Langdon et al v. Lesser Financial Enterprises, LLC et al

-1-
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Baltimore
In Re: 	*
CHARLES M. LANGDON
MARY ANN LANGDON,
* 	Case No. 	07-21058-DK
* 	Chapter 	11
*
Debtors. 	*
************************************* 	*
CHARLES M. LANGDON
MARY ANN LANGDON,
*
*
*
Plaintiffs. 	*
vs. 	* 	Adversary 	No. 07-00903-DK
LESSER FINANCIAL ENTERPRISES, LLC,
et al.,
*
*
*
Defendant. 	*
MEMORANDUM OPINION
Before the court is Defendant’s Greg Friedman’s Motion To Dismiss Second Amended
Complaint, Or In the Alternative, Motion For Summary Judgment, response, and reply thereto. The
court is called upon to determine whether Charles M. Langdon and Mary Ann Langdon ( the
“Plaintiffs”) can maintain causes of action based on negligence, negligent misrepresentation, fraud,
and conspiracy against an attorney, Greg Friedman ("Friedman"). The court must also decide
Date signed February 10, 2009
Entered: February 11, 2009 Case 07-00903 Doc 55 Filed 02/11/09 Page 1 of 13

1 Langdon v. Lesser Enterprises, LLC, et al., Circuit Court for Montgomery County, State
of Maryland, filed July 11, 2007, Case No. 284380-V.
2 Hereinafter, this pleading will be referred to as the Amended Complaint.
3 Hereinafter, this pleading will be referred to as the First Motion To Dismiss.
-2-
whether the court can consider punitive damages stemming from the fraud and conspiracy claims.
The court finds that a hearing will not aid in the decisional making process. For the reasons set
forth herein, the Motion to Dismiss will be denied, and the court will not consider the motion as a
motion for summary judgment.
Procedural Background
The Plaintiff initiated this adversary proceeding on November 6, 2007 by notice of removal
of a civil action pending in the Circuit Court for Montgomery County pursuant to 28 U.S.C.
§1452(a) and Fed. R. Bankr. P. 9027. 1 An amended complaint was filed by the Plaintiffs on
January 7, 2008. 2 The court entered an order granting leave for the filing of the already amended
complaint and ordered the parties to file all papers from the Circuit Court for Montgomery County.
Defendant Friedman filed a motion to dismiss or, in the alternative, for summary judgment on
February 19, 2008. 3
The court held a hearing on the First Motion To Dismiss and responses thereto on March 19,
2008. The court considered the motion solely as a motion to dismiss, and not as a motion for
summary judgment, because the court found that it was premature to entertain a motion for
summary judgment before the parties completed discovery. Applying the plausibility standard
enunciated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the court found that the
Plaintiffs failed to allege facts that support the causes of action asserted against Friedman.
Accordingly, the court granted the motion to dismiss with leave to amend the complaint, and
dismissed Count I - Negligence, Count II - Negligent Misrepresentation, Count IV- Fraud, and
Case 07-00903 Doc 55 Filed 02/11/09 Page 2 of 13

