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Sargent v. Buckley
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MAINE SUPREME JUDICIAL COURT				Reporter of Decisions
Decision:	1997 ME 159
Docket:	Pen-96-338
Submitted
on Briefs:	March 14, 1997
Decided:	July 21, 1997

Panel:  WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, and LIPEZ, JJ.


J. CAROLYN SARGENT v. PHILIP BUCKLEY, et al.



WATHEN, C.J.


 	[¶1] Plaintiff, J. Carolyn Sargent, appeals from the judgment entered
in the Superior Court (Penobscot County, Marsano, J.) granting defendants'
motion to dismiss plaintiff's amended complaint pursuant to M.R. Civ. P.
12(b)(6).  The complaint was brought against an individual attorney, Philip
Buckley, and his law firm, Rudman & Winchell.  It alleges claims of fraud and
breach of a fiduciary duty arising from defendants' representation of
plaintiff's husband in her action for divorce.  With respect to count I of the
complaint, plaintiff argues that the court erred by ruling that she has failed
to state a claim for fraud and erred by ruling that defendants had no duty to
file a marital property list with the divorce court pursuant to M.R. Civ. P.
80(n).   With respect to count II, plaintiff argues that the court erred in
ruling that an attorney's breach of the fiduciary duty of loyalty to a former
client is not actionable.   We determine that count I is barred by the final
judgment in Sargent v. Sargent, 677 A.2d 528 (Me. 1996) (Sargent II),{1} and
that the court erred by dismissing count II.  Thus, we vacate the judgment
on count II.	
	[¶2]  The factual background and procedural history may be
summarized as follows:  Plaintiff and James Sargent were married in 1978. 
Before the marriage they entered into an ante-nuptial agreement providing
that, in the event of a divorce, plaintiff would receive $5,000 in lieu of
alimony, support and property settlement rights.  For the purposes of this
agreement, plaintiff was represented by attorney Albert Winchell, now
deceased, a partner of defendant Rudman & Winchell.  The firm also
represented plaintiff in other legal matters before and during the marriage
to James. 
	[¶3] The complaint alleges that in early 1989, plaintiff and James
Sargent began the process of separation.  James sought legal advice from
defendant Philip Buckley, a partner of Rudman & Winchell, and plaintiff
sought advice from a Lewiston attorney.  Buckley knew that his partner
Albert Winchell had represented plaintiff in negotiating the ante-nuptial
agreement and that the firm had represented her in other matters.  In April
1989, Buckley was advised by an associate in the firm that he should obtain
written consent from plaintiff before representing James Sargent on the
separation and divorce, because the firm represented plaintiff on the
antenuptial agreement.  Buckley never obtained such consent.  A separation
agreement was entered into in April, 1989.  The agreement provided that
plaintiff was to receive approximately one million dollars in cash and
property and that the terms of the agreement were to be incorporated into
the divorce decree.  Neither plaintiff nor her attorney attended the
subsequent divorce hearing.  Buckley presented the separation agreement to
the District Court at the hearing and the court issued a decree incorporating
the terms of the agreement. 
	[¶4]  In 1992, plaintiff filed suit against James alleging that he
fraudulently induced her to enter into the separation agreement by
misrepresenting the value of the marital estate.  While her appeal from
summary judgment was pending, plaintiff brought the present action
alleging that Buckley conspired with James in concealing and
misrepresenting the value of the marital estate, and that Buckley breached
the fiduciary duty of loyalty owed to plaintiff as a former client.  Defendants'
answer asserted that the complaint fails to state a claim on which relief can
be granted, and that it is barred by res judicata, collateral estoppel, and the
statute of limitations.  Defendant filed a motion to dismiss for failure to state
a claim pursuant to M.R. Civ. P. 12(b)(6), for failure to file within the statute
of limitations and for failure to plead fraud with sufficient particularity
pursuant to M.R. Civ. P. 9(b).  Plaintiff filed a motion to amend her complaint
to more particularly allege fraud and to include count II for the breach of a
professional duty.  After granting plaintiff's motion to amend, the court
dismissed the complaint basing its order solely on M.R. Civ. P. 12(b)(6).
Count I
	[¶5]  While this appeal was pending, we issued our decision in Sargent
II, 677 A.2d 528 (Me. 1996) affirming a summary judgment in favor of
James Sargent on plaintiff's claims of civil fraud and misrepresentation.  She
alleged in that action that James led her to believe that the marital estate
totalled $2 million dollars when he knew it totalled $17 million dollars.  We
held that plaintiff failed to establish justifiable reliance on the alleged
misrepresentations, a necessary element of fraud.  The record established 
that plaintiff did not believe her husband's misrepresentations about his
wealth at the time of the settlement agreement, and that during the divorce
negotiations she believed "her husband was worth something more than 14
million dollars."  Id. at 530.  It was also established that plaintiff's attorney
advised her not to sign the settlement agreement, and that she chose not to
engage in discovery or to contest the divorce.  Based on this evidence we
concluded that "there was no reliance" by her on her husband's
misrepresentations.  Id. 
	[¶6]  It necessarily follows from the decision in Sargent II that plaintiff
is collaterally estopped from asserting justifiable reliance on the same
misrepresentations and concealments allegedly made by attorney Buckley. 
Based on the findings made in Sargent II, she cannot have relied on
misrepresentations asserting the marital estate to be $2 million dollars
regardless of the source of the misrepresentations.  Collateral estoppel bars
plaintiff from asserting an issue of fact or law that was actually litigated on
the merits and determined by a valid final judgment in a prior action if the
issue was essential to the judgment.  Morton v. Schneider, 612 A.2d 1285,
1286 (Me. 1992).  Plaintiff's awareness of  the general extent of James
Sargent's wealth is an issue of fact that was actually litigated on the merits,
determined by a final judgment, and was essential to that judgment.  She is
now barred from asserting her ignorance of the extent of Sargent's wealth, a
fact that is necessary for proving her reliance on Buckley's alleged
misrepresentations.  The fact that defendants were not parties to the prior
action is immaterial in this non-mutual defensive application of collateral
estoppel.  Hossler v. Barry, 403 A.2d 762, 768 (Me. 1979).  
	[¶7]  Because plaintiff's allegations of fraud are barred by collateral
estoppel, we need not address her argument that defendants had a duty to
file a marital property list with the divorce court.  
Count II
	[¶8]  Plaintiff alleges that defendants Buckley and Rudman & Winchell
owed her a fiduciary duty of loyalty as a former client, and that their breach
resulted in harm to her.  She specifically alleges that defendants breached
the duty of loyalty by representing James Sargent in the divorce and by using
confidential information in their representation of James.   She also alleges
that attorney Buckley violated the Maine Bar Rules that provide:

