000,-

000. Presumably, although this is not expressly stated, on

the four corners of the pleadings he is seeking damages in

the amount of $1,000,000 on the malicious prosecution

compensa- [163] tory damages.

Now, this is the structure of the litigation to which we

must address ourselves.

There have been formal motions to dismiss by the de-

fendants. In the plaintiffs’ reply, there have not been in

so many words, a formal motion to dismiss, but the lan-

guage of the plaintiffs’ reply seeks a dismissal of the

counter claims. It seems fair and logical and efficient that

we should, at this juncture of our proceedings, read the

pleadings in a sense that would give effect and cause to

their filing. So it would seem that we have before us mo-

tions to dismiss with regard to both the complaint and

to the counter claim.

The language of the formal motions of the defendants

and the implied language, at least, of the plaintiffs in the

reply to the counter claims leaves little doubt that the

parties were thinking in terms of, and directing the nature

of this proceedings, toward a Rule 12(b)(6) motion for

dismissal on the failure to state a claim upon which relief

can be granted.

The 12(b)(6) motion is a very limited opportunity to dis-

miss a case as we look at it in the general purport of the

language of the Rule itself, study the history and so forth,

and the evolution of it.

7

(isan fiotaes elude

5a

There are, of course, some exceptions with regard [164]

to the law of libel litigation, the law of libel and slander

and malicious prosecution.

The test for a Rule 12(b)(6) motion is pretty fairly

stated in Federal Practice and Procedures by Wright and

Miller, Volume V and particularly Section 1357 which con-

tains the subheading of ‘‘Practice under 12(b)(6)”’.

Now, at page 600, Professors Miller and Wright say as

follows.

‘““The test most often applied to determine the suf-

ficiency of the complaint was set out in the leading

case of Conley v. Gibson, in which the Supreme Court

stated that in appraising the sufficiency of their com-

plaint we follow, of course, the accepted rule that a

complaint should not be dismissed for failure to state

a claim unless it appears beyond doubt that the plain-

tiff can prove no set of facts in support of his claim

which would entitle him to relief.’’

Now, continuing on with the text, Professor Wright

says, ‘‘The question, therefore, is whether in the light

most favorable to plaintiff, and with every doubt resolved

in his behalf, the complaint states any valid claim for re-

lief. The complaint should not be dismissed merely because

plaintiff’s allegations do not support the legal theory he

intends to proceed on, since the Court is under a duty to

examine the Complaini to determine if the allegations pro-

vide for relief [165] on any possible theory. Similarly, it

need not appear that plaintiff can obtain the particular

relief prayed for, as long as the Court can ascertain that

some relief may be granted. Nonetheless, as is discussed

more fully elsewhere,.the pleader must set forth sufficient

information to outline the elements of his claim, or to per-

mit inferences to be drawn that these elements exist.

Nor should the complaint be dismissed merely because

the Court doubts plaintiff will prevail in the action.

6a

Whether plaintiff can prevail is a matter properly deter-

mined on the basis of proof and not merely on the plead-

ings. The Court should be especially reluctant to dismiss

on the basis of the pleadings when the asserted theory of

liability is novel or extreme, since it is important that

new legal theories be explored and assayed in the light of

actual facts rather than a pleader’s suppositions. In any

event, the motion for summary judgment provides a more

expeditious and effective procedure for quickly terminat-

ing an action that does not appear to merit relief on its

substantive merits.

As a practical matter, a dismissal under Rule 12(b)(6)

is likely to be granted only in the unusual case in which

plaintiff includes allegations that show on the face of the

complaint that there is some insuperable bar to relief. In

other words, dismissal is justified only when the allega-

tions of the complaint itself clearly demonstrate that [166]

plaintiff does not have a claim. For example, in Case v.

State Farm Mutual Automobile Insurance Company, plain-

tiff claimed damages for defendant’s wrongful lornine

tion of a contract. However, the terms of the contract

which was attached to the complaint as an exhibit iow

that defendant has the right to terminate with or without

cause. Since it was clear that plaintiff had not stated an

actionable claim, the Court dismissed the claim under Rule

12(b) (6). Similarly, when the complaint in an action for

negligence contained allegations indicating that the sole

proximate cause of the injury was the aegligence of the

plaintiff and not of defendant, the complaint was dismissed

for insufficieney.’’

There are some other examples, but I think that gives us

a fairly good cross-section of the limited opportunities

that do arise under Rule 12(b)(6) motions.

Now, continuing on with this, I would refer to Section

1397 at page 610, where Professor Wright notes as follows.

dt tenella

:

:

7

7a

“There is one significant exception to the general rule

that the complaint will be construed liberally on a Rule

12(b)(6) motion. When the claim alleged is a traditionally

disfavored cause of action, such as malicious prosecution,

libel and slander, the Courts tend to construe the com-

plaint by somewhat stricter standard and are more inciined

[167] to grant a Rule 12(b)(6) motion to dismiss. For ex-

ample, in Ne ‘onal Bowl-O-Mat Corporation v. Brunswick

Corporation, the Court dismissed the third count of the

defendant’s counter claim for failing to state a claim for

Gefamation. Two of the pleading deficiencies noted by the

Court were defendant’s failure to set out the alleged de-

famatory statements with sufficient particularity to allow

the Court to determine if they would support the action,

and defendant’s failure to plead dates indicating that the

action was not barred by the Statute of Limitations. If the

Court had applied the usual liberal standards for constru-

ing a complaint, it probably would have assumed, for pur-

poses of the motion, that the statements were dafamatory

and that the action was timely.”’

There is another reference that might be made just in

passing, and that is the contents of Section 1245 of the

same Volume of Wright and Miller and this having to do

with the question of libel and slander and Section 1246,

that has to do with malicious prosecution. The latter two

sections in looking at the cause of action in light and from

the view point of a Rule 8 aliegation.

Mr. Roush mentioned to us in his comments and, of

course, it is referred to here in the matter just mentioned

where I read from Professor Wright, and that is the test

of a claim ean be best arrived at through the motion for

summary judgment process and whether it stands the test

of time [168] and is a claim that relief can be granted

upon is usually raised in that particular. So, it is another

avenue that is available.

Sa

Now, in looking at Rule 12, the last sentence thereof

and sub-paragraph B, we find, ‘‘If, on a motion asserting

the defense numbered (6) to dismiss for failure of the

pleading to state a claim upon which relief can be granted,

matters outside the pleading are presented to, and not ex-

cluded by the Court, the motion shall be treated as one

for summary judgment and disposed of as provided in

Rule 56, and all parties shall be given reasonable oppor-

tunity to present all materi»! made pertinent to such a

motion by Rule 56.’’

And this goes right to the suggestion that Mr. Roush

has made here this morning.

Now, Wright and Miller have some commentaries on the

conversion of a Rule 12(b)(6) motion to a summary judg-

ment motion. Section 1356 of the same Volume of Wright

and Miller which I have earlier referred to, this refers to

the last sentence of the Rule that I just mentioned here.

Now, on page 676, Professor Miller speaks as follows:

‘Technically, of course, the Rule 12(b)(6) motion does

not attack the merits of the case; it merely challenges the

pleader’s failure to state a claim properly. As noted above,

however, since the promulgation of the Federal Rules

[169] most Courts have allowed the parties to go beyond

the question of the complaint’s formal sufficiency and to

introduce affidavits and other matters in conjunction with

the Rule 12(b)(6) motion, to ascertain whether there is

any merit to the claim. In that sense, the Rule 12(b) (6)

motion is closely related to the summary judgment motion

and the addition of the last sentence in Rule 12(b) (6)

merely acknowledges that fact.

