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Dombek v. Adler

United States District Court, D. South Carolina, Charleston Division

February 5, 2019

Charles Dombek, Justin T. Foxx, The Optimal Insurance Group, Paul Cassano & Paul LoPiccolo, Plaintiffs,
F. Miles Adler, Defendant.


          Richard Mark Gergel United States District Court Judge

         This matter is before the Court on the Motion to Dismiss Counterclaims (Dkt. No. 32) by Plaintiffs Charles Dombek, Justin T. Foxx, The Optimal Insurance Group, Paul Cassano, and Paul LoPiccolo (collectively, "Plaintiffs"). For the reasons set forth below, the Court grants in part and denies the motion.

         I. Background

         Plaintiffs assert claims for breach of fiduciary duty, legal malpractice, negligence, and unfair trade practices against Defendant F. Miles Adler regarding a gold-investment scheme. (Dkt. No. 22.) The operative First Amended Complaint alleges, generally, that the Plaintiffs invested hundreds of thousands of dollars in a venture to export freshly mined gold ingots from the Democratic Republic of Congo through an attorney in Nairobi, Kenya. (Dkt. No. 22 at ¶¶ 22 -25.) Adler allegedly represented that he would serve as legal counsel for the enterprise and any risk of loss would be covered by his insurance. (Id.) However, the plan fell apart and the gold shipment was ultimately seized and retained by the sellers even after the Plaintiffs paid hundreds of thousands of dollars to secure its release. (Id. at ¶¶ 30 - 31.) The Plaintiffs allege that Adler failed to do basic due diligence on the sellers, failed to set up appropriate legal instruments to protect their investments, and paid himself for his work in the scheme. (Id. at 33 - 40.)

         Defendant Adler denies any misconduct or liability related to the gold investments. (Dkt. No. 30.) Additionally, Adler brings ten counterclaims against the Plaintiffs for their alleged roles in the failed scheme. Specifically, Adler alleges that he and Plaintiffs Dombek and Cassano entered into a partnership, and therefore they are all jointly and severally liable for any claims against the partnership. (Dkt. No. 30 at ¶ 95.) Based on this allegation, Adler brings the following counterclaims: declaratory judgment, defamation, breach of contract, breach of fiduciary duty, promissory estoppel, breach of good faith and fair dealing, negligent misrepresentation, misappropriation of partnership opportunities, quantum meruit, and complete set off. (Dkt. No. 30 at 14 - 21.) Plaintiffs now seek to dismiss all of Adler's counterclaims, and Adler opposes the motion.[1] (Dkt. Nos. 32, 36.)

         II. Legal Standard

         Rule 12(b)(6) of the Federal Rules of Civil Procedure permits the dismissal of an action if the complaint fails "to state a claim upon which relief can be granted." Such a motion tests the legal sufficiency of the complaint and "does not resolve contests surrounding the facts, the merits of the claim, or the applicability of defenses.... Our inquiry then is limited to whether the allegations constitute 'a short and plain statement of the claim showing that the pleader is entitled to relief.'" Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (quotation marks and citation omitted). In a Rule 12(b)(6) motion, the Court is obligated to "assume the truth of all facts alleged in the complaint and the existence of any fact that can be proved, consistent with the complaint's allegations." E. Shore Mas., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). However, while the Court must accept the facts in a light most favorable to the non-moving party, it "need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." Id.

         To survive a motion to dismiss, the complaint must state "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570(2007). Although the requirement of plausibility does not impose a probability requirement at this stage, the complaint must show more than a "sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint has "facial plausibility" where the pleading "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

         III. Discussion

         As a preliminary matter, Defendant Adler has withdrawn his counterclaims for quantum meruit and for a complete set-off. (Dkt. No. 36 at 1, 15.) Therefore, Plaintiffs' motion to dismiss as to the claims for quantum meruit (Ninth Counterclaim) and complete set-off (Tenth Counterclaim) is granted. The Court discusses the other counterclaims in order:

         A. First Counterclaim: Declaratory Judgment

         Adler seeks a declaratory judgment under S.C. Code § 15-53-10 et seq. that Adler and Plaintiffs Dombek and Cassano entered into a partnership, rather than some other form of relationship. South Carolina's declaratory judgment law makes clear that, "[t]he court may refuse to render or enter a declaratory judgment or decree when such judgment or decree, if rendered or entered, would not terminate the uncertainty or controversy giving rise to the proceeding." S.C. Code Ann. § 15-53-70. See Pee Dee Elec. Co-op., Inc. v. Carolina Power & Light Co., 279 S.C. 64, 66, 301 S.E.2d 761, 762 (1983) (affirming dismissal of action where declaratory judgment would not have terminated the controversy underlying the proceedings). Here, a declaration would not resolve or terminate the controversy in the proceedings. An attorney-client relationship can exist regardless of whether the attorney also has a separate business relationship with the client. See Ellis v. Davidson, 358 S.C. 509, 523, 595 S.E.2d 817, 824 (Ct. App. 2004) (reversing grant of summary judgment on legal malpractice claim where attorney and client also formed corporation); Matter of Conway, 305 S.C. 388, 392, 409 S.E.2d 357, 359 (1991) ("An attorney who enters into business with his client does not...shed his professional standing and obligation, and there is no just reason why he should be permitted to do so."). Regardless of the determination of the declaratory judgment, Plaintiffs claims, including for legal malpractice, and many of Adler's counterclaims would be unaffected and therefore declaratory judgment is inappropriate here. Furthermore, as discussed below, Adler also fails to allege that a partnership existed, and therefore his request for a declaratory judgment of a partnership is subject to dismissal. Therefore, Adler's first counterclaim for a declaratory judgment is dismissed.

         B. Second Counterclaim: Defamation Per Se

         The elements of defamation are: "1) a false and defamatory statement concerning another; (2) an unprivileged publication to a third party; (3) fault on the part of the publisher; and (4) either action ability of the statement irrespective of special harm or the existence of special harm caused by the publication." McNeil v. S.C. Dep't of Corr.,404 S.C. 186, 195, 743 S.E.2d 843, 848 (Ct. App. 2013). Adler's counterclaim is nothing more than a recitation of these elements. Importantly, regarding the allegedly defamatory statement, Adler merely states that "on multiple occasions," including in an email dated "19 September 2015" the Plaintiffs "publish[ed] unprivileged statements alleging that Adler engaged in crimes of moral turpitude and acted in a manner unfit for Adler's lawful business or profession." (Dkt. No. 30 at ¶ 115.) Adler argues that the inclusion of "crime of moral turpitude" and "unfit in his profession" suffice to make out a claim for defamation per se. (Dkt. No. 36 at 7.) However, those statements are nothing more than a recitation of one form of defamation, slander per se. See Murray v. Holnam, Inc.,344 S.C. 129, 142, 542 S.E.2d 743, 749 (Ct. App. 2001) ("Slander is actionable per se if it charges the plaintiff with...: (1) commission of a crime of moral turpitude; ...; or (5) unfitness in one's business or profession."). The counterclaim includes no other details regarding the allegedly defamatory statements. ...

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