February 3, 2015
Irene Dickerson, Plaintiff,
Julianne E. Murray, Esq, Murray Law LLC, Defendants.
Date Submitted: October 17, 2014
Upon Defendants' Motion to Dismiss Count Two.
Herbert W. Mondros, Esquire, Margolis Edelstein, Attorney for Defendants
Patrick Scanlon, Law Offices of Patrick Scanlon, Attorney for Plaintiff
RICHARD F. STOKES, J.
This matter is presently before the Court on the motion of Julianne E. Murray, Esquire, and Murray Law (collectively, "Defendants") for dismissal of Count Two. Defendants move this Court for an order dismissing Count Two of the Complaint pursuant to Superior Court Civil Rule 12. Irene Dickerson's ("Plaintiff") claims arise out of the alleged negligent provision of legal services.Defendants represented Plaintiff in the underlying transaction in which Defendants drafted a note resulting in the mortgage of the Plaintiff's property.
Plaintiff asserts during the course of the representation Defendants were negligent and violated a "conflict of interest" in providing legal services. In response, Defendants move this Court to dismiss Count Two contending Plaintiff failed to state a claim upon which relief can be granted and subject matter jurisdiction is lacking with respect to Count Two.
For the following reasons, Defendants' Motion to Dismiss Count Two is GRANTED.
II. FACTS AND PROCEDURAL POSTURE
According to the plaintiff, on May 28, 2013, Defendants represented Plaintiff in a transaction effectuating a mortgage in order to provide a third-party the funds to purchase a property. Defendants prepared a note to enable Plaintiff to mortgage her property for the benefit of Matthew Chasanov, Plaintiff's grandson, and his wife, Lindsay Chasanov (collectively the "Chasanovs").
The note, drafted by Defendants, did not include many of the standard provisions typical of a mortgage transaction. For example, the note lacked clauses for acceleration, amortization, attorney's fees in the event of default, interest, and the signatures of the Chasanovs. The note was signed only by Plaintiff and her husband, Mathew Dickerson, resulting in their personal liability in the event of default.
Plaintiff agreed to complete the mortgage transaction with the understanding that the Chasanovs would make her mortgage payments. Upon completion of the transaction, the Chasanovs purchased a home together as husband and wife. Shortly thereafter, the Chasanovs defaulted after making only one payment on the note resulting in damages of approximately $148, 000.Plaintiff subsequently filed the present suit against the Defendants.
Defendants' instant motion to dismiss was filed August 28, 2014. Plaintiff timely filed a response on September 24, 2014. On October 3, 2014 Defendants' Motion to Dismiss was heard and later Memoranda of Law were provided to the Court regarding the dismissal of Count Two on October 13, 2014. For the reasons explained below, the Court will enter an order granting the motion to dismiss Count Two, the "conflict of interest" claim.
III. STANDARD OF REVIEW
The Court may grant a motion to dismiss if the pleadings fail to comply with the governing standard in Delaware–reasonable conceivability. In analyzing a motion to dismiss, Delaware trial courts limit their considerations to the well-pleaded allegations in the complaint, accepting them as true,  and draw on the reasonable factual inferences in favor of the non-moving party.
"A complaint is 'well-pled' if it puts the opposing party on notice of the claim being brought against it." As such, "[t]he complaint itself 'need only give general notice of the claim asserted....'" Accordingly, "a motion to dismiss, at such a preliminary stage, requires the [trial] court to determine with reasonable certainty that a plaintiff could prevail on no set of facts that can be inferred from the pleadings."
In addition, this Court may "grant a dismissal 'pursuant to Superior Court Civil Rule 12(b)(1) when it lacks jurisdiction over the subject matter' of the complaint." "The jurisdiction of the subject matter of any controversy in any court must be determined in the first instance by the allegations of the complaint." This Court must make a determination as to subject matter jurisdiction by accepting the allegations set forth by the non-moving party as true. If this Court determines Plaintiff's claim is a purely equitable cause of action, then the Court may properly grant a dismissal because Superior Court's jurisdiction lies in matters of law,  as opposed to the Court of Chancery's jurisdiction, which lies in matters of equity.