Although the conversion provision in Rule 12(b) ex-

pressly applies only to the defense described in 12(b) (6),

it is not necessary that the moving party actually label his

motion as one under that provision in order for it to be

converted into a motion for summary judgment. The ele-

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9a

ment that triggers the conversion is a challenge to the

sufficiency of the pleader’s claim supported by extra-plead-

ing material. It is not relevant how the defense actually

is denominated.’’

Now, over on page 679 of that same Section, Section

1366, the text continues as follows.

‘‘When the extra-pleading material is comprehensive

and will enable a rational determination of the summary

judgment motion, the Court is likely to accept it; when it

is scanty, incomplete or inconclusive, the Court probably

will reject it.’’

Now, going on further down it says, ‘‘Once the Court

[170] decides to accept matters outside the pleading, it

must convert the motion to dismiss into one for summary

judgment, and several Courts have held that it is revers-

ible error for the District Court to consider outside matter

without converting the motion to dismiss into a motion

for summary judgment. A few Courts have limited this

compulsory aspect of the last sentence in Rule 12(b) by

holding that only items specifically enumerated in Rule

56(c) constitute matters outside the pleading. Under this

interpretation, only depositions, answers to interrogator-

ies, admissions on file, and affidavits are sufficient to con-

vert a Rule 12(b)(6) motion. Most Courts, however, view

matters outside the pleading as including any written or

oral evidence in support of, or in opposition to the plead-

ing that provides some substantiation for, and does not

merely reiterate what is said in the pleadings.’’

Now, going over to page 683, the text continues as fol-

lows. ‘‘As soon as a motion to dismiss under Rule 12(b)

(6) is converted into a motion for summary judgment, the

requirements of Rule 56 become operable. It is important

that the Court give the parties notice of the changed status

of the motion and a reasonable opportunity to present all

material made pertinent to such a motion by Rule 56. In

10a

this way, no one will be taken by surprise by the conver-

sion. Once the proceeding becomes one for summary judg-

ment, the moving [171] party’s burden changes and he is

obliged to dc.aonstrate that there exists no genuine issue

as to any material fact and that he is entitled to a judg-

ment as a matter of law.”’

Just one more reference that I would bring to our at-

tention in this matter and that is on page 664 and is Sec-

tion 1364.

‘*The use of extra-pleading material on a motion under

Rule 12(b)(6) has caused considerably more difficulty

however. Soon after the Federal Rules went into effect a

controversy as to whether Rule 12(b)(6) permitted the

use of affidavits and other materials arose among the com-

mentators and the Courts. The majority view was to the

effect that Rule 12(b)(6) overturned the common law bar

against the speaking demurrer and permitted a speaking

motion to dismiss for failure to state a claim for relief.’’

Now, turning over to page 668 of this text, in pertinent

part it goes on to say, *‘The 1948 amendment to Rule

12(b), which added the last sentence to the sub-division

and the parallel amendment to Rule 12(c), leaves no doubt

that materials outside the pleading can be presented in

support of a motion to dismiss. The purpose of the amend-

ment Was to resolve the split of authority concerning

speaking motion by providing a definite base in the Rules

for the treatment of Rule 12(b)(6) motions supported by

matters extraneous to the pleading.

[172] It should be noted that no distinction is made in

the amended Rule between a motion that simply negates

the allegations in the pleading, and one that raises affirma-

tive defenses. The Courts, however, have had little diffi-

culty in concluding that the 1948 amendment applies to

affirmative defenses as well as to denials and that these

defenses may be made on a motion to dismiss even though

they do not appear on the face of the Complaint.

lla

A wide range of material may be introduced in conjune-

tion with a Rule 12(b) motion, subject, of course, to the

Court’s discretion to reject the evidence if it feels it is

not substantial or comprehensive enough to facilitate the

disposition of the action. The illustration of the type of

evidence that has been used on a Rule 12(b)(6) motion are

the following: admissions of counsel, affidavits, answers to

interrogatories, collective bargaining agreements, con-

tracts, copyrighted material, depositions, exhibits, hearsay,

issues of a magazine, Court judgments and orders, judi-

cial notice of prior pleadings, leases, letters, oral argu-

ments, prior pleadings, and transcripts of prior court pro-

ceedings. Memoranda and briefs also may be submitted

to support or oppose a 12(b) motion, although their con-

tents probably does not qualify as evidence.”’

So there we have a very interesting procedural under-

taking in this case where both parties have resorted to

[173] a base case, we will call it, our Civil Action No. 74-

2-W. That record, of course, is before the Court with all

of the pleadings and with all of the exhibits and with all

of the rulings and the 4500 pages of transcript. We have

that entire record here and indeed, it seems that it is in-

cumbent upon the Court in a matter of this nature, to

judicially notice such a record since it is so intimately in-

volved with the litigation that we have at hand.

. Also, the Court must at least take judicial notice of the

appellate record of the base case which was the entire

record at the Court of Appeals for the Fourth Circuit. The

Court with or without judicial notice is bound as is the law

of the land, to obey that decision that came down from

that appeal.

Let me now make a reference to that at this time and

this is Molever v. Levenson and it is reported in 539 Fed-

eral Reporter, 2nd, 996. So, we have those matters and

they are in this case. .

12a

In this case we have the early wave of discovery that has

been presented to us and admitted, to a limited degree.

The Court must also take this into account.

Now, whether malpractice litigation falls into the same

category as libel and slander with regard to the extent

of the allegations that we eall disfavored or vexatious

that certainly is not an issue here.

[174] Certainly, some appellate court on some day will

discuss this issue and in the appropriate case with the

proper factual underpinnings very likely will say that this

is a disfavored area of litigation if its principal purpose

is harrassment and something in the nature of vexatious

litigation.

Going on now to this matter. We have to determine if

this is one upon which relief can be granted. There has

been referred to this Court and independent research has

disclosed that we have an expanding area of litigation in

attorney malpractice cases. There have been general ex-

pressions of expanding the law in this area by some Courts

and expanding legal malpractice. Those expressions and

those rulings and those findings, it seems, must be weighed

in light of the factual premises of the particular case, so as

to properly distinguish actionable misconduct from practi-

cal conduct of a client’s affairs. We must, of course, know

that these are measured in hindsight and of retrospect and

80, it seems that this observation is pointed and is appro-

priate at this time regardless of what standard or duty or

error of negligence or standard of performance might be

ultimately adopted in this area.

Now, going to the conversion of 12(b)(6) motions that

are before the Court by both sides to a summary judgment

motion under Rule 56. It would seem that we have just about

[175] everything that is the basis of this case in this Court.

This has been retained in the District of Arizona, of course

if that was so, this Court would not have had immediate

access to the file of 74-2-W. And it is important that the

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13a

file be available to us to know the reasons and the grounds

and the rationale of the litigation that is here.

So, in looking at this as both a 12(b)(6) motion, limited

as it is, and looking at it also from the broader expanse of

the Rule 56 summary judgment plateau, let’s measure here

the defendants’ motion to dismiss the Complaint in Count 1.

It would seem that the motion to dismiss as filed by the

defendants as to Count 1 go basically to the adverse ruling

1o the plaintiffs in 74-2-W. And that it is the result of a

rule of law, if we listen to the defendants, rather than to a

malpractice matter determined from the facts as contended

here by the plaintiff.

We must break this down. We must break this down into

the several claims that were raised in the basic litigation.

We must look to the law that controls this Court, namely;

the Fourth Circuit decision of May 3, of 1976.

Let’s turn first to the 10(B) (5) litigation where the ver-

dict was for the sum of $59,496 in the original cause of

action.

