Attorneys – RICO — Tort/Negligence – Tortious Interference with Prospective Economic Advantage – Civil Practice — Prior Litigation – Collateral Attack

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Cullen v. Emanuel & Dunn, PLLC (Lawyers Weekly No. 12-16-0919, 25 pp.) (Martha A. Geer, J.) Appealed from Columbus County Superior Court (Thomas H. Lock, J.) N.C. App. Unpub.

Holding: Plaintiffs lost a prior lawsuit and are now suing the lawyers who represented the winning side. Plaintiffs have not shown that an attorney’s acceptance of a retainer to represent a defendant in a fraud action, without more, is enough to make the attorney liable under North Carolina’s Racketeering Influenced and Corrupt Organizations Act.

We affirm judgment on the pleadings for defendants.

In a prior lawsuit, plaintiffs alleged they were the victims of a scam. Their claims were dismissed without prejudice based on a lack of personal jurisdiction and plaintiffs’ failure to join a necessary party.

During that lawsuit, defense counsel was initially successful in having plaintiffs’ attorney removed as counsel. The attorney was later reinstated as plaintiffs’ counsel.

Motion to Continue

Even though plaintiffs were given all the notice required by the Rules of Civil Procedure, they sought a continuance, citing a need for more time to respond to defendants’ brief in support of their motion for judgment on the pleadings. Since plaintiffs’ counsel is prosecuting multiple actions involving these facts and would have been familiar with the case law he believed supported plaintiffs’ causes of action, plaintiffs have failed to show that the trial court abused its discretion in refusing to grant a continuance.

Negligent Supervision

Plaintiffs claim that the defendant-law firm negligently supervised its associate, defendant Bettis. This claim is barred by Petrou v. Hale, 43 N.C. App. 655, 260 S.E.2d 130 (1979). Under Petrou, the firm and its members owed no duty, for negligence purposes, to the parties who were adverse to the firm’s clients. Plaintiffs should have sought recourse for any misconduct by Mr. Bettis or the firm by seeking sanctions from the trial court in the underlying lawsuit (the Lucas action) or by initiating a disciplinary proceeding with the State Bar.

Tortious Interference

Plaintiffs’ claim of tortious interference with prospective advantage is based on the disqualification of their attorney in the underlying lawsuit.

Plaintiffs cite no authority suggesting that a successful motion for disqualification can give rise to a claim for tortious interference with contract.

Moreover, any disqualification of counsel was an act of the trial court; clearly, the Lucas trial court found defendants’ actions to be legally justified.

Therefore, plaintiffs’ argument is a collateral attack on the disqualification order. Since plaintiffs’ fraud allegations involve matters related to the Lucas court’s determination on the merits, they involve only intrinsic fraud. If plaintiffs were injured by the brief disqualification of their counsel, they should have sought relief in the Lucas trial court. They cannot pursue such relief in a separate action.

Fraud

Plaintiffs also allege attorney fraud under G.S. § 84-13. However, have cited no authority — and we have found none — even suggesting that a claim may be brought under § 84-13 for alleged fraud by an opposing counsel in a wholly separate action.

In any event, this argument again constitutes a collateral attack on the dismissal order in the Lucas case. To prevail on this claim, plaintiffs, in this case, would have to obtain a ruling that the dismissal in Lucas was not warranted. The alleged fraud relates to a determination of the merits of the motion to dismiss and, therefore, is intrinsic fraud. Consequently, the collateral attack is invalid, and the trial court properly granted judgment to defendants on this cause of action.

RICO

Finally, plaintiffs have cited no authority holding that a pattern of racketeering exists for purposes of a private RICO suit based on (1) a law firm’s accepting a retainer to represent a party defending against allegations of fraud by the client and (2) an attorney’s making allegedly false statements in order to cause his client to prevail in litigation.

As an initial matter, plaintiffs’ “obtaining property by false pretenses” argument constitutes another collateral attack on the dismissal order in the Lucas litigation. Mr. Bettis’ actions leading up to the dismissal of the Lucas litigation cannot be a basis for an independent RICO action.

With respect to the acceptance of a retainer, in enacting the N.C. RICO Act, the General Assembly expressly stated, “It is not the intent of the General Assembly to in any way interfere with the attorney-client relationship.” G.S. § 75D-2(b).

Setting aside the fact that the single act of accepting a retainer does not constitute a “pattern” of racketeering activity, plaintiffs have not provided any basis for holding, despite the General Assembly’s statement of contrary intent, that an attorney’s acceptance of a retainer to represent a defendant in a fraud action, without more, is sufficient to subject the attorney to liability under RICO.

The potential for plaintiffs to have recovered some indeterminate portion of their losses in the Lucas action is not the concrete loss to business or property necessary for a RICO cause of action. A showing of “injury” under RICO requires proof of concrete financial loss, and not mere injury to a valuable intangible property interest.

Plaintiffs have merely pointed to the possibility of a verdict in their favor had defendants not been successful in having the prior class action dismissed. Such a mere expectancy is far too intangible to constitute an injury to property sufficient to support a claim under RICO.

Affirmed.