4 Hereinafter, this pleading will be referred to as the Second Complaint.
5 Hereinafter, these defendants will be referred to as Lesser.
6 This allegation is not contested by Defendants Lesser and Lesser Financial. Defendant
Friedman has not formally admitted or denied this allegation.
7 This allegation is not contested by Defendants Lesser and Lesser Financial. Defendant
Friedman has not formally admitted or denied this allegation.
8 This allegation is contested by Defendants Lesser. Defendant Friedman has not
formally admitted or denied this allegation.
9 This allegation is not contested by Defendants Lesser and Lesser Financial. Defendant
Friedman has not formally admitted or denied this allegation.
-3-
Count V-Conspiracy of the amended complaint as to Friedman only.
The Plaintiffs filed a second amended complaint on April 1, 2008.4 According to this
Second Complaint, on or about August 16, 2005, Defendants Lesser Financial Enterprises LLC and
Allan Lesser 5 agreed to loan Defendant Stephen Seiber ("Seiber") $275,000. The Plaintiffs
executed a guaranty for that loan on behalf of Seiber. Lesser directed Friedman to secure the loan
by filing deeds of trust on real properties owned by Seiber located at 3734 Angleton Court,
Burtonsville, Maryland 20866 and 5001 Atlantic Avenue, Unit 405, Mooring Condominium, Ocean
City, Maryland.6 Prior to the execution of this particular loan and guaranty, Lesser and Seiber had
executed previous loans7 that were also purportedly secured by Seiber's Burtonsville property. 8 At
some point, Seiber defaulted on his loan or loans with Lesser.9
The Plaintiffs' Second Complaint includes the same causes of action against Defendant
Friedman as Amended Complaint. However, it includes more facts and details to support the
causes of action. In sum, Count I - Negligence contends that Friedman breached his duty to the
Plaintiffs by failing to file the deeds of trust, to perform a title search, to disclose the results of the
title search, and to disclose the other liens or deeds of trust. Count II - Negligent Misrepresentation
argues that Friedman had the scienter and intent to induce the Plaintiffs to provide the guaranty in
Case 07-00903 Doc 55 Filed 02/11/09 Page 3 of 13

10 Hereinafter, this pleading will be referred as the Second Motion To Dismiss.
-4-
reliance of his false representations. Count IV- Fraud contends that Defendant Friedman knowingly
and maliciously provided false information, which the Plaintiffs reasonably relied upon when
executing the guaranty. Count V - Civil Conspiracy alleges that Friedman conspired with the other
defendants to defraud the Plaintiffs. Lastly, the Second Complaint requests punitive damages for
the fraud and civil conspiracy claims.
Friedman filed a motion to dismiss the Second Complaint in lieu of an answer on April 1,
2008.10 Friedman argued that all counts against him should be dismissed, with prejudice, for failure
to state a claim upon which relief may be granted, or in the alternative as a matter of law. Similar,
to the First Motion To Dismiss, in the Second Motion To Dismiss Friedman argues that there is no
dispute as to any material issue of fact and that the court should, in the alternative of granting the
motion to dismiss, grant summary judgment in favor of Friedman. Because the Second Complaint
was met a renewed motion to dismiss, no discovery schedule has been set by the court, while the
court considered this motion. For this reason, the court will not consider the affidavits of Charles
and Mary Langdon attached to the Second Motion To Dismiss. The court finds again that it is
premature to decide a motion for summary judgment since discovery is not complete, and this court
will only consider this motion as a motion to dismiss under Fed. R. Civ. P. 12(b)(6).
Friedman's main argument in this Second Motion To Dismiss is that the he did not owe a
duty to the Plaintiffs due to a lack of privity between the parties. Further Friedman asserts the
Plaintiffs were not intended to receive a direct benefit from Friedman's employment by Lesser.
Friedman's second argument contends that the alleged misrepresentations communicated to the
Plaintiffs were for future promises, and cannot form the basis for the negligent misrepresentation
claim. The third argument declares that the complaint's generic allegation without specific facts
Case 07-00903 Doc 55 Filed 02/11/09 Page 4 of 13