The Fourth Circuit in page 1000 of their opinion [176]

said that, “No breach of the Act by this Appellant is per-

ceived. There was no device, scheme, or artifice to defraud

. in connection with the purchase or sale of the (the

stock). Although not demandable, Molever had been given

due notice of the intended sale. Moreover, he had been

sent a financial statement of the Bank showing the addition

to the Bank’s assets. In Law, on these facts, he had no

ground of complaint. Therefore, the verdict and the judg-

ment in this action must be reversed and vacated.”

So, it would appear that t’ » law of the land with regard

to the 10(B)(5) claim is thoroughly established. The law

is pretty well stated on that.

Now turning next to the floor plan, the so-called floor

plan claim. This is a part of the derivative action, the

l4a

ci negoamspel derivative action. We have the Reichart’s floor

pian and this was an organization, or a business, which was

owned by the Levensons. It was .

3 s claimed

had misused their position. ee eet AE

eg record in this Court on this claim seems to be rather

= and rather complete. As a matter of fact, the Fourth

ireult’s opinion on page 1000 commented and said

“Despite the inexecusible deception by the defendants

?

subsequent arrangements for release and indemnification

negate plaintiff's right of recovery.”

Here there was a finding by the Court, and this is [177]

on page L001 of the opinion. “Assuming that the West Vir

ginia statute required the defendants to substantiate the ju

tice and bona fides of the agreement, to us they did o “t

clear and convincing evidence. It is overwhelming in their

favor on the issue.” Now, going on over to page 1002 if

the opinion. ‘‘On this uncontrovertable evidence we u hold

the agreement. In short, plaintiffs’ proof just did er

the test exacted by the State’s Jurisprudence ;” ce

Now, going on further with the text of the opinion, the

say. “In view of the grounds of our decision, there is i

need further to ponder these points. Upon defendant ‘ a

tions, the Distriet Court’s final order on this cause on

tion must be reversed, with judgments for the defendants.”

So there, both on the facts and on the effect of the ec

tract of idemnification, what have you or whatever va

want to call that, the Fourth Circuit, as a matter of he

has pretty well wiped out that floor plan contention. aut

Now, turning to the Dennis Li

se nnis Line of automobile loans

There was some almost $900,000 worth of those loans ind

apparently about half of them were bad. They have re-

manded that one for another tri

al. So, :

that is premature. we have a claim here

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15a

We also have another aspect of this that we must think

about. In an earlier preliminary proceedings that was be-

fore the Court on the question of jurisdictional amount,

[178] the Fourth Circuit in Bernstein v. Levenson at 437

Fed 2nd, 756 which was a 1971 case, spoke of this stock-

holder’s derivative action as being in favor of the Bank.

Page 1003, the Court said. “We previously held in earlier

proceedings that the real party in interest in this derivative

action is the Bank. The award of damages to the stock-

holders, instead of the Bank, was therefore erroneous.”

The judgment order as corrected on the 2ist of May,

1974. “That the plaintiffs and all other stockholders of the

Bank of Wheeling similarly situated recever of and from

Robert Levenson, Donald Levenson, and Reichart Furni-

ture Company, the sum of $1,230,520,” and then the rest of

that is self-explanatory.

Now, going on after the semi-colon there, it says, “And.

said plaintiffs and all other stockholders of said Bank sim-

ilarly situated recover from and of Robert Levenson and

Donald Levenson the sum of $700,000 as a result of the

Dennis Line loans,” and then the rest of it is explanatory

also. So, apparently when this was before the Fourth Cir-

cuit, these were ascertained and determined as to who

should prevail and who is the real party in interest. And

of course, that did not preclude anybody with standing to

come forward and to prosecute the case. But the real party

in interest is what it says. But this is something that as of

- et has not been determined and we are now in the early

stages of the re- [179] structuring of the basic case for

disposition here and now.

Now, going on. We are faced there with those problems

and in other words, we are dealing here with the complaint

of $5,330,016, I believe that is the total amount of the

amended complaint and the addendum clause and eliminat-

ing the Dennis Line of auto loans because it is a pending

matter and thus is premature here, that would be $700,000.

l6a

So eliminating the Reichart’s floor plan of $1,230,520 and

eliminating the 10(B)(5) cause of action of $59,496, we are

then left with the defamation claim which the jury verdict

was on all counts, came out to Three and a-quarter Million

Dollars. It was this claim that the Court, this Court, set

aside the jury verdict on and this was then affirmed by the

Fourth Cireuit Court of Appeals.

Now, let’s look to the malpractice issue here as measured

against the defamation. We have the defamation occurring

on September, September 29th of 1966, and that being at a

Board of Directors meeting. That was the first cause of

action and that was against Robert Levenson alone.

The second basic cause of action under defamation was

against Robert Levenson, Donald Levenson, and Joseph

Gomphers, their Attorney.

Now, this allegedly occurred at the Board of Directors

meeting in February of 1967. Now, going on to the third

defamation as alleged, that occurred on November 25, 1966

and [182] an area that could be further developed that the

defendants here failed to introduce evidence that would

lead this matter further along the road to an affirmative

accomplishment, but for their negligence. But the evidence

in this case is rather striking. It would be hard tod imagine

anything further being developed than was developed in

the earlier case.

So we have here these causes of action which to the

Court seem to be causes of action that are governed by

very well defined rules of law set down by the Circuit

Court of Appeals for the Fourth Circuit.

Because they are matters of law, and because the claim

must be a claim upon which relief can be granted, the Court

believes that as to these aspects of the matter the motions

to dismiss must be granted.

N ow, there is another area that is raised by the motions

to dismiss and that is, namely, there can be no malpractice

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17a

cause of action if there are errors of judgment and/or trial

tactics, or secondly, in the Appellate practice, as long as the

rules of practice are observed and appeals are handled in

a timely fashion and properly presented. That perhaps does

not articulate the matter as fully as the defendants have

done in their motions.

Looking at that, it seems important to us to turn to this

Woodruff case that has been mentioned by both sides. This

is found in 423 Federal Supplement at 1284 and is a 1976

[183] case and comes to us from the United States District

Court for the Western District of Tennessee.

We have Chief Judge Bailey Brown writing the opinion

for the Court. Now this was a case which was based upon

legal malpractice. and the cause of action was a personal

injury suit, and this had more added to it perhaps, than

what we have in the ease before the Court.

The matter had been dismissed by the District Court and

then it was sent back by the Sixth Circuit Court of Appeals

for trial. The trial was had, the jury failed to reach a ver-

dict. Judge Brown took the case away from further sub-

mission to the jury.

In this case, they presented a summary of injuries and

damages and the entire transcript, except the part dealing

with the injuries, the personal injuries in the personal in-

jury case, was read to the jury as well as the lengthy charge

and so forth. In other words, the whole personal injury

case upon which this legal malpractice was based was read

to the jury insofar as it was really pertinent to the issues.

Then the Court said, at page 1287, “This Court had con-

cluded that questions of law with respect to the personal

injury trial became, with the aid of expert testimony, ques-

tions of fact for the malpractice jury and were so treated,

leaving for the Court questions of malpractice law.”

