Bankruptcy attorney prevails in malpractice suit

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Where a man sued his former bankruptcy attorney for malpractice, but he could not show that his claimed damages resulted from her alleged breaches, she prevailed in the suit.

Background

Marc Labgold was the CEO of biotechnology company Antara Biosciences Inc. from 2006 until July 2007. In 2010, former employees of Antara filed a lawsuit against one of plaintiff’s business partners in California state court. Plaintiff was added as a defendant in that case in September 2012. The Antara creditors alleged that plaintiff was liable based upon theories of, inter alia, fraud, embezzlement and conversion.

On Dec. 21, 2012, plaintiff married Taryn Labgold. On Jan. 7, 2013, plaintiff transferred a residence at 2257 Compass Point, Lane, Reston to himself and his wife as tenants by the entirety, and the deed was recorded in the Fairfax County land records two days later.

Less than four months later, in April 2013, plaintiff first met with bankruptcy attorney Linda Regenhardt regarding potentially filing for personal bankruptcy protection. On July 23, 2013, Linda Regenhardt filed a bankruptcy petition under Chapter 7 on behalf of plaintiff. Although the Compass Point residence was listed as an exempt asset in plaintiff’s bankruptcy schedules, the January transfer was not disclosed as it should have been in response to a question in plaintiff’s signed statement of financial affairs.

In the early part of 2014, three adversary proceedings were instituted against plaintiff in the bankruptcy court. On May 25, 2022, plaintiff filed sued Rengenhart for legal malpractice. Plaintiff alleges Regenhardt breached the standard of care as plaintiff’s bankruptcy attorney in multiple ways. The parties have filed cross-motions for summary judgment.

Analysis

Plaintiff asserts that but for Regenhardt’s breaches, the U.S. trustee would not have initiated its adversary proceeding against plaintiff seeking to deny plaintiff a discharge. All of plaintiff’s allegations of breaches committed by his bankruptcy attorney relate to the Compass Point residence.

Critically, for the purposes of causation, the U.S. trustee sought a denial of discharge under 11 U.S.C. § 727(a) on multiple grounds completely unrelated to the transfer of the Compass Point residence. Plaintiff has offered no evidence whatsoever regarding any of these independent reasons or why the U.S. trustee would not have initiated an action based on these other independent grounds.

Plaintiff argues that summary judgment is precluded (and a triable issue exists) merely because he has set forth expert testimony on the element of causation. Plaintiff is mistaken. When the proximate cause of an injury is left to pure speculation or conjecture — even when there is expert witness testimony offered — the claim nonetheless fails as a matter of law. “Here, the expert opinion of Bruce Henry — the evidence plaintiff primarily relies on in support of its theory — omits reference to these other grounds upon which the U.S. trustee cited as a basis for denial of discharge.

For instance, at his deposition, Mr. Henry admitted that he could not read the U.S. trustee’s mind and was therefore speculating as to the U.S. trustee’s reasoning, thought process, intent and motive behind filing the adversary proceeding. Thus, Mr. Henry’s opinions about why the U.S. trustee filed the adversary proceeding in the first place are admittedly based on speculation. Under these circumstances — when the expert witness’s testimony on an element of the claim is entirely speculative — it is appropriate to grant defendants’ summary judgment. Two cases cited by defendants support this analysis.

Plaintiff’s second theory is that but for the alleged post-petition breaches by Regenhardt, plaintiff would have prevailed in the trial of the U.S. trustee adversary proceeding. But plaintiff cannot prove causation as a matter of law on this theory either. Again, the only evidence advanced by plaintiff to support causation on this element is the speculative opinions of Mr. Henry.

Not only is there a lack of non-speculative evidence in the record to suggest that Regenhardt’s post-petition conduct proximately caused the bankruptcy court’s decision to deny plaintiff’s discharge, but the undisputed evidence actually demonstrates that the denial was based solely on the January 2013 fraudulent transfer — pre-petition conduct. But all of plaintiff’s allegations of Regenhardt’s purported breaches occurred post-petition.

Plaintiff’s motion for summary judgment denied. Defendant’s motion for summary judgment granted.

Labgold v. Regenhardt, Case No. 1:22-cv-751, Nov. 1, 2023. EDVA at Alexandria (Nachmanoff). VLW 023-3-702. 15 pp.