11 Plaintiffs Charles M. And Mary Ann Langdon's Opposition To Defendant Greg
Friedman's Motion To Dismiss Second Amended Complaint Or Alternatively For Summary
Judgment, filed April 25, 2008.
12 Defendant Greg Friedman's Reply To Plaintiff's Opposition To Defendant's Motion To
Dismiss Second Amended Complaint, Or In the Alternative, Motion For Summary Judgment,
filed May 6, 2008.
-5-
cannot substantiate a fraud claim. Defendant Friedman also argues that the conspiracy claim fails
because it is not a separate independent tort in the absence of an underlying tort, and that an
attorney cannot be held liable for conspiracy while working for his client. Finally, the Defense
argues that the complaint has not provided sufficient facts to support a finding of punitive damages
for fraud or conspiracy.
The Plaintiffs filed an opposition to the motion to dismiss.11 The Plaintiffs contend that the
court should invoke the law of the case doctrine and decline to entertain the motion to dismiss and
avoid relitigating issues previously decided. The Plaintiffs further explain that motion to dismiss
should be denied because Maryland law recognizes that attorney malpractice may occur between an
attorney and non-client, under the third party beneficiary exception. The remainder of the
opposition argues that the Plaintiff provided sufficient factual allegations in the Second Complaint
to support the causes of actions alleged.
Friedman filed a reply which concentrates on how the Plaintiffs have failed again to
properly plead their claims.12
Discussion
A motion to dismiss for failure to state a claim upon which relief can be granted pursuant to
Fed. R. Civ. P. 12(b)(6), made applicable to this adversary proceeding by Fed. R. Bankr. P. 7012(b),
should be granted only if the complaint fails to allege "enough facts to state a claim to relief that is
plausible on its face." Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008)(quoting Twombly,
Case 07-00903 Doc 55 Filed 02/11/09 Page 5 of 13

-6-
550 U.S. 544). “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’
requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do.” Twombly at 555(citations omitted). 	The plausibility standard is flexible and
may require additional facts in certain causes of action. Iqbal v. Hasty, 490 F.3d 143, 157-158 (2nd
Cir. 2007).
Negligence
Generally, Maryland does not recognize a cause of action in negligence stemming from a
breach of contract, except in limited circumstances. This Court discussed in Connecticut Pizza, Inc.
v. Bell Atlantic-Washington, D.C., Inc., ("In re Connecticut Pizza, Inc."), 193 B.R. 217 (Bankr.
D.Md. 1996) whether an independent cause of action ex delicto exists for the breach of a duty
which arises solely as the result of a contract between the parties. In that case, this Court examined
whether the plaintiff's, Connecticut Pizza Inc., negligence claim against the defendant, Bell
Atlantic-Washington, D.C., Inc., could survive a summary judgment motion filed by Bell Atlantic.
This court held that the mere negligent breach of a contract, between the parties, absent a deed or
obligation imposed by law was not enough to sustain a negligence tort action. In re Connecticut
Pizza, Inc. 193 B.R. at 223.
However, Maryland has recognized ex delicto causes of action against attorneys. In a
negligence action against an attorney, otherwise referred to as attorney malpractice, the plaintiff
must prove a negligent breach of duty to establish liability. Mumford v. Staton, Whaley and Price,
255 A.2d 359, 364 (Md. 1969); Flaherty v. Weinberg, 492 A.2d 618, 626 (Md. 1985). A plaintiff
must prove the following elements to recover against an attorney for negligence: "(1) [t]he
attorney’s employment; (2) his neglect of a reasonable duty; and (3) that the neglect was a the
proximate cause of loss to the client." Maryland Cas. Co. v. Price, 231 F. 397, 401 (4th Cir. 1916).
Strict privity is usually necessary in attorney malpractice cases. The court in Flaherty
Case 07-00903 Doc 55 Filed 02/11/09 Page 6 of 13