18a

[184] And then an expert testified as to the accident re-

construction and how the claims were not investigat

erly and so forth. esi’

Then as I recall it, the Court took the question of Appel-

late negligence from the jury in this case, but that is not

important to our issue here. 7

Going now over to page 1288, the Court said as follows

“Tt seems to this Court that there are two main problems

in maintaining such a case as this. The first is that the

preparation for and the trial of a law suit toa jury requires

the exercise of a kind of judgment that is quite different

from the kind of judgment exercised by other professions

This is so because in dealing with human beings as the trial

lawyer must, be they witnesses, judges, clients, adversary

counsel, and jurors, the factors that come into play are in-

tangible and numerous, so that the trial lawyer has to rely

on his education, practical experience, rationale analysis

and sheer instinct in making decisions. This being true it

was difficult for this Court to believe it would be proper to

submit to a jury, based upon the expert testimony of a sec-

ond-guessing lawyer who has the benefit of hindsight the

question of whether the trial lawyer was negligent. ;

The second reason why this Court had serious doubt as

to whether this action could be maintained has to do with

causation; the malpractice jury is called upon to determine

[ 185} whether, if something that was done by the defend-

ant’s trial lawyer had not been done, or something that was

not done had been done, the j nia

ae jury verdict in th

injury case would have been different.’ © personal

And then going over to page 1289, the C

additional matters in that case, namely, he

conflict of interest claims. Of course, we don’t have an of

that in this. The up-shot of the Woodruff opinion was that

judgment was entered for the defendant. In other words

the Court, with the benefit of the total record and with the

RS SCA He Sos te ce tates nig ithe Sle Sea

19a

benefit of the evidence and the witnesses, with the benefit of

the charge to the jury and the whole record before him as

developed, let the matter go to the jury, and upon reflection

and upon deliberation, determined that under those circum-

stances, under those issues whicli were so very closely paral-

lel to our case here, thought it was not a matter that should

be disposed of on the facts, but it should be disposed upon

the law.

Another area that is enlightening to us are the comments

in Amjur 2nd, Attorneys at Law, Section 170.

‘<Tf an attorney acts in good faith, and in an honest belief

that his acts and advice are well founded and in the best

interest of his client, he is not held liable for a near error

of judgment.’’ Now, going on down to the last [186] para-

graph of that section. ‘‘In the absence of an express agree-

ment, an attorney is not an insurer or guarantor of the

soundness of his opinion, or of the successful outcome of

litigation.”’ And then going over to the Appellate level on

this issue, and this is Section 172, it is said, ‘‘ Negligence of

an attorney in failing to take proper steps to protect his

client’s right of appeal or review has been held actionable

where, as a result, the right of the appeal was lost. But it

has been held that charges of negligence in failing to obtain

Appellate Review or a new trial after an unfavorable judg-

ment or verdict below would not support a verdict against

the attorney in the absence of a showing that if the appeal

or new trial had been obtained, a judgment more favorable

to the plaintiff would have resulted.”’

Well, in looking to our case file, the base litigation which

is here, which is 74-2-W, the plaintiffs acquired everything

that they could ask for. They acquired everything. They

have been deprived of the factual side of their case by vir-

tue of the applicable law as read by this Court and as read

by the Fourth Circuit. There are, of course, emerging

areas of malpractice being developed. I was referred to,

and I have a xerox copy of the American University Law

20a

Review article, which is Volume 26, page 408, and at page

433 where the writer says, ‘‘A client faces the most difficult

burden of proving causation when he alleges that his attor-

ney was [187] negligent in preparing or conducting litiga-

tion. The client must prove that the result of the prior liti-

gation would have been different but for the attorney’s

negligence. Such proof can be made only by trying the origi-

nal action in the present malpractice trial, thus creating a

suit within a suit. The client must prove that he had a

sound claim or defense in the original action or that the

attorney negligently failed to effect an appeal that would

have been sustained.’”’

And then going on now to the next paragraph.

‘‘The requirement that the first suit be proven within the

second is merely a reflection of the basic tort law principle,

that to establish liability for negligence, the plaintiff must

show that but for the defendant’s negligence the injury

would not have been sustained. If the plaintiff in a malprac-

tice action would have lost the original suit notwithstanding

the attorney’s negligence, then that negligence did not

cause any injury in fact, and no liability attaches.’’

That language has such a ring to it in this litigation, it

seems, in light of the voluminous factual record that we

have and in light of a ruling on the law by the Fourth

Circuit.

So, again, for reasons of failure to state a claim upon

which relief can be granted as we measure it under the

[188] more restricted rules as earlier indicated, and under

the more expanded rules and the included material, that

certainly seems germaine and valued in this matter, the

Court believes that the motions to dismiss the first count of

the Complaint must be granted.

There are further grounds cited that the Statute of Limi-

tations on this first count of the claim and in view of the

Court’s ruling, which is dispositive of the issue, it does not

2la

appear necessary at this time for the Court to address it-

self to that issue. ;

Now, let’s turn to defendants’ motions to dismiss count 2

of the Complaint. This is an action where the plaintiff Mol-

ever alone sues the defendant Preiser alone. The defendant

Brown is a party by reference but not by any specific aile-

gations, but that is something that could be corrected or

modified on amended pleadings and that is not a definitive

or final ruling, but just a mere observation.

Now, looking at paragraph 4 of count 2 of the Amended

Complaint in this matter, it says, as follows. It is short so

I will just go ahead and read that. ‘‘Defendant Preiser

thereafter agreed to file and prosecute the appropriate

damage action against Pinsky and the Levensons, but neg-

ligently failed and refused to do so within the time pro-

scribed by the applicable statute of Limitations. Further-

more, the defendant advised and prevailed upon plaintiff to

[189] dismiss a complaint for damages for defamation that

had previously been filed ageinst said Pinsky and refused

to amend the Complaint in said proceedings to seek dam-

ages for the defamatory letter of March, 1971. Defendant

also negligently advised plaintiff that no separate action

could be filed seeking damages for the Pinsky letter. Plain-

tiff’s causes of action against Pinsky have been forever

barred by the applicable Statute of Limitations. Plaintiff's

causes of action aforesaid had a reasonable damage value

and at least $1,000,000 compensatory and punitive dam-

ages.’’

Well, we have at least three claims here that we must

look to. During the period of the original cause of action

which is 74-2-W, a defamation occurred. Now, turning to

paragraph 3. ‘‘Abraham Pinsky, of Wheeling, West Vir-

ginia, published a letter to at least two newspapers with

National circulation, the Los Angeles Times and the Wash-

ington Post, and to two separate committees of the United

22a

States Congress, which letter defamed plaintiff Molever

and caused him substantial damages.’’ And so forth.

And that goes on to say that the letter was written dur-

ing the pendency of 74-2-W. That was the litigation against

the Levensons in which Pinsky was their attorney of record.

Now, looking to paragraph 2. ‘‘Sometime prior to March,

1971, plaintiff I. M. Molever, acting in his own be- [190]

half, retained defendant Stanley B. Preiser to represent

plaintiff Molever’s interest in the defamation claim, part of

the litigation referred to in Count 1 above. Said Attorney-

Client contract was entered into in the State of Arizona

while defendant Preiser was present in said state for the

purpose of negotiating, procuring, and consumating said

contract.”’

The only other reference we have as to times specifically

is the defamatory letter of March, 1971. There is no other

reference to a time, a date, or a place. So, whether there

was a negligent failure to sue or whether there was an im-

proper advice of counsel to dismiss a case that had been

filed presumably on this letter, whether there was a negli-

gent or improper refusal to amend the complaint so as to

include allegations of the March, 1971 letter, we have solely

and totally only March, 1971 as our time as to Count 2.

This also goes to the question of advising Molever that

no separate action could be filed on the Pinsky letter. The

time of the publication was March of 1971. The Court, I

believe, could take judicial notice, of the fact that March of

1971 is a year and a month, it had 31 days in that month, so

that is outside of our time limit. That is the outside of our

time limit.

Now, as we have earlier noted in our amended complaint

here, this was filed in April, April 13, 1977 with the [191]

Clerk of the United States District Court for the District

of Arizona. That amendment relates back to the original

complaint, which was filed April 4, 1977, and that was with

the same clerk and the same Federal Court in Arizona.

23a

The date of the submission is April 4, 1977 by counsel

for the plaintiffs in this case now before the Court.

