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Lalonde v. Taylor English Duma, LLP

Court of Appeals of Georgia, Second Division

March 11, 2019


          MILLER, P. J., BROWN and GOSS, JJ.

          GOSS, JUDGE.

         These appeals stem from the trial court's grant of summary judgment to the law firm Taylor English Duma, LLP and one of its partners, Michael H. Trotter, in a legal malpractice action. Their client was engineer and medical device inventor Michael Lalonde. Lalonde sued his former attorneys, arguing that they breached the standard of care by drafting a contract which permitted the investor and majority owner of a company in which Lalonde held a minority share to unilaterally dissolve the company, damaging Lalonde financially.[1] In Case No. A18A2012, Lalonde argues that the trial court erred in granting summary judgment to the defendants. In Case No. A18A2013, Taylor English and Trotter argue that the trial court erred in denying their motions to exclude expert testimony. The cases are consolidated for our review. Finding no error in Case No. A18A2012, we affirm. We dismiss as moot the appeal in Case No. A18A2013.

         Case No. A18A2012

         1. In a multi-part enumeration, Lalonde argues that the trial court erred in granting summary judgment to Taylor English and Trotter.

         We conduct a de novo review of a trial court's grant or denial of a motion for summary judgment to determine whether any genuine issue of material fact exists and whether the moving party is entitled to judgment as a matter of law. We view the evidence and reasonable inferences drawn from it in favor of the nonmoving party. Cowart v. Widener, 287 Ga. 622, 623 (1) (a) (697 S.E.2d 779) (2010).

         So viewed, the evidence shows that Lalonde invented small, portable, continuous positive airway pressure ("CPAP") devices designed to treat sleep apnea. Lalonde provided his CPAP technology and related patents to a Delaware limited liability company, called Deshum Medical, LLC, in exchange for a one-third ownership interest in Deshum. The contributing members of Deshum were Lalonde, as inventor; and PBM Capital Investments, LLC, with president Paul Manning, as investor. PBM agreed to provide $5 million to Deshum in return for a majority, two-thirds ownership interest in the company.

         Lalonde retained Trotter and his firm, Taylor English, and they drafted the Deshum Operating Agreement and related documents putting together the business deal between Lalonde and PBM. Lalonde argues on appeal that throughout the process of crafting the Operating Agreement, he told his lawyers that he wanted his ownership rights protected. Under the Operating Agreement, Deshum's initial three-member Board of Managers consisted of Manning and Sean Stalfort from PBM, and Lalonde. The Operating Agreement, as executed, provided that "[n]otwithstanding anything to the contrary, contained in this Article . . . or any other term or provision of this Agreement," under § 6.03, neither the Board, nor any manager, could undertake various actions without the consent of a "Super Majority of the Board," which at that point in time meant all three managers. However, although the Operating Agreement at § 6.03 (g) provided that a Super Majority of the Board was needed to dissolve the company, it also provided at § 11.01 that Deshum could be dissolved under any one of three scenarios: "(a) the decision of the Board in its sole discretion; (b) the election of the Members holding a Required Interest, or (c) the entry of a final decree of judicial dissolution[.]" (Emphasis supplied.) The Operating Agreement defines "Members" holding a "Required Interest" as those owning more than 50 percent of the "issued and outstanding Units of the Company." Lalonde held about one-third of the units, and PBM held the remaining two-thirds.

         On January 22, 2013, following disputes between Lalonde and Manning, PBM fired Lalonde. On March 20, 2013, the Board meeting minutes state that at a special meeting of which Lalonde was notified but did not attend, Manning announced that PBM's $5 million investment had been almost exhausted because the CPAP device, which was supposed to have been in the final stages of development according to Lalonde's representations, was not in workable form and needed further development. Manning said that it was "highly unlikely" that PBM would invest more money in the device because by February 2013, about $4.3 million of the $5 million already had been spent, and the remaining money would run out in a few weeks. Deshum Board minutes averred that $4.8 million had been spent by the end of April 2013, and that the company would run out of money by the end of May 2013. Lalonde, by contrast, contends that once PBM realized that FDA approval of the CPAP device was imminent, PBM began trying to force him out.

