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Sumrall v. Smith

United States District Court, M.D. Georgia, Macon Division

May 7, 2018

JOSPEH T. SUMRALL, JR., et al., Plaintiffs,
v.
HY SMITH, et al., Defendants.

          ORDER ON CERTAIN DEFENDANTS' MOTION TO DISMISS COUNTS II, V, and VI

          TILMAN E. SELF, III, JUDGE

         Before the Court is Defendants Hy Smith; Hy Smith Consulting, Inc.; GPS Practices Sales, Inc.; and GPS Transitions, LLC f/k/a ADS Florida, LLC's Motion to Dismiss [Doc. 12] Counts II, V, and VI of Plaintiffs' Complaint [Doc. 3-1]. Plaintiffs initially filed this action in the Superior Court of Houston County on July 11, 2017 [Doc. 3-1, at 1], and on August 31, 2017, all Defendants filed a notice of removal pursuant to 28 U.S.C. § 1446. [Doc. 1].

         FACTUAL BACKGROUND

         A. Plaintiffs' Complaint

         The following facts are taken from Plaintiffs' Complaint [Doc. 3-1] and assumed to be true for the purposes of ruling on Defendants' Motion to Dismiss [Doc. 12]. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). Plaintiffs Joseph T. Sumrall, Jr., DMD, (“Joe Sumrall”), Joseph G. Sumrall, DDS (“Gran Sumrall”), and Houston Dental Professionals, P.C. (“Houston Dental”) (collectively, “Plaintiffs”) filed suit against Hy Smith (“Smith”), a dental practice broker and practice management consultant, and four corporate entities with which Smith is affiliated: Hy Smith Consulting, Inc. (“Hy Smith Consulting”); GPS Practice Sales, Inc. f/k/a Professional Transitions, Inc.[1] (“Professional Transitions”); GPS Transitions, LLC f/k/a ADS Florida, LLC (“ADS Florida”);[2] and Pride Institute Companies, Inc. d/b/a The Pride Institute (“Pride Institute”). [Doc. 3-1, at ¶¶ 4-10, 17]. In their lawsuit, Plaintiffs allege claims against the above-listed Defendants for professional negligence, negligence per se, breach of fiduciary duty, negligent misrepresentation, fraud, and fraudulent inducement, [3] punitive damages, and attorneys' fees [Id. at 19, 23, 25-27, 29, 35-36]. Four of those Defendants: Smith, Hy Smith Consulting, Professional Transitions, and ADS Florida now move the Court to dismiss Counts II, V, and VI of Plaintiffs' Complaint [Doc. 3-1].

         In 1995, Jerry T. Vasko, DMD (“Vasko”) began practicing dentistry with Plaintiff Joe Sumrall as an associate of Houston Dental. [Id. at ¶ 15]. After Vasko expressed interest in buying into Houston Dental and becoming a partner with Joe Sumrall, Plaintiff Joe Sumrall and Vasko met with Defendant Smith in February 2003 in connection with potential engagement for appraisal services related to the dental practice. [Id. at ¶¶ 21-22]. Then, on or about March 13, 2003, Houston Dental engaged Defendants[4] for the purpose of providing professional management consulting services, practice valuation, and appraisal services. [Id. at ¶ 23-24]. After Vasko's purchase of a 50% interest in Houston Dental, Defendants continued to provide professional management consulting services, practice valuation, and appraisal services for Houston Dental and, in connection with such services, Houston Dental continued to provide Defendants with access to confidential and proprietary information. [Id. at ¶ 39].

         In or around August 2011, Plaintiff Gran Sumrall began practicing dentistry as an associate with his father, Plaintiff Joe Sumrall, and Vasko. [Doc. 3-1, at ¶ 42]. By April 23, 2015, [5] at the latest, Plaintiffs allege that Defendants were aware that Vasko, due to his plans to leave the state of Georgia, wanted to sell the 50% interest he acquired in Houston Dental during the 2003 transactions. [Id. at ¶¶ 43, 46]. Defendants advised, brokered, provided legal documentation for the 2015 transaction, and closed the sale of Vasko's 50% interest in Houston Dental to Gran Sumrall and completed the related practice transition in approximately two months.[6] [Id. at ¶¶ 46, 99]. Defendants purportedly held themselves out as “an expert and qualified neutral party representing the interests of all parties in connection with [the 2015 transactions].” [Id. at ¶ 49]. Further, Defendants failed to advise Plaintiffs, or express any concerns, of any issues that could arise from dual representation. [Id. at ¶ 62]. Therein lies the bulk of the dispute.