So, as we take March 31, 1971, we apply the West Vir-

ginia one year Statute of Limitations to the defamation

action and we find that March 31 of 1972 is the date in ques-

tion. And then whether we use the Arizona four year

Statute of Limitations or the West Virginia one year Stat-

ute of Limitations, we find that we are still short by four

or five days of falling within the period of the limitation.

So Count 2 of the Complaint here must fail on the claim

of being untimely. Also, it is not necessary perhaps to touch

upon this, but it does not seem to satisfy the overviews of

particularity that Professor Wright has ascribed to, and

Professor Miller, as to more detail with regard to allega-

tions of matters of this nature.

Now, let me turn next to the plaintiffs’ motion to dismiss

counter-claims. The defendant Preiser has sought in the

first count of his counter claim to obtain attorney’s fees in

the sum of $298,066. Now I said Attorney fees; it says for

expenses, fees and costs that they, the plaintiff and he had

agreed to which were not paid. This has to do [192] with

the contract.

The reply of the plaintiff on this matter is that the agree-

ment does not satisfy the Statute of Frauds, it is without

the Statute of Limitations, and it does not particularize

who made the agreement and so forth and so on, or how the

agreement was formalized. Those are good objections in the

latter particular.

And while 12(b)(6) under that at least, there are obliga-

tions where proper and where possible to amend, the de-

fendant will be—the defendant Preiser will be required to

particularize his contentions of count 1 within 20 days.

Count 2 of the counterclaim that defendant Preiser has

presented is one of malicious prosecution. The plaintiffs

24a

say that this is premature and was premature; however, in

light of the Court’s ruling on the matter here today, this

would breathe new life into the litigation of malicious

prosecution and abuse of process.

On the third count of the claim of defendant Preiser,

there are allegations that in this case that maligned the

defendant, are untrue and so forth. The plaintiffs reply

that pleadings and allegations in Court matters of this

nature are given a privilege and that is true. The right of

the individual in many instances must yield to the right of

society under our system of law in order to get at the truth

of the situation.

[193] So the portion that alleges defamation allegations

in this civil action may be stricken. He goes on, however,

and says that the plaintiffs knowingly published the libel

contained in the lawsuit against this defendant, and did

knowingly publish slanderous statements of and concerning

this defendant to various and numerous persons charging

negligence and fault against this defendant in the handling

of litigation. That does not particularize the defamation in

the degree that the stricture rules has indicated by Profes-

sor Wright seem to require and that seems to be the major-

ity view.

However, in order that we may be able to reach the lan-

guage of the malicious prosecution and defamation and to

determine whether these are disfavored areas of litigation

and so forth, the defendant will be required to replead with

the needed particularity as to that portion of the claim

that is outside, over and beyond the allegations that are

here and now before the Court.

The defendant Brown has also filed a counter claim for

fees. Again, the motion to dismiss goes to allegations of the

failure to satisfy the statute of fraud and thus disabled, the

Statute of Limitations is inapplicable and the failure to

allege the debtor. In this case, I believe the Complaint does

25a

allege that Molever contracted with the defendant Brown.

So there does not seem to be a need to particu- [194] larize

here.

I would refer us back to paragraph 4 of the answer. I

mis-spoke when I said counter claim and that the defendant

denies the allegations found in paragraph no. 4 of the

plaintiffs’ Complaint and affirmatively alleges that he was

retained by I. M. Molever for the purposes of complying

with the local rules of Court, United States District Court,

Northern District of West Virginia and so forth. So that is

the area that perhaps, by reference, would be enough to

satisfy the pleading requirement.

As to the malicious prosecution, in view of the Court’s

ruling here today this now becomes a viable cause of action.

The reply seems to raise a question of privilege. And ap-

parently is directed towards the defendant Preiser’s libel

action because there is no defamation, libel and slander in

Mr. Brown’s cause of action. That is the only thing urged

in the cause of action by Mr. Brown.

So, for bookkeeping purposes, we have motions by the

defendants to require the plaintiffs to post bond and surety

for costs and that will be denied. There are objections to

the discovery by the defendants and perhaps there are some

other motions that are pending by the plaintiffs in this

matter. There is also the defendants’ motions to stay dis-

covery pending action on the motions to dismiss. All of

these discovery efforts will now be terminated and stayed

[195] at this time.

Also, discovery will start anew after the 20 days. For re-

pleading these matters that remain in this litigation.

I will ask counsel for the defendants, since they have pre-

vailed on the motions and are closer to this area, to pre-

pare an appropriate order carrying forward all of these

various rulings by the Court today and submit that to the

Court for consideration and entry. I would have you send

26a

to plaintiffs’ counsel a copy of the order and if there are

any objections to it, you can advise the Court.

All right. We will stand in recess for the time being.

(Whereupon, this matter came to a conclusion at this

time.)

27a

[114]

ORDER

On the 19th day of September, 1977, came the plaintiffs,

by Charles D. Roush, their attorney, and came the de-

fendant Stanley E. Preiser, by Edward W. Eardley, his

attorney, and the defendant John F. Brown, Jr., by Her-

bert G. Underwood and James D. Gray, his attorneys, all

pursuant to the respective motions of said defendants,

which are:

1. Motions to dismiss in accordance with Rule 12(b)

of the Federal Rules of Civil Procedure;

2. Motion to require security for costs;

3. Objections to the plaintiffs’ motion for produc-

tion of documents.

Thereupon, the Court heard argument upon the issues

raised by the respective motions of said defendants to

dismiss this civil action as to them, and the plaintiffs’

resistance thereto, having heretofore reviewed the respec-

tive memoranda of law submitted by the parties hereto.

It appearing to the Court that the plaintiffs have alleged

that defendants, by their counterclaims, have failed to

state a cause of action against the plaintiffs, the Court

is of opinion to consider such contention of the plaintiffs

and the resistance of the respective defendants thereto as

properly before the Court at this time.

After due consideration, the Court is of opinion to and

does take judicial notice of the entire record of the “base

litigation” herein, which is Civil Action No. 74-2-W, in the

United States District Court for the Northern District of

West Virginia, and the decision of the Court of Appeals

[115] for the Fourth Circuit in Molever et al. v. Leven-

son et al., Nos. 75-1107 and 75-1108, decided May 3, 1976,

and by reason thereof hereby Orvrrs the respective 12(b)

motions of the defendants and the motions of the plaintiffs

28a

to dismiss the counterclaims for failure to state a cause

of action upon which relief can be granted, treated as

motions for summary judgment in accordance with Rule

56 of the Federal Rules of Civil Procedure.

There being no genuine issue of material fact as between

the plaintiffs and the defendants, and there being no just

reason for delay, it is Orperep that Count One of plain-

tiffs’ amended complaint be dismissed for failure to state

a cause of action upon which relief may be granted, and

that Count Two of plaintiffs’ amended complaint be dis-

missed upon a plea of the statute of limitations as to

the defendant Stanley E. Preiser and for failure to state

a cause of action upon which relief may be granted against

the defendant John F. Brown, Jr., which dismissal is

with prejudice, and to which the plaintiffs, by counsel,

except.

It is further Orperep that the plaintiffs’ motions for

summary judgmént as they apply to the counterclaim of

the defendant John F. Brown, Jr., are denied; that said

motions insofar as they pertain to Count I and Count ITI

of the counterclaim of the defendant Stanley E. Preiser

are sustained, and said counts are dismissed, without

prejudice, and with leave to amend Count I so as to

specifically allege the party or parties with whom said

defendant allegedly contracted with regard to the matters

at issue herein and with leave to amend Count III so as to

particularize the [116] nature of the alleged defamation;

identify to whom publication was made and in all respects

to satisfy the counterclaimant’s obligation to plead pre-

cisely a claim for defamation.