-7-
thoroughly discussed how jurisdictions chipped away at the strict privity requirement in attorney
malpractice cases. Flaherty 492 A.2d at 621-623. Maryland courts, along with other courts, have
recognized the third party beneficiary theory exception to strict privity.
[T]o establish a duty owed by the attorney to [a] nonclient the latter
must allege and prove that the intent of the client to benefit the nonclient was a
direct purpose of the transaction or relationship. In this regard, the test for third
party recovery is whether the intent to benefit actually existed, not whether there
could have been an intent to benefit the third party.
Flaherty at 625.
The Maryland Appellate courts have further explained that the interests of the client and the
nonclient should be identical. In the case of Goerlich v. Courtney Industries, Inc., 581 A.2d 825
(Md. App. 1990), the plaintiff filed a legal malpractice claim against an attorney, who represented
the plaintiff's former employer. The complaint alleged that his former employer's Shareholders'
Agreement constituted a misrepresentation and that the attorney who drafted the agreement engaged
in malpractice. Goerlich, 581 A.2d at 827. The reviewing court found that the plaintiff did not
allege in his amended complaint that a direct purpose of the agreement was to establish an
employment relationship, and that any incidental purpose does not make the plaintiff an intended
third party beneficiary to the agreement. Goerlich at 828. The court pointed out that the interests
of the corporation and of the plaintiff were diametrically opposed, and that according to Canon 7, a
lawyer cannot represent or act for conflicting interests in a transaction. Id. (citations omitted).
In considering a motion to dismiss, the court must accept as true all well-pleaded material
facts and exhibits, and decide in the Defense's favor if it is apparent that the Plaintiff cannot prove
any set of facts in support of the claim. Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir.
1999). After careful review of the Second Complaint, it is clear to this court that the Plaintiffs have
properly pled enough factual allegations to support a negligence claim.
Contrary to the Defense's insistence that the Plaintiff have failed to provide averments that
Case 07-00903 Doc 55 Filed 02/11/09 Page 7 of 13

13 Upon payment of the obligation by a guarantor, the guarantor may have a right to be
subrogated to lender's lien interest thus benefitting the guarantor in recovering upon an
indemnity right. National Bank of Commerce Trust & Sav. Asso. v. Katleman, 266 N.W. 2d 736
(Neb. 1978). For this reason, under some circumstances, a lender's impairment of rights to the
borrower's collateral may result in a common law right of discharge of guarantor. Id.; cf. Gambo
v. Bank of Maryland, 648 A.2d. 1105 (Md. Ct. Spec. App. 1994) (the court recognized a
guarantor's common law impairment of collateral defense).
-8-
would support a finding of a duty to a non-client under the third party beneficiary exception, the
court notes that the Plaintiffs specifically aver,
14. That Defendant Lesser had retained Defendant Friedman to prepare and file
the deeds of trust on Defendant Seiber's Burtonsville and Ocean City properties to
induce the Plaintiffs to execute the guaranty.
15. That it was Defendant Lesser's intent in engaging Defendant Friedman to
prepare and file deeds of trust on Defendant Seiber's real property to directly
benefit the Plaintiffs.
Second Complaint, filed April 1, 2008. These averments could not be more clear, and the court is
quite confused as to how the Defense stubbornly ignores these allegations in its Second Motion To
Dismiss and its Reply. 	The Twombly standard does not require the Plaintiff to prove the
allegations. Nor does it dispel with the court considering inferences from the facts alleged.
Although the Defense insists that the Plaintiffs must explicitly demonstrate an "intent" or "purpose"
to establish the third party beneficiary exception, these are the type of elements that the trier of fact
usually infers from conduct and actions presented at trial.
The Defense also moves for the court to find that the interests of the Lesser and the Plaintiffs
cannot be identical in this loan transaction because the Plaintiffs were guarantors and Lesser was the
creditor. However, this is a factual dispute that the Defense is trying to improperly interject in a
motion to dismiss. In considering this Second Motion To Dismiss, the court must consider all facts
pled in the Second Complaint as true. While in the general sense guarantors and creditors do not
always have the same interests, it may be in the common interest of both to collateralize the debt by
a lien against the borrower's property.13 Nowhere in Flaherty does the court explicitly state that to
Case 07-00903 Doc 55 Filed 02/11/09 Page 8 of 13