A lawyer shall not accept employment adverse to a former client
without that client's informed written consent if such new
employment involves the subject matter of the former
employment or may involve the use of confidential information
obtained through such former employment.

M. Bar R. 3.4(e).{2}  In its dismissal of count II the court reasoned that a
violation of the Maine Bar Rules does not give rise to a cause of action for
legal malpractice.  We agree with plaintiff that the court erred by failing to
recognize that she presented a claim for relief based on a breach of common
law fiduciary duties.  She relies on the Maine Bar Rules merely as evidence
of the applicable standard of care.{3} 
	[¶9]  We have held that an "attorney and client necessarily share a
fiduciary relationship of the highest confidence."  Anderson v. Neal, 428
A.2d 1189, 1191 (Me. 1981).  In Peaslee v. Pedco, Inc., 388 A.2d 103 (Me.
1978), an attorney's breach of the duty of loyalty supported an action for
rescission of a land contract.  The fiduciary obligations of an attorney are
derived from common law and equity independent of professional rules of
conduct.  2 Ronald E. Mallen & Jeffrey M. Smith Legal Malpractice, § 14.1
(4th ed. 1996).  "[T]he basic fiduciary obligations are two-fold:  undivided
loyalty and confidentiality . . . . These common-law duties predate and exist
despite independent, codified ethical standards."  Id. at 227-28.  "A lawyer
who acts adversely to a former client can be sued for the financial
consequences of disloyalty, which primarily is for abuse of confidences."  Id.
§ 16.23 at 483-4.  
	[¶10]  A motion to dismiss for failure to state a claim tests only the
sufficiency of the complaint.  In reviewing the trial court's dismissal, we
accept the material allegations of the complaint as true and examine the
complaint in "the light most favorable to the plaintiff to determine whether
it sets forth the elements of a cause of action or alleges facts that would
entitle the plaintiff to relief pursuant to some legal theory."  Hamilton v.
Greenleaf, 677 A.2d 525, 527 (Me. 1996).  We will uphold a dismissal "only
when it appears beyond doubt that a plaintiff is entitled to no relief under
any set of facts that he might prove in support of his claim."  Id.  The legal
sufficiency of a complaint is a question of law.  Id.
	[¶11] Plaintiff's complaint alleges that defendants breached their duty
of loyalty to her as a former client by representing James Sargent without
her consent, and by disclosing confidential information during that
representation.  Count II is actionable because we cannot rule as a matter of
law that she is entitled to no relief under any set of facts that she might
prove in support of her claim.{4}
	[¶12]  The entry is: 
Judgment on Count I affirmed.  Judgment on Count
II vacated.  Remanded for further proceedings
consistent with the opinion herein.

Attorney for plaintiff: Timothy Murphy, Esq. Gardner, Gardner & Murphy 9 Beach Street Saco, ME 04072 Attorneys for defendants: Michael G. Messerschmidt, Esq. Kevin J. Beal, Esq. Preti, Flaherty, Beliveau & Pacios, LLC P O Box 11410 Portland, ME 04104-7410
FOOTNOTES******************************** {1} This is the fourth time plaintiff has sought review of a judgment arising from her divorce. In Sargent v. Sargent, 622 A.2d 721 (Me. 1993) (Sargent I) we vacated a dismissal of plaintiff's complaint alleging that James Sargent fraudulently induced her to enter a separation agreement. In Sargent v. Sargent, 677 A.2d 528 (Me. 1996) (Sargent II) we affirmed a summary judgment in favor of James in the same action. In Sargent v. Sargent, 1997 ME 38 (Sargent III) we affirmed the court's denial of her motion to set the divorce judgment aside. {2} Rule 3.4 was amended in 1993. The relevant provision is now contained in M. Bar R. 3.4(d)(1) that provides: Except as permitted by this rule, a lawyer shall not commence representation adverse to a former client without the client's informed written consent if such new representation is substantially related to the subject matter of the former representation or may involve the use of confidential information obtained though such former representation. (Emphasis added to highlight amended language.) {3} We have stated that: "The provisions of the code of professional responsibility and the disciplinary rules are useful guidelines for the understanding of a lawyer's obligations." In Re Dineen, 380 A.2d 603, 604 (Me. 1977). {4} Defendants contend on appeal that count II is barred by the statute of limitations. The court did not rule on the affirmative defense of the statute of limitations and there has not been sufficient factual development to address it on appeal.