It is further Orperep that the motions of the respective

defendants for security for costs is denied, and all other

motions and objections as to discovery procedures are

OrpereD overruled and denied, with all discovery proce-

dures OrpERepD suspended and stayed until the amendments

authorized herein and the responses thereto have been

filed.

Eo eScOoOrOr ee

29s

It is further Orperep that the opinion of this Court

rendered on the 19th day of September, 1977, be tran-

scribed and made a part of the record of this case and

shall constitute this Court’s findings of fact and conclu-

sions of law.

Enter: October 6th, 1977

/s/ Ropert EK. Maxweiu

Judge, United States District Court

Approved:

/s/ Epwarp W. Earpiey

Attorney for Defendant Stanley E. Preiser

/s/ Hersert G, UNpERwoop

Attorney for Defendant John F. Brown, Jr.

I hereby certify that the annexed instrument is a true

and correct copy of the original on file in my office.

Attest: Thomas F. Stafford

Clerk, U.S. District Court

Northern District of West Virginia

By: /s/ [Illegible]

Deputy Clerk

30a

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 78-1034

Mopern Marts, Inc., a Pennsylvania Corporation; Prrrs-

purcH & West Virainia Investment Co., a Pennsylvania

Corporation; Berry Bernstein: Suimiey L. WEeiNBERGER,

a Custodian; Don D. Brooks; I. M. Motever; and Jean B.

Paris, Appellants,

v.

Stranutey KE. Preiser; and Joun IF, Brown, JR.,

Appellees.

Appeal from the United States District Court for the

Northern District of West Virginia, at Elkins.

Robert E. Maxwell, Chief Judge.

Argued December 6, 1978

Decided March 8, 1979

Before Winter, Russert, and Wiener, Circuit Judges.

Charles D. Roush (Francis G. Fleming, Treon, Warnicke,

Dann & Roush, P.A. on brief) for Appellants; Herbert G.

Underwood, Edward W. Eardley (Steptoe and Johnson

on brief) for Appellees.

Per Curiam:

For a first cause of action, plaintiffs collectively sued

defendants for legal malpractice in a case in which we

reversed a judgment obtained by plaintiffs, Molever v.

Levenson, 539 F.2d 996 (4th Cir. 1976). For a second

cause of action, plaintiff I. M. Molever sued defendant

Stanley K. Preiser for legal malpractice in handling a

suit for defamation which arose out of the litigation re-

3la

ferred to in the first cause of action, The district court

granted summary judgment for defendants in both causes

of action, and plaintiffs appeal.* We affirm.

I.

Before proceeding to the merits, we treat two of plain-

tiffs’ suggestions about the possible disqualifiaction of one

or more of the members of the panel to hear this appeal.

Plaintiffs have not formally moved for the disqualification

of any member of the present panel, but in a letter from

plaintiffs’ counsel disqualification is suggested for two

reasons: first, it is sugyested that no judge who partici-

pated in the decision of Molever v. Levenson, supra,

should sit in this case since this case concerns a claim of

legal malpractice in the prior appeal, and second, counsel

advises us that, in the course of discovery in the present

case (while it was pending in the District of Arizona and

before it was transferred to the Northern District of West

Virginia where it was decided), defendants listed all of

the judges of this court as witnesses for defendants,

We reject both suggestions that we are disqualified.

With regard to participation in the previous appeal, we

see no reason why, in a case of this nature, one who sat

and decided a previous appeal is not fully competent to

decide if there was legal malpractice in the representation

in that appeal. A claim of legal malpractice raises issues

about the competence and quality of representation by

counsel, not the correctness of the decision in the prior

appeal, the competence of the judicial participation, or the

quality of the judicial result in the prior appeal.

* One of the defendants, John F. Brown, Jr., counterclaimed

for alleged malicious prosecution and for alleged abuse of process.

When the instant appeal was taken, the counterclaim was unde-

cided. However, the district court certified, pursuant to F. R. Civ.

P. 54, that the summary judgments for defendants were final ; hence

this appeal is properly before us.

32a

With regard to the listing of judges of this court as

witnesses for the defendants, none of us has any knowl-

edge of the case or the quality or competence of legal

representation in the prior case which is not reflected by .

the record, the briefs and the tape of oral arguments in

that case. Any claim of legal malpractice in the prior case

must be based, inter alia, upon the record, briefs and

arguments in that case and not upon any independent

knowledge on our part, for in fact we have none. The sug-

gestion that we are proper defense witnesses is legally

frivolous. Under these circumstances, we decline to recog-

nize the listing of us as witnesses as a ground for dis-

qualification.

II.

In response to plaintiffs’ amended complaint, defendants

filed, inter alia, motions to dismiss pursuant to F. R. Civ.

P. 12(b). When the 12(b) motions came on for decision,

the district court took judicial notice of the record of the

previous case, including the record of proceedings in this

court, and treated the 12(b) motions as motions for sum-

mary judgment. It granted summary judgment for defend-

ants as to the first cause of action since it found no merit

in the claim, It also ruled that the second cause of action

was barred by limitations as to defendant Preiser and so

it entered summary judgment for him.

In this appeal, plaintiffs assign as reversible error that

none of the parties asked the district court to take judicial

notice of the prior case, that they were denied the oppor-

tunity to be heard as to the propriety of taking judicial

notice of the record as granted by Evidence Rule 201(e),

and that it was not proper for the district court to take

judicial notice of the record in another case. They con-

tend also that the district court improperly treated the

12(b) motions as motions for summary judgment, that

they were denied the opportunity to demonstrate that

33a

material facts were disputed, and that the record does not

show that judgment should be entered against them.

We see no error in the district court’s taking judicial

notice of the entire record of proceedings in the previous

ease. Evidence Rule 201(¢) and (f) authorizes the district

court to take judicial notice on its own motion at any

stage of the proceedings. It is sufficient that a judicialiy

noticed fact is one “not subject to reasonable dispute in

that it is * * * capable of accurate and ready determina-

tion by; resort to sources whose accuracy cannot reason-

ably be questioned.” Evidence Rule 201(b). Certainly the

trial record and appellate decision noticed by the district

court satisfied this requirement. While the “opportunity

to be heard as to the propriety of taking judicial notice

and the tenor of the matter noticed’’ was not afforded be-

fore notice was taken, plaintiffs were given full opportu-

nity at a subsequent hearing to voice any objections to the

notice, but-they failed to appear. Evidence Rule 201(e)

states that the) opportunity to be heard may be given after

judicial notice\has been taken. We see no procedural or

substantive error under Evidence Rule 201.

We also see no impropriety in the district court’s treat-

ing the 12(b) motions as motions for summary judgment.

Notice that the district court would consider the 12(b)

motions as motions for summary judgment was given at

the hearing, although it must be conceded that little op-

portunity was given either party to present additional

material before the court concluded to grant summary

judgment. This procedural irregularity was not prejudi-

cial, however, because the district court specifically invited

objections from plaintiffs to the grant of summary judg-

ment and the district court entertained two motions for

reconsideration which were supported by an affidavit. The

affidavit included no material indicating that the summary

judgment granted was improper.

34a

On the merits, we think that defendants were entitled to

summary judgment as to plaintiffs’ first cause of action.

The record of the proceedings in the district court and in

the appeal in the previous case discloses to us no evidence

of legal malpractice sufficient to entitle plaintiffs to a

trial or to a verdict. While plaintiffs make general allega-

tions that defendants negligently failed to adduce evidence

which was available to them and which would have sup-

ported plaintiffs’ recovery in the first trial, plaintiffs, in

spite of having been given ample opvortunity to do so,

have failed to demonstrate what those facts are. We there-

fore cannot consider them, and absent such specifications

sufficient to show a genuine dispute as to a material fact,

we agree with the district court that defendants were en-

titled to summary judgment.

