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Reedy v. American Guar. & Liab. Ins. Co.

United States District Court, D. Columbia.

March 23, 2015

BURK & REEDY, LLP and JAMES BURK, Plaintiffs,
v.
AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Defendant

For James Burk, Burk & Reedy, LLP, Plaintiff, Counter Defendant: James Eddy Burk, LEAD ATTORNEY, BURK & REEDY LLP, Washington, DC USA.

For American Guarantee And Liability Insurance Company, Defendant: Adam M. Smith, Eduardo Demarco, LEAD ATTORNEYS, PRO HAC VICE, COUGHLIN DUFFY LLP, Morristown, N.J. USA; William Joseph Carter, CARR MALONEY PC, Washington, DC USA.

For American Guarantee And Liability Insurance Company, Counter Claimant: William Joseph Carter, CARR MALONEY PC, Washington, DC USA.

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MEMORANDUM OPINION

REGGIE B. WALTON, United States District Judge.

The plaintiffs, Burk & Reedy, LLP and James Burk, filed this civil action in the Superior Court of the District of Columbia

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(" Superior Court" ) against the defendant, American Guarantee and Liability Insurance Company, seeking various forms of relief as a result of the defendant's denial of coverage and indemnification for third-party claims being asserted against them in a separate action in Superior Court. See, e.g., Notice of Removal at 1, 4. The defendant then removed the action to this Court. See id. Currently pending before the Court are the parties' motions for summary judgment. Plaintiffs' Motion for Summary Judgment (" Pls.' Summ. J. Mot." ); Defendant American Guarantee and Liability Insurance Company's Motion for Summary Judgment (" Def.'s Summ. J. Mot." ). After carefully considering the parties' submissions,[1] the Court concludes for the following reasons that it must grant the defendant's motion for summary judgment and deny the plaintiff's motion.

I. BACKGROUND

The following facts are undisputed. China Trade and Investments, LLC (" CTI" ) was an importer and exporter of urea. Def.'s Facts ¶ 4; see also Pls.' Resp. to Def.'s Facts ¶ 4. Plaintiff James Burk " was a co-managing member of CTI," who had at least a 32.5% ownership interest in CTI at all relevant times in this dispute. Def.'s Facts ¶ ¶ 5, 6; see also Pls.' Resp. to Def.'s Facts ¶ 4. " On or about October 31, 2008," plaintiff James Burk and Steven Allemang, another co-managing member of CTI, executed an agreement with Gratian M. Yatsevitch, III, whereby Mr. Yatsevitch became a " 32.5% owner of CTI in consideration for [Mr.] Yatsevitch's agreement to secure collateral for a loan to CTI." Def.'s Facts ¶ 7; see also Pls.' Resp. to Def.'s Facts ¶ 4. On December 8, 2008, Mr. Yatsevitch secured a $325,000 loan for CTI from lender Hard Money Bankers, and thus became a 32.5% owner of CTI. Def.'s Facts ¶ ¶ 8-9; see also Pls.' Resp. to Def.'s Facts ¶ 4. Mr. Yatsevitch " was made a guarantor of the loan to CTI . . . and real property owned by [Mr.] Yatsevitch was encumbered as collateral for the loan . . . ." Def.'s Facts ¶ 10; see also Pls.' Resp. to Def.'s Facts ¶ 4. " [T]he loan was to fund CTI's transactions involving the sale of urea." Def.'s Facts ¶ 13; see also Pls.' Resp. to Def.'s Facts ¶ 6.

Thereafter, " CTI did not consummate the urea deals and the loan was not repaid," Def.'s Facts ¶ 14; see also Pls.' Resp. to Def.'s Facts ¶ 6, and " the lender took actions to initiate a foreclosure sale of the real property that [Mr.] Yatsevitch

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used as collateral for the loan," Def.'s Facts ¶ 15; see also Pls.' Resp. to Def.'s Facts ¶ 6. The real property " was eventually sold and the loan was repaid." Def.'s Facts ¶ 16; see also Pls.' Resp. to Def.'s Facts ¶ 6.

Mr. Yatsevitch then commenced a lawsuit in Superior Court against the plaintiffs, seeking " money and real property that he lost in connection with various business ventures allegedly orchestrated by [plaintiff James] Burk" (the " underlying action" ). Def.'s Facts ¶ ¶ 1-2; see also Pls.' Resp. to Def.'s Facts ¶ ¶ 1-2; Pls.' Summ. J. Mot., Exhibit (" Ex." ) 4 (Yatsevitch Amended Complaint (" Yatsevitch Am. Compl." )). Mr. Yatsevitch initially filed fourteen claims against the plaintiffs, but the Superior Court has since dismissed ten of those claims, leaving only four at issue, including one for legal malpractice. Def.'s Facts ¶ 17; see also Pls.' Resp. to Def.'s Facts ¶ 4. Allegations in support of the legal malpractice claim include:

CTI is the alter[]ego of . . . [plaintiff James] Burk and [Mr.] Allemang, who are both managing members of the [c]ompany[; ]
As a result, Mr. Yatsevitch told . . . [plaintiff James] Burk and [Mr.] Allemang that if he were to invest, he would have to be made one of CTI's managing members. [They] . . . agreed[; ]
. . .
[Plaintiff James] Burk . . . knew that Mr. Yatsevitch relied upon his advice in connection with all legal issues that arose and, in particular, in connection with the loan from Hard Money Bankers and Mr. Yatsevitch's agreement to invest in CTI[; ]
[Plaintiff James] Burk provided advice to Mr. Yatsevitch in connection with his decision to invest in CTI[; ]
. . .
[Plaintiff James] Burk breached his fiduciary duty to Mr. Yatsevitch in connection with the CTI investment in that he did not act in good faith or with complete candor when he made representations concerning Mr. Allemang and/or the profitability of CTI. To the contrary, [plaintiff James] Burk acted in bad faith, because his actions were undertaken to further his own self-interest in creating a possibility that CTI would be able to engage in a transaction that would result in substantial profits to [plaintiff James] Burk[; ]
. . .
[Plaintiff James] Burk, who had previously represented Mr. Yatsevitch on other matters, engaged in conduct that communicated his consent to act as counsel for Mr. Yatsevitch with respect to the loan from Hard Money Bankers. As counsel to Mr. Yatsevitch, [plaintiff James] Burk had a duty to exercise reasonable care and skill with respect to the contracts to which Mr. Yatsevitch became a party, including all of the documents that relate to the loan between CTI and Hard Money Bankers . .., and to safeguard the interests of both CTI and Mr. Yatsevitch[; ]
[Plaintiff James] Burk breached his duty of care by failing to inform Mr. Yatsevitch of various false representations in the Hard Money loan documents; by failing to negotiate with Hard Money Bankers in a manner to protect Mr. Yatsevitch's interests; and by failing to advise Mr. Yatsevitch about various significant aspects of the Hard Money [Bankers] loan documents[; ]
[Plaintiff James] Burk failed to adhere to the D.C. Rules of Professional Conduct in connection with the CTI loan in that he became engaged in business with a client in at least two respects, (a) by acting as counsel to CTI while owning a

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significant percent of that company and (b) by doing business with a client while failing to accurately, fully and fairly disclose all aspects of the business to Mr. Yatsevitch[; ]
[Plaintiffs James] Burk and Burk & Reedy[, LLP] were not only overseeing, but also promoting the transactions and business dealings that resulted in Mr. Yatsevitch agreeing to guaranty [sic] the ...

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