-9-
establish a duty to a non-client there can only be one direct purpose of the transaction. Commonly,
clients hire attorneys to perform a variety of services in a real estate transaction. The filing of a
deed of trust does not occur by chance or without intention. The affidavits of Dr. Alan Lesser and
the Langdons disagree on whether an intent existed. This is a dispute of fact that is not ripe for
adjudication in a motion to dismiss.
Negligent Misrepresentation
Under Maryland law, negligent misrepresentation is established by proving that: (1) the
defendant owing a duty of care to the Plaintiff, negligently asserts a false statement; (2) the
Defendant intends that his statement will be acted upon by the Plaintiff; (3) the Defendant has
knowledge that the Plaintiff will probably rely on the statement, which, if erroneous, will cause loss
or injury; (4) the Plaintiff, justifiably, takes action in reliance on the statement; and (5) the Plaintiff
suffers damage proximately caused by the Defendant's negligence. Flaherty at 627-628.
A negligent misrepresentation claim cannot be founded upon the promise of a future event.
The court in Ward Dev. Co., Inc. v. Ingrao, 493 A.2d 421 (Md. App. 1985) discussed the difference
between a promise of future events and an estimate by one knowledgeable in a particular field. In
that case, the plaintiffs, new homeowners, charged that the developer of their residences negligently
misrepresented the anticipated sewer and water assessments for the plaintiffs. Ward Dev. Co. Inc.,
493 A.2d at 423. The appellate court reviewed and found that the lower court did not err in denying
the developer's motion for directed verdict. Id. at 427. The court held that "redress may be had for
representations as to future facts and not merely as to past or existing facts." Id. (citing Stewart v.
Phoenix National Bank, 64 P.2d 101 (Ariz. 1937)).
The Defense argues that under Ward reasoning, the Plaintiff's averment cannot support a
negligent misrepresentation claim and is insufficient as a matter of law. Specifically, the Defendant
cited that Ward supports its argument that an action for misrepresentation does not lie for unfulfilled
Case 07-00903 Doc 55 Filed 02/11/09 Page 9 of 13

-10-
promises or the failure of future events to materialize. However, as quoted above, Ward recognized
that a statement made by someone knowledgeable in a particular field is actionable under the tort of
negligent misrepresentation. Id. at 427. Furthermore, the court disagrees with the Defense that a
lawyer's alleged statements regarding the filing of deeds of trust to securitize collateral, can solely
be categorized as a future event or promise.
Fraud
Rule 9(b) provides: "In all averments of fraud or mistake, the circumstances constituting
fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of
mind of a person may be averred generally." See Fed. R. Civ. P. 9(b). A plaintiff alleging fraud
must specifically allege facts concerning "the time, place and contents of the false representations,
as well as the identity of the person making the misrepresentation, and what [was] obtained
thereby." National Mortgage. Warehouse LLC v. Trokeriotis, 201 F.Supp. 2d 499, 504 (D.Md.
2002)(quoting Kerby v. Mortgage Funding Corp., 992 F.Supp. 787, 799 (D.Md. 1998)). The
National Mortgage case goes on to say that the "court should hesitate to dismiss if it finds that '(1)
that the defendant has been made aware of the particular circumstances for which [it] will have to
prepare a defense at trial, and (2) that plaintiff has substantial pre-discovery evidence of those
facts.'" Id. at 505.
The Second Complaint provides the Defense with adequate notice of the claims against him,
and it describes the loan transaction allegedly constituting the fraud. All of the evidence that could
prove the fraud does not have to be presented at the pleading stage.
Conspiracy
To establish a conspiracy claim, the Plaintiff must prove "that the attorney acted without
legal justification and with the intent of injuring." Fraidin v. Weitzman, 611 A.2d 1046, 1079 (Md.
App. 1992). "The plaintiff must establish that the attorney did not act within the role of an advisor
Case 07-00903 Doc 55 Filed 02/11/09 Page 10 of 13