         Plaintiffs claim that Defendants, in the course of providing services for the 2015 transactions in connection with Gran Sumrall's purchase of Vasko's 50% partnership interest, made “representations” and “unilateral adjustments” regarding the historical financial[7] and accounting data of Houston Dental. [Id. at 50-51]. Specifically, Plaintiffs assert that the adjustments within the sale of the 50% interest in Houston Dental resulted in an inaccurately high purchase amount-in Vasko's favor. [Doc. 3-1, at ¶¶ 51, 59]. This alleged detriment to Plaintiffs, as well as disputes regarding the contractual rights and obligations set forth in the legal documentation drafted by defendants, led to extensive litigation between Plaintiffs and Vasko. [Id. at ¶¶ 59, 64]. Additionally, Plaintiffs allege that Defendants knew of facts and circumstances that rendered their valuation of Houston Dental, Vasko's 50% interest, and the purchase price for Vasko's sale of his 50% interest, inaccurate and unfairly favorable to the detriment of Plaintiffs. [Id. at ¶¶ 51, 58-60, and 102]. In summation, Plaintiffs state that they relied on the misrepresentations, warranties, and material nondisclosures made by Defendants and suffered substantial loss as a result. [Id. at ¶ 102].

         B. Defendants' Motion to Dismiss

         Defendants Smith, Hy Smith Consulting, Professional Transitions, and ADS Florida filed the instant Motion to Dismiss [Doc. 12] on August 21, 2017, in the Superior Court of Houston County.[8] There, Defendants moved to dismiss Count II based on O.C.G.A. § 9-11-12(b)(6)[9] and Counts V and VI based on O.C.G.A. § 9-11-9(b).[10] [Doc. 12]. As an alternative to Defendants' Motion to Dismiss Counts V and VI, Defendants moved for a more definite statement. [Id.].

         Defendants' Motion [Doc. 12] as it relates to Count II, rests on the general premise that “Georgia law does not recognize a private right of action for the unauthorized practice of law.” [Doc. 12, at 4 (citing Oswell v. Nixon, 620 S.E.2d 419, 422 (Ga.Ct.App. 2005)]. Additionally, Defendants move the Court to either dismiss, or in the alternative require a more definite statement, Counts V and VI on the assertion that Plaintiffs' Complaint [Doc. 3-1] does not supply the minimum, necessary detail required by O.C.G.A. § 9-11-9(b) and therefore fails to plead fraud with particularity.

         In light of this case's § 1446 removal, the Court notes (for the purposes of Counts V and VI) that “the procedure for pleading fraud in federal courts is governed by federal law and not state law . . .” McAllister Towing & Transp. Co., Inc. v. Thorn's Diesel Service, Inc., 131 F.Supp.2d 1296, 1302 (2001) (citing Hayduk v. Lanna, 775 F.2d 441, 443 (1st Cir. 1985) (“[T]he procedure for pleading fraud in federal courts in all diversity suits is governed by the special pleading requirements of Federal Rule of Civil Procedure 9(b).”)). Therefore, the Court follows the law relating to Fed.R.Civ.P. 9(b)[11] in its determination of whether Plaintiffs' Complaint, as stated, satisfies the 9(b) requirements to survive a motion to dismiss. Similarly, in considering Count II (Negligence Per Se), the Court reviews the Defendants' motion against standards under the federal rules, specifically Fed.R.Civ.P. 12(b)(6).[12]

         CONCLUSIONS OF LAW

         A. Standard of Review

         1.Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(6)

         Defendants seek dismissal of Count II for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). When ruling on a motion to dismiss pursuant to Rule 12(b)(6), a district court must accept as true the facts set forth in the complaint and draw all reasonable inferences in the plaintiff's favor. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A complaint fails to state a claim if it does not include “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). The factual allegations in a complaint “must be enough to raise a right to relief above the speculative level” and cannot “merely create[] a suspicion [of] a legally cognizable right of action.” Twombly, 550 U.S. at 555 (first alteration in original).

         In other words, the complaint must allege enough facts “to raise a reasonable expectation that discovery will reveal evidence” supporting a claim. Id. at 556. A complaint may survive a motion to dismiss for failure to state a claim even if the possibility of recovery is extremely “remote and unlikely.” Id.

         2. Motion to Dismiss Pursuant ...


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