III.

As to the claim of malpractice in the handling of the

defamation suit arising out of the past litigation, we again

agree with the district court and conclude that it was

barred by limitations, so that defendant Preiser was en-

titled to judgment as a matter of law.

Plaintiff Molever charges that defendant Preiser was

negligent and in breach of his contract of employment in

failing to prosecute a defamation action by reason of the

publication in March 1971 of a defamatory letter and in

advising plaintiff that no action could be filed. The alleged

defamation occurred in West Virginia and the parties do

not dispute that it was barred by limitations as of April 1,

1972. Molever’s claim for malpractice and breach of con-

tract arose on that date.

The instant case was filed on April 4, 1977 in the Dis-

trict of Arizona and subsequently transferred to the

Northern District of West Virginia. Van Dusen v. Bar-

rack, 376 U.S. 612 (1964), holds that the transferee (West

35a

Virginia) must apply the law of the transferor (Arizona).

Plaintiff concedes that Arizona would apply its own stat-

ute of limitations, and that it is four years. It follows that

Molever’s claim against Preiser was barred by limitations

on and after April 1, 1976, and more specifically that it

was stale when the instant case was filed on April 4, 1977.

AFFIRMED.

APPENDIX B

37a

[13]

AMENDED COMPLAINT

For their complaint against defendants, plaintiffs allege

as follows:

Count One

1. Plaintiffs Modern Marts, Ine. and Pittsburgh & West

Virginia Investment Co. are corporations incorporated

under the laws of the State of Pennsylvania and have their

principal places of business in the State of Arizona. Plain-

tiff Betty Bernstein is a citizen of the State of Florida.

Plaintiff Shirley L. Weinberger, Custodian, is a citizen of

the State of Pennsylvania. Plaintiffs Don D. Brooks and

I. M. Molever are citizens of the State of Arizona. Plain-

tiff Jean C. Paris is a citizen of the State of California.

2. Defendants Stanley E. Preiser and John F. Brown,

Jr. are citizens and residents of the State of West Vir-

ginia who have caused acts or events to occur within the

State of Arizona out of which plaintiffs’ complaint arises.

3. The matter in controversy exceeds the sum of Ten

Thousand Dollars ($10,000.00), exclusive of interest and

costs.

4. In or about December, 1971, plaintiff I. M. Molever,

acting in his own behalf and on behalf of the other plain-

tiffs, retained defendants to represent plaintiffs’ interests

in certain litigation, pending and to be brought, which was

subsequently consolidated for trial in the United States

District Court for the Northern District of West Virginia,

[14] Civil Action No. 74-2-W. Said attorney-client con-

tract was entered into in the State of Arizona while de-

fendants were present in said State for the purpose of

negotiating, procuring and consummating said contract.

5. The defendants held themselves out to plaintiffs as

specialists and experts in litigation and appeals, and

agreed, both orally and in writing, to use that degree of

expertise, skill and knowledge ordinarily used by attorneys

38a

specializing in such fields, in order to properly and fully

represent plaintiffs’ interests. Plaintiffs relied completely

upon defendants’ representations in entrusting their claims

and representations to the defendants.

6. Plaintiffs’ consolidated claims were tried in the

United States District Court for the Northern District of

West Virginia commencing in April, 1974, The jury re-

turned verdicts in favor of plaintiffs on all claims and

awarded plaintiffs damages in the amount of $5,033,016.

Formal judgment on the verdicts was entered on May 21,

1974. Thereafter, however, and by virtue of subsequent

rulings by the trial judge and by the appellate court, all of

the verdicts and judgments in plaintiffs’ favor were va-

cated or reversed, leaving plaintiffs nothing except sub-

stantial indebtedness for legal fees and costs.

7. Defendants breached the expressed and implied terms

and conditions of their contracts with plaintiffs and fur-

ther breached the duties owed to the plaintiffs as clients

by failing to exercise the requisite degree of expertise,

skill and knowledge ordinarily possessed and used by at-

torneys practicing such specialties during said proceed-

ings, or to effectively [15] represent the plaintiffs at all

in certain aspects of the trial and in the post-trial and

appellate proceedings following judgment.

8. Said breaches of contract and negligence proximately

resulted in the post-trial and appeal rulings referred to

above, which rulings vacated or reversed plaintiffs’ substan-

tial awards of damages. Said conduct and omissions alse

proximately resulted in plaintiffs’ having to incur substan-

tial additional legal fees and costs.

9. Since this action arises in part out of contract, plain-

tiffs are entitled to an award of reasonable attorneys’ fees

under the provisions of Arizona Revised Statutes, Section

12-341.01. Plaintiffs request leave of the Court to allege

and prove such attorneys’ fees at the conclusion of pro-

ceedings on this complaint.

39a

Wuererore, plaintiffs pray for judgment against the de-

fendants on Count One as follows:

A. Damages in the amount of $5,033,016, the jury ver-

dict referred to in Paragraph 6, with interest thereon at

the maximum legal rate from May 21, 1974, until paid.

B. For such sums as are necessary to compensate plain-

tiffs for the additional legal fees and costs proximately

resulting from defendants’ conduct and omissions afore-

said, with interest thereon at the maximum legal rate from’

the date of judgment until paid.

C. For plaintiffs’ reasonable attorneys’ fees incurred

in this proceeding, with interest thereon at the maximum

legal rate from the date of judgment until paid.

D. For plaintiffs’ costs of this proceeding, with [16] in-

terest thereon at the maximum legal rate from the date

of judgment until paid.

K. For such other relief as the Court may deem neces-

sary or appropriate under the circumstances of the case.

Count Two

i. Plaintiff I. M. Molever incorporates herein, as

through set forth here in full, paragraphs one through six,

inclusive, of Count One.

2. Sometime prior to March, 1971, plaintiff I. M. Mol-

ever, acting in his own behalf, retained defendant Stanley

E. Preiser to represent plaintiffs Molever’s interests in

the dafamation claim, part of the litigation referred to in

Count One above. Said attorney-client contract was en-

tered into in the State of Arizona while defendant Preiser

was present in said State for the purpose of negotiating,

procuring and consummating said contract.

3. During the pendency of plaintiff Molever’s defama-

tion claim in the United States District Court for the

40a

Northern District of West Virginia, the attorney and agent

for the defendants Levenson, one Abraham Pinsky, of

Wheeling, West Virginia, published a letter to at least

two newspapers with national circulation, the Los Angeles

Times and The Washington Post, and to two separate com-

mittees of the United States Congress, which letter de-

famed plaintiff Molever and caused him substantial dam-

ages. Said letter was written during the pendency of the

suit against the Levensons ir which Pinsky was their at-

torney of record.

[17] 4. Defendant Preiser thereafter agreed to file and

prosecute the appropriate damage action against Pinsky

and the Levensons, but negligently failed and refused to

do so within the time prescribed by the applicable statute

of limitations. Furthermore, the defendant advised and

prevailed upon plaintiff to dismiss a complaint for dam-

ages for defamation that had previously been filed against

said Pinsky and refused to amend the complaint in said

proceeding to seek damages for the defamatory letter of

March, 1971. Defendant also negligently advised plaintiff

that no separate action could be filed seeking damages for

the Pinsky letter. Plaintiff’s causes of action against

Pinsky have been forever barred by the applicable statute

of limitations. Plaintiff’s causes of action aforesaid had a

reasonable damage value of at least one million dollars,

compensatory and punitive damages.

