Summary:
In a prior related case, the Plaintiffs brought class action suit against Credit Collections Defense Network (“CCDN”) and several individuals, as attorneys associated with CCDN, alleging a scam that involved promises to assist debtors in legally avoiding credit card debts. See Lucas v. R.K. Lock & Assoc., 710 S.E. 2d 707 (N.C. Ct. App. March 2011). In that case, the attorney defendants moved for and were granted a dismissal due to a lack of personal jurisdiction, as they did not have minimum contacts with the State of North Carolina, other than in connection with CCDN, which had not been named in that Complaint as a party. The CCDN also brought a motion of sanctions against the Plaintiffs’ attorney under Rule 11 and the Plaintiffs sought reconsideration of the dismissal. The trial court declined to reconsider the dismissal and granted sanctions against the Plaintiffs’ attorney. The Plaintiffs then appealed. The Court of Appeals held that it lacked jurisdiction to rule on the dismissal, since the appeal was only as to the Motion to Reconsider and not the early Motion to Dismiss. Similarly, since CCDN was not a party to the action, the trial court did not have jurisdiction to sanction the Plaintiffs’ attorney on behalf of CCDN.
While the appeal in Lucas was pending, this case was commenced, asserting that the lawyer for CCDN and the attorney defendants in Lucas had acted with improper purpose, made knowingly false statements and sought to delay any recovery until CCDN could go out of business. Defendants in the present case again filed requesting and were granted a dismissal, ultimately alleging that the Plaintiffs had “failed to allege sufficient facts in their complaint to support their claim for relief.”
The Court of Appeals here held that the Plaintiffs’ complaint failed to show that the Defendants owed a duty to any plaintiffs. Following Petrou v. Hale, 43 N.C. App 655 (1979), an attorney do not owe a duty for negligent purposes in filing a complaint, as other adequate remedies exist for frivolous law suits.
As to the tortious interference and the N.C.G.S. § 84-13 attorney fraud claims, which werebased on an attempt to disqualify the Plaintiffs’ attorney in the original case due to his pre-existing relationship with CCDN. Here the Court of Appeals held that any disqualification was ultimately an act by the trial court and not the moving party. The present suit was, accordingly, an improper collateral attack on the prior order. Such a collateral attack could only be sustained if there were allegations, missing here, of extrinsic fraud.
Regarding the claim that the Defendants had violated the North Carolina RICO act, the Court of Appeals found no authority that a pattern of racketeering exists based on either a law firm’s acceptance of a retainer for defending against a fraud claim or an attorney’s allegedly false statements.
Commentary:
While having not read the earlier pleadings or orders in this case, it appears that the Defendants were arguing insufficiency of pleading in the vein of the federal Iqbal/Twombley standard. This opinion by the Court of Appeals seems to rest largely on findings that the Plaintiffs’ causes of action failed as matters of law or were improper collateral attacks on prior orders. This case doe, however seem to inch closer towards an adoption by North Carolina courts of Iqbal/Twombley. See also Evans v. Neill at:
http://ncbankruptcyexpert.com/2011/11/15/nc-court-of-appeals-evans-v-neill-breach-of-fiduciary-duty-by-substitute-trustee-in-foreclosure/
For a copy of both opinions, please see:
Cullen v. Emmanuel & Dunn- Collateral Attack & IqbalTwombley.pdf
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