Accordingly, this Court may enter an order dismissing Count Two for two reasons. First, Plaintiff has failed to state a claim upon which relief can be granted. Alternatively, this Court may enter an order granting dismissal for lack of subject matter jurisdiction.
A. Count Two May Be Dismissed for Failure to State A Claim Upon Which Relief Can be Granted in Accordance with Rule 12(b)(6)
i. A Violation of Professional Ethics Standards Does Not Constitute an Independent Cause of Action
Count Two alleges Defendants acted in contravention of Plaintiff's best interest by maintaining representation notwithstanding an alleged conflict of interest.Defendants, on the other hand, argue Count Two should be dismissed.
Delaware Lawyers' Rules of Professional Conduct provide "a lawyer shall not represent a client if the representation involves a conflict of interest." However, this proposition in itself is subject to exception.
Even if an attorney failed to adequately represent clients with concurrent conflicting interest in accordance with the Rules, it is well-settled and "generally recognized that the intent of professional ethical codes is to establish a disciplinary remedy rather than to create civil liability." In fact, the preamble of the Delaware Rules explicitly states the following:
"[v]iolation of a Rule should not itself give rise to a cause of action against a lawyer nor should it create any presumption in such a case that a legal duty has been breached. In addition, violation of a Rule does not necessarily warrant any other nondisciplinary remedy, such as disqualification of a lawyer in pending litigation. The rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability. Furthermore, the purpose of the Rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a Rule is a just basis for a lawyer's self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule."
As such, an alleged Rule violation by the Plaintiff, in itself, does not provide the basis for civil liability as this is contrary to the Rules' stated purpose.
Delaware Courts have held violations of a canon of ethics or professional standards, standing alone, are not actionable because the Rules themselves were not intended to be independent causes of action. Thus, Plaintiff does not have an independent cause of action for Defendants' alleged violation of the Rules standing alone.
ii. Violations of Professional Ethics Standards May Be Utilized As Evidence in a Negligence Action
Although a violation of professional ethics standards may not be used as an independent cause of action, a violation may be material evidence in a separate cause of action. Under Delaware law, when a plaintiff makes a claim for negligence "the Rules may be used, to the extent relevant, to support" whether an attorney "may have breached a common law duty to the plaintiff." In this case, violations of the professional ethics standards may be utilized as evidence to support the negligence claim,  Count One,  but do not constitute a separate claim.
As such, Count Two is redundant as to Count One because the alleged violations in Count Two are not actionable standing alone and are ancillary to the Plaintiff's negligence claim. In fact, Plaintiff's "conflict of interest" claim is predicated on the same alleged wrongful conduct as the negligence action. The Delaware Rules of Professional Conduct and any suspected Rule violations resulting from the actions of the Defendants, to the extent they are relevant, may be introduced to bolster the negligence claim. The Court finds Count Two is superfluous and dismissal of Count Two is thus warranted.
iii. Professional Negligence is Distinct from a Breach of Fiduciary Duty Claim
Additionally, an order granting dismissal may be entered as to Count Two because relief may not be granted under any reasonable interpretation of the facts based on the failure to substantiate the elements of a potential claim for relief.Liability arising out of representing clients with conflicting interests may attach under different legal theories. For example, an attorney may be liable under a negligence theory or a claim for breach of fiduciary duty.
In the instant case, negligence and a "conflict of interest" claim have been asserted. Drawing on a reasonable inference, "conflict of interest" could plausibly be interpreted to mean a breach of fiduciary duty. The question is whether this case sounds in professional negligence, or a claim for breach of a fiduciary duty because these claims are distinct.