5. The defendant held himself out to plaintiff as a spe-

cialist and expert in litigation of this nature, and agreed,

both orally and in writing, to use that degree of expertise,

skill and knowledge ordinarily used by attorneys specializ-

ing in such fields, in order to properly and fully represent

plaintiff’s interest. Plaintiff relied completely upon de-

fendant’s representation in entrusting his potential claims

to the defendant. Defendant continued to represent plain-

tiff in this regard until at least January, 1977, when the

parties terminated their relationship.

4la

6. Defendant breached the expressed and implied terms

and conditions of his contract with plaintiff and further

breached the duty owed to plaintiff as client by failing to

exercise the requisite degree of expertise, skill, perserver-

ance [18] and knowledge ordinarily possessed and used by

attorneys practicing such specialties during said proceed-

ings, or to represent the plaintiff at all in connection with

the claims defendant repeatedly promised and represented

he would file, but which he never did file.

7. Said breaches of contract and negligence proximately

resulted in plaintiff’s claims being forever barred by the

applicable statute of limitations, thereby resulting in the

irretrievable loss to plaintiff of the damage value of said

claims.

8. Since this action arises in part out of contract, plain-

tiff is entitled to an award of reasonable attorneys’ fees

under the provisions of Arizona Revised Statutes, Section

12-341.01. Plaintiff requests leave of the Court to allege

and prove such attorneys’ fees at the conclusion of pro-

ceedings on this Complaint.

Wuererorg, plaintiff 1. M. Molever prays for judgment

against defendant Preiser on Count Two as follows:

A. Damages in the amount of one million dollars, with

interest thereon at the maximum legal rate from the date

of judgment until paid.

B. For plaintiff’s reasonable attorneys’ fees incurred

in this proceeding, with interest thereon at the maximum

legal rate from the date of judgment until paid.

C. For plaintiff’s costs of this proceeding, with interest

thereon at the maximum legal rate from the date of judg-

ment until paid.

D. For such other and further relief as the Court may

deem necessary or appropriate under the circumstances of

the case.

42a

[19] Daren this 13th day of April, 1977.

Treon, WarnIcKE, Dann &

Roush, P.A.

By /s/ Cuartes D. Rousn

Charles D. Roush

By /s/ B. Micuast Dann

B. Michael Dann

Attorneys for Plaintiffs

43a

[20]

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

No. Civ. 77-290 Phx. WPC

I. M. Mo.ever, et al., Plaintiff,

Vs.

Stran.tey E. Preiser, et al., Defendant.

Date: June 21, 1977

ORDER

Defendants have filed a motion to dismiss or in the

alternative, for change of venue. For lack of personal

jurisdiction over defendants and as an alternative ground,

pursuant to 28 U.S.C. § 1404(a),

Ir Is OrpEReED:

1. The motion to dismiss is denied.

2. The alternative motion is granted and this case

is hereby transferred to the United States District

Court for the Northern District of West Virginia for

all further proceedings.

/s/ Wn. P. CoppLe

Wm. P. Copple

United States District Judge

Mailed this 21st day of June, 1977, to:

Treon Warnicke Dann & Roush

Jennings Strouss & Salmon

44a

[37]

MOTION TO DISMISS ON BEHALF OF THE DEFENDANT

JOHN F. BROWN, JR.

Defendant John F. Brown, Jr., in accordance with Rule

12(b) of the Federal Rules of Civil Procedure, moves the

Court for an order dismissing him from this civil action

for the plaintiffs’ failure to allege a cause of action against

this defendant upon which relief can be granted, on the

following grounds:

1. Plaintiffs have failed to allege any acts, either of

omission or commission on the part of this defendant,

which proximately caused or proximately contributed to

their alleged damages.

2. The plaintiffs have failed to allege any acts, either

of omission or commission on the part of this defendant,

which, if performed or omitted, would have altered or

changed the results of Civil Action 74-2-W in the United

States District Court for the Northern District of West

Virginia; the result of the post-trial activity incident to

that civil action or the appeal thereof to the United States

Court of Appeals for the Fourth Circuit.

3. The corporate plaintiffs are not legal entities.

4. Plaintiffs’ alleged cause of action is premature inso-

far as it pertains to the “Dennis Line Loans” which were

a part of the stockholders’ derivative action within Civil

Action 74-2-W, as that claim remains upon the docket of

the United States District Court for the Northern District

of West Virginia, having been remanded for a new trial

by United States Court of Appeals for the Fourth Circuit.

[38] 5. The plaintiff Molever was not a party to the

stockholders’ derivative action which was a part of Civil

Action 74-2-W in the United States District Court for the

Northern District of West Virginia.

6. The plaintiffs’ complaint seeks damages for alleged

errors of judgment in the conduct of trial, post-trial pro-

45a

cedures and appellate procedures, which are not compensa-

ble at law.

7. The plaintiffs are barred by the applicable statute of

limitations in that their complaint was not filed in the

United States District Court for the Distriet of Arizona

within a one-year period immediately followi ing the accrual

of their alleged cause of action.

8. The plaintiffs are barred by the applicable statute of

limitations in that their complaint was not filed in the

United States District Court for the District of Arizona

within a two-year period immediately following the ac-

crual of their alleged cause of action.

Dated this lst day of July, 1977.

/8/ Hersert G. UnpERwoop

Ilerbert G. Underwood

Union Bank Building

Clarksburg, W. Va. 26301

Attorney for Defendant

John I’. Brown, Jr.

Srepror & JOHNSON

Clarksburg, W. Va.

Of Counsel

46a

[39]

CERTIFICATE OF SERVICE

I hereby certify that on the Ist day of July, 1977, I

served the foregoing Motion to Dismiss on Behalf of the

Defendant John F. Brown, Jr., upon Charles D. Roush

and B. Michael Dann of Treon, Warnicke, Dann & Roush,

P.A., attorneys of record for the plaintiffs, and upon Ed-

ward W. Eardiey, attorney for defendant Stanley E.

Preiser, by depositing true copies thereof in the United

States mail, postage prepaid, in envelopes e« iressed to

them at 100 West Washington, Suite 2250, Phoenix, Ari-

zona, 85003, and at Post Office Box 1588, Charleston, West

Virginia, respectively.

/s/ Hersert G. Unperwoop

Herbert G. Underwood

47a

[40]

AMENDED MOTION TO DISMISS

The defendant Stanley E. Preiser, by Edward W. Eard-

ley, his attorney, hereby moves the Court to dismiss this

action for the following reasons:

1. The allegations of the amended complaint are so

vague and involve conclusions ‘of law and fail to state any

factual basis for a cause of action.

2. The alleged causes of action set forth in the amended

complaint herein are barred by the applicable statutes of

limitations of the States of Arizona and West Virginia.

3. The corporate: plaintiffs are no longer in existence

and therefore cannot assert any cause of action herein.

4. The individual plaintiffs have no cause of action as

individuals with respect to the handling of the derivative

stockholders action referred to in the amended complaint.

5. These plaintiffs have not actually suffered any dam-

ages of a recoverable nature because the litigation in ques-

tion is still pending and their complaints, if any, are pre-

mature.

6. The plaintiffs have failed to allege what act or acts

this defendant did or failed to do that would have pro-

duced a different result either at the trial or post-trial or

on appeal.

[41] 7. The plaintiffs have failed to state that the result

of the trial or appeal would have been different had this

defendant performed or failed to perform certain acts.

8. No cause of action for negligence will lie against a

lawyer for trial of a case for matters of judgment as is

alleged in the amended complaint, nor does any cause of

: 48a

action lie against any lawyer for post-trial or appellate

conduct as loig as appellate requirements are met.

/s/ Epwarp W. EarpLey

Edward W. Eardley

Attorney for Defendant,

Stanley E. Preiser

Srerptor & JoHNSON

P. O. Box 1588

Charleston, West Virginia 25326

Of Counsel