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Fischer v. Flax

January 30, 2003

BENSON J. FISCHER, ET AL., APPELLANTS,
v.
ESTATE OF HOWARD L. FLAX, ET AL., APPELLEES.



Appeal from the Superior Court of the District of Columbia (CA-678-97) (Hon. Steffen W. Graae, Trial Judge)

Before Terry and Farrell, Associate Judges, and Belson, Senior Judge.

The opinion of the court was delivered by: Farrell, Associate Judge

Argued November 26, 2002

Appellants Benson J. Fischer, et al. sued Howard L. Flax, the law firm of Paley, Rothman, Goldstein, Rosenberg & Cooper (hereafter Paley Rothman), and Paley Rothman attorney Alan S. Mark for fraud, negligent misrepresentation, tortious interference, and other alleged misconduct arising from a financing transaction with a third party that did not materialize. The trial judge granted summary judgment to Paley Rothman and Mark. On the rescheduled trial date for Fischer's claims against Flax, the judge denied Fischer's renewed motion for a continuance and, when Fischer stated through counsel that he would not proceed in the circumstances, dismissed the complaint with prejudice. The case proceeded to a jury trial on the Flax Estate's counterclaim *fn1 for quantum meruit recovery, resulting in an award of $300,000 in damages. The trial judge then heard testimony on the defendants' joint counterclaim for bad faith litigation, and awarded them collectively some $930,000 in attorney's fees and costs, together with $40,000 in punitive damages.

On appeal, Fischer challenges the trial judge's grant of summary judgment to Paley Rothman and Mark; his refusal to continue the trial as to Flax and the resulting dismissal; the award of fees for bad faith litigation; and the judge's decision not to recuse himself on Fischer's motion alleging bias. We affirm the judgment in all respects.

I. Background

In 1995 Fischer, a principal owner of Fischer Brewing Company, needed financing to expand the marketing and production of "Redneck Beer" and related products. He enlisted a friend, Howard Flax, to look for an investor on the understanding, memorialized in a Letter Agreement, that Flax would receive a substantial finder's fee if he succeeded in obtaining financing. *fn2 In March 1996, Flax sent a letter and promotional package on Fischer's behalf to Laidlaw & Co., an investment banking firm, and that same month Flax, Fischer, and others met with Laidlaw representatives in New York, including Doug Miscoll. Laidlaw liked Fischer's proposal and began assembling a financial package that would include a public stock offering. Laidlaw, of course, was to receive a commission for the deal.

Following the Laidlaw meeting, Fischer was informed by an attorney specializing in securities law that National Association of Security Dealers (NASD) fair practice rules would likely bar Fischer from paying out more than 15% of the gross offering proceeds to Flax and Laidlaw combined. Thus, the payment of 15% in stock to Flax as promised, see note 2, supra, would leave nothing to compensate Laidlaw. Nevertheless, on the same day Fischer received this advice, Laidlaw (unaware of the compensation agreement with Flax) faxed a draft agreement to Fischer, which he signed.

Knowing he could not make payments under both agreements, Fischer told Flax that he would not pay him the 15% promised, and this led to a series of compromise discussions between the two and their attorneys, each one more contentious than the last. Meanwhile Laidlaw learned of the Fischer/Flax agreement and the obstacle it posed. At about the same time, Laidlaw's Doug Miscoll discovered a letter and a promotional package purportedly sent to Laidlaw by one Howard Reissner on Fischer's behalf dated March 6, 1996 -- a few days before Flax's initial contact with Laidlaw. Miscoll wrote Flax advising him that Laidlaw would recognize Reissner as the finder and pay him $10,000 if the financing was provided. Negotiations nonetheless continued between Fischer and Flax over a reduced compensation agreement, but without success. Laidlaw eventually withdrew its financing offer to Fischer, in large part because the public demand for brewery stocks had declined. Blaming Flax and his attorney Alan Mark of Paley Rothman for the loss of the Laidlaw deal, Fischer then brought this suit.

In the complaint, Fischer alleged numerous torts all resting on the factual allegations that (1) Howard Flax, aided and abetted by Paley Rothman, had misrepresented to Fischer that he had extensive experience in initial public stock offerings and was a licensed broker-dealer, as well as the fact that a finder's fee of 15% in stock was standard in the industry; and (2) Flax and Paley Rothman had sabotaged the Laidlaw financing after learning that Howard Reissner was the true finder by virtue of his letter and promotional package of March 6, 1996. Flax counterclaimed, charging that Fischer himself had scuttled the financing and thus breached his finder's fee agreement with Flax, and alternatively sought damages on a quantum meruit theory. Both Flax and Paley Rothman further alleged that Fischer had brought the suit in bad faith, chiefly because he knew that the documents supporting his assertion that Reissner was the finder in the Laidlaw transaction were fabricated.

II. Summary Judgment

Fischer contends first that Judge Graae erred in granting summary judgment to attorney Mark and Paley Rothman, who had represented Flax in the ongoing negotiations about Flax's compensation if he secured financing. Fischer originally sued Paley Rothman for extortion, tortious interference, aiding and abetting tortious conduct, and conspiring with Flax to commit such conduct. After the judge dismissed these claims "without prejudice" (concluding that Paley Rothman, through Mark, had done nothing more than represent Flax in his colorable claim to a fee from Fischer), Fischer re-pleaded the tortious interference count, styling it "tortious interference with prospective economic advantage" and claiming that Paley Rothman had unlawfully committed a number of acts intending to injure Fischer in his business relationship with Laidlaw. Fischer now argues that in granting summary judgment to Mark and Paley Rothman, Judge Graae erroneously deemed Fischer to have abandoned all his claims except the newly-pleaded tortious interference.

We have no need to join the parties' debate over whether Fischer renewed the other claims originally pleaded, because they are legally insufficient in any case. First, Fischer has cited no law -- and we have found none -- recognizing a civil cause of action for extortion in this jurisdiction, and it has been rejected elsewhere. *fn3 Second, Fischer's claims of conspiracy and aiding and abetting are entirely derivative of his claim of tortious interference by Flax. That is because there can be no "conspiracy" with a client if an attorney merely acts within the scope of his employment as an advisor to, or an advocate on behalf of, the client. See Fraidin v. Weitzman, 611 A.2d 1046, 1079 (Md. Ct. Spec. App. 1992). *fn4 Similarly, absent evidence that the attorney knew of wrongful conduct by the client and rendered substantial assistance in committing it, he cannot be held to be agent -- an aider and abettor -- of that conduct. See RONALD E. MALLEN & JEFFREY M. SMITH, LEGAL MALPRACTICE § 6.5, at 560 (5th ed. 2000); Schatz v. Rosenberg, 943 F.2d 485, 495 (4th Cir. 1991).

This leaves us with Fischer's claims -- under the heading of tortious interference --that Alan Mark, while acting as Flax's counsel, wrongly advanced a "false claim" for compensation on Flax's behalf and, further, advanced that claim not as Flax's attorney but for his own benefit as a close friend of Flax. On the basis of the full discovery conducted, Judge Graae correctly found no evidence creating a triable issue on either allegation. An attorney "who pursues in good faith his or her client's interests on a matter fairly debatable in the law" cannot be held liable to an ...


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