14 Amended Complaint, filed April 1, 2008. at pg 5.
-11-
and merely advise, but instead knew of the client's wrongful conduct and was actively involved in
the wrongful conduct." Fraidin, 611 A.2d at 1079 (citing to McElhanon v. Hing, 728 P.2d 256, 264-
265 (Ariz. App. 1985), cert. denied, 481 U.S. 1030). In addition, the conspiracy must personally
benefit the attorney. Id. at 1080.
Here, the amended complaint includes allegations that the Defendant knew that Seiber did
not have legal title and "knowingly, intentionally, wilfully, maliciously, fraudulently and/or with
wilful disregard for the rights of the Plaintiff. "14 Additionally, since the other claims against the
Defendant will not be dismissed, then the conspiracy claim stands.
Punitive Damage
"[A] punitive damage award ...is not designed to benefit the plaintiff. It is designed ... to
benefit society ... by punishing a defendant, by way of ... a civil fine for its malicious acts." Darcars
Motors of Silver Spring, Inc. v. Borzym, 818 A.2d 1159, 1186 (Md. App. 2003). Judge Wilner
explained in Alexander & Alexander, Inc. v. B. Dixon Evander & Associates, Inc., 596 A.2d 687,
715 (Md. App. 1991) that punitive damages:
(1) may be imposed only where there is outrageous conduct,
(2) may be awarded only upon a showing of "actual malice" on the part of the
defendant, i.e., "the performance of an act without legal justification or excuse,
but with an evil or rancorous motive influenced by hate, the purpose being to
deliberately and willfully injure the plaintiff" or, in certain kinds of cases, subject
to further refinement by the Court of Appeals, "implied malice," i.e., " conduct of
an extraordinary nature characterized by a wanton or reckless disregard for the
rights of others,
(3) are to punish the wrongdoer, to teach him not to repeat his wrongful conduct
and to deter others from engaging in the same conduct,
(4) must relate to the degree of culpability exhibited by a particular defendant and
that party's ability to pay,
(5) represent a civil fine, and as such, should be imposed on an individual basis,
and
(6) may be awarded only upon proof of actual loss and thus may not be awarded
unless there is also an award of compensatory damages.
Case 07-00903 Doc 55 Filed 02/11/09 Page 11 of 13

-12-
Id. at 715 (citations omitted). This is an extremely high standard to meet, and the amended
complaint is devoid of specific facts that would support imposing punitive damages.
However, the Defendant has sufficient notice that punitive damages are requested, and an
adjudication of whether punitive damages should be imposed is better examined at the end of
discovery, and therefore the court will not grant the motion to dismiss the punitive damage requests.
An order in conformity with this opinion will be entered.
cc: 	Charles M. Langdon
6303 Ivy Lane, Ste. 102
Greenbelt, MD 20770
Mary Ann Langdon
16 Grand Port Road
Berlin, MD 21811
James S. Liskow
Washington Business Park
4601 Forbes Boulevard
Suite #200
Lanham, MD 20706
John Douglas Burns
6303 Ivy Lane, Ste. 102
Greenbelt, MD 20770
(301) 441-8780
Lesser Financial Enterprises, LLC
and Allan Lesser
c/o Harry M. Stern, Esq.
10400 Connecticut Avenue, Suite 405
Kensington, MD 20895
Stephen Seiber
3724 Angelton Court
Burtonsville, MD 20866
Case 07-00903 Doc 55 Filed 02/11/09 Page 12 of 13

-13-
Greg S Friedman
c/o Larry L. Puckett, Esq.
Eccleston and Wolf, P.C.
729 E. Pratt Street, 7th Floor
Baltimore, MD 21202
Harry M. Stern
10400 Connecticut Avenue
Suite 405
Kensington, MD 20895
Larry L. Puckett
Eccleston and Wolf, P.C.
Baltimore-Washington Law Center
4th Floor
7240 Parkway Drive
Hanover, MD 21076
End of Order
Case 07-00903 Doc 55 Filed 02/11/09 Page 13 of 13