         PBM issued a letter of dissolution for Deshum under § 11.01 of the Operating Agreement in April 2013, stating that the company "will soon have exhausted its capital reserves and that, under present circumstances, it is not possible for [Deshum] to raise additional capital." As outlined above, § 11.01, option (b), provided for dissolution of the company by vote of unit holders holding a "Required Interest," that is, more than 50 percent of the company's outstanding units, and Lalonde held only a minority interest. In May 2013, the Deshum Board, with Lalonde participating by telephone and dissenting, voted that upon dissolution, the company's assets would be distributed "in kind" to Deshum members based upon their fractional rights under the Operating Agreement. The Board, again with Lalonde dissenting, adopted a dissolution plan on August 22, 2013, and remaining assets were transferred on or about that day to Human Design Medical, LLC ("HDM"). HDM was owned by PBM and The Paul B. Manning 1999 Irrevocable Trusts. Manning was HDM's chief executive officer. HDM then began marketing the CPAP device, acquired two foreign companies with marketing capability, and later sold the companies and devices to another foreign company.

         In 2015, Lalonde filed the instant lawsuit against Trotter and Taylor English, arguing that they committed legal malpractice in drafting an Operating Agreement which allowed PBM to dissolve Deshum unilaterally, thus injuring Lalonde financially. Trotter and Taylor English moved for summary judgment, arguing, among other things, that the attorneys breached no duty to Lalonde and that Lalonde was unable to prove causation. The trial court granted their motion. In so doing, it relied upon the Georgia legal malpractice standard, as does this Court:

In a legal malpractice action, the plaintiff must establish three elements: (1) employment of the defendant attorney, (2) failure of the attorney to exercise ordinary care, skill and diligence, and (3) that such negligence was the proximate cause of damage to the plaintiff. With respect to the 'ordinary care, skill and diligence' element, the law imposes upon persons performing professional services the duty to exercise a reasonable degree of sill and care, as determined by the degree of skill and care ordinarily employed by their respective professions under similar conditions and like surrounding circumstances.

(Citations and punctuation omitted; emphasis in original.) Allen v. Lefkoff, Duncan, Grimes & Dermer, P. C., 265 Ga. 374, 375 (2) (a) (453 S.E.2d 719) (1995). The parties do not dispute the first element of the standard, and we need not address it.

         Contrary to Lalonde's assertions on appeal, the trial court specifically stated that it "does not hold that Defendants violated their standard of care." (Emphasis supplied.) Rather, the trial court found that breach of the standard of care and causation are separate inquiries, citing Rogers v. Norvell, 174 Ga.App. 453, 457-458 (2) (330 S.E.2d 392) (1985).[2] The trial court essentially pretermitted any finding as to attorney malpractice, and instead determined that Lalonde "has not shown, and cannot uphold his burden to show, that [Taylor English and Trotter] were the proximate cause of his damages and, therefore, his legal malpractice claim fails as a matter of law." Lalonde filed the instant appeal from that order. We find no error.

         1. Lalonde argues that the trial court erred in granting summary judgment to Trotter and Taylor English by finding that Lalonde broke the chain of causation and waived his claims against his former counsel by settling a lawsuit he filed in Delaware Chancery Court against PBM and Deshum.

         Lalonde's Delaware Chancery Court petition is dated May 21, 2013, [3] after Deshum issued letters of dissolution in April 2013, but before the company had actually dissolved. Lalonde did not seek to stop the dissolution in Chancery court. Rather, and significantly, he also sought dissolution. However, he sought judicial dissolution instead of the majority unit holder dissolution that PBM had initiated. A final decree of judicial dissolution is one of the methods for which the Operating Agreement provides under § 11.01, option (c).

         In the petition, Lalonde argued that PBM had violated the Operating Agreement and his employment agreement, and that because of animosity and pending litigation, [4] "the [m]anagers are unable to carry out the business of the [c]ompany." In his cause of action for judicial dissolution, Lalonde alleged that "[i]t is not reasonably practicable for Deshum to continue to operate in accordance with the Operating Agreement[, ]" and "Deshum lacks the financial means to continue in operation. PBM is unwilling to invest any additional funds . . . and the PBM Managers have determined that ...

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