In order to prevail on a breach of fiduciary duty action, unlike a negligence claim, Plaintiff must demonstrate the attorney-client relationship between the Defendants and Plaintiff was fiduciary in nature. Generally, a fiduciary relationship requires "a special trust relationship between the parties." Fiduciary relationships typically develop when one party "reposes special trust in another or where a special duty exists on the part of one person to protect the interest of another."
Customarily, a fiduciary is "one who is entrusted with the power to manage and control the property of another." Corporations, partnerships, trusts, and estates typically exhibit the characteristics of a fiduciary relationship. An attorney may take on a fiduciary role "in narrow circumstances." For example, when an attorney "is acting in a second capacity like a trustee or corporate manager[, ]" "[s]uch as in the case of client trust accounts."
Simply labeling an attorney a fiduciary, however, is insufficient because nomenclature does not establish duties. "[A]n attorney must act in some capacity beyond the mere provision of legal services to owe actionable fiduciary duties."
In the present case, Plaintiff has failed to allege factual contentions sufficient to prove the existence of a special trust, or relationship to substantiate a breach of fiduciary duty claim. Rather, representations by Plaintiff indicate Defendants did not go beyond providing legal service. Defendants' rendering of legal services, therefore, did not establish a fiduciary relationship because merely establishing an attorney-client relationship does not de facto give rise to fiduciary duties. Absent a fiduciary relationship between Plaintiff and Defendants, the Defendants did not owe Plaintiff a fiduciary duty.
Thus, there are insufficient facts from which a court could reasonably conclude Defendants breached a fiduciary duty owed to Plaintiff. Accordingly, an order granting dismissal may be entered because relief may not be granted under any reasonable interpretation of the facts.
B. Count Two May be Dismissed For Lack of Subject Matter Jurisdiction in Accordance With Rule 12(b)(1)
Plaintiff invites the Court to entertain a "conflict of interest" action noting that other jurisdictions recognize conflict of interest as an independent cause of action.Pursuant to 12(b)(1),  Defendants contend that Count Two should be dismissed for lack of subject matter jurisdiction. Defendants assert Count Two is essentially an equitable claim for breach of a fiduciary duty and as such jurisdiction is properly with the Court of Chancery, not Superior Court.
It appears to the Court, what Plaintiff seeks to gain is an order awarding monetary damages, a legal remedy. Disputes seeking only monetary damages are generally within this Court's jurisdiction; however, the nature of the remedy, in it of itself, is not dispositive in terms of jurisdiction. Rather, the origin of the right being asserted may also impact what court may properly exercise subject matter jurisdiction. In the instant case, the origin of the asserted right in a breach of fiduciary duty claim is equity because "equity, not law, is the source" of a fiduciary relationship. Jurisdiction for a breach of fiduciary duty action is properly in the Chancery Court, even if only monetary damages are sought, because the claim arises out of a relationship that is equitable in nature.
Furthermore, it is a well-accepted principle of Delaware law that this Court lacks subject matter jurisdiction to entertain equitable causes of action. This Court has held a "[b]reach of fiduciary duty is an equitable cause of action and the Chancery Court has exclusive jurisdiction over [such claims]." As such, the Court of Chancery has exclusive subject matter jurisdiction to adjudicate a breach of fiduciary claim.
Thus, the Court may dismiss Count Two because this Court lacks subject matter jurisdiction to entertain a breach of fiduciary duty claim. Even if the Court did have subject matter jurisdiction to consider Count Two, it appears that Defendant did not owe the Plaintiff a fiduciary duty. Additionally, even assuming arguendo that a fiduciary duty was owed to Plaintiff, Plaintiff has failed to factually support the elements of such a claim. Therefore, in light of Plaintiffs failure to factually and legally support a valid claim an order entering dismissal is also warranted because the Plaintiff has failed to state a claim upon which relief could be granted.
For all of these reasons, Defendants' motion to dismiss Count Two, the "conflict of interest" claim, is GRANTED.
IT IS SO ORDERED.