Inland Am. Winston Hotels, Inc. v. Winston

Inland Am. Winston Hotels, Inc. v. Winston, 2010 NCBC 19.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF WAKE 08 CVS 021786

INLAND AMERICAN WINSTON HOTELS,
INC.,

Plaintiff,

v.

ROBERT W. WINSTON, III, ORDER & OPINION
KENNETH R. CROCKETT,
WINSTON HOSPITALITY, INC.,
WILLIAM W. BUNCH, III and
BROWN & BUNCH, PLLC,

Defendants.

{1} THIS MATTER is before the Court on Defendants William W.
Bunch, III and Brown & Bunch, PLLC’s Motion for Summary Judgment
pursuant to Rule 56 of the North Carolina Rules of Civil Procedure. After
considering the briefs submitted, other submissions of counsel, and oral
argument, the court concludes that Defendants William W. Bunch III and
Brown & Bunch, PLLC’s Motion for Summary Judgment should be
GRANTED.

Moore & Van Allen, PLLC by Scott M. Tyler and Karin M. McGinnis
and DLA Piper, LLP by Jeffrey D. Herschman and Melissa R. Roth for
Plaintiff Inland American Winston Hotels, Inc.

Cranfill Sumner & Hartzog, LLP by Richard Boyette for Defendants
William W. Bunch, III and Brown & Bunch, PLLC.

Tennille, Judge.
I.
PROCEDURAL BACKGROUND
{2} This action was filed in Wake County on December 12, 2008. The
matter was designated a mandatory complex business case by order of the
Chief Justice of the Supreme Court of North Carolina dated December 22,
2008 and subsequently assigned to the undersigned Special Superior Court
Judge for Complex Business Cases by order of the Chief Special Superior
Court Judge for Complex Business Cases dated December 22, 2008.
{3} By order dated May 5, 2009, this action was consolidated with a
related case, Crockett Capital Corp. v. Inland Am. Winston Hotels, Inc., No.
08 CVS 000691 (N.C. Super. Ct. filed Jan. 16, 2008), for discovery purposes
only. Defendants William W. Bunch, III (“Mr. Bunch” or “Bunch”) and Brown
& Bunch, PLLC are not parties in the related case. In this action, Plaintiff
filed suit against Defendants Kenneth R. Crockett and Robert W. Winston for
breach of contract and usurpation of corporate opportunity, against
Defendant Winston Hospitality, Inc. for tortious interference with prospective
advantage, and against Defendants Bunch and Brown & Bunch, PLLC for
legal malpractice, breach of fiduciary duty, and tortious interference with
prospective advantage. 1
{4} Defendants Bunch and Brown & Bunch, PLLC filed a Motion for
Summary Judgment pursuant to Rule 56 of the North Carolina Rules of Civil
Procedure on June 16, 2010. Plaintiff filed a responsive brief on July 19,
2010. Defendants Bunch and Brown & Bunch, PLLC filed a reply brief on
August 2, 2010. The Court heard oral arguments on the Motion on
September 23, 2010. This Order and Opinion only addresses the Bunch and
Brown & Bunch, PLLC Motion.

1 No independent claims are asserted against the law firm other than those based upon the

actions of Mr. Bunch. References to the claims against Mr. Bunch in this Order and Opinion
also apply to the claims against Brown & Bunch, PLLC.
II.
FACTUAL BACKGROUND
A.
THE PARTIES
{5} Plaintiff Inland American Winston Hotels, Inc. (“Inland”) is a
corporation organized under the laws of the state of Delaware, with its
principal office and place of business in Oak Brook, Illinois. Inland is the
successor by merger to Winston Hotels, Inc. (“Winston Hotels”), a North
Carolina corporation. The merger became effective on July 1, 2007 when
Inland acquired all of the capital stock of Winston Hotels. (Defendants
William W. Bunch, III and Brown & Bunch, PLLC’s Br. in Supp. of Mot. for
Summ. J. (“Defs.’ Summ. J. Br.”) 3.) On that date Inland also became the
general partner of Winn Limited Partnership (“Winn LP”), a North Carolina
Limited Partnership previously owned by Winston Hotels. (Mem. of Law in
Opp. to the Mot. for Summ. J. Filed by Defs. William W. Bunch, III and
Brown & Bunch, PLLC (“Pl.’s Resp. Br.”) 3; Dep. of Kenneth R. Crockett
(“Crockett Dep.”) 302:17−303:1.)
{6} Defendant Bunch is an attorney duly licensed to practice law in the
state of North Carolina and at all material times has been a member of
Brown & Bunch, PLLC. Mr. Bunch is a real estate transactional lawyer and
a founding partner of Brown & Bunch, PLLC.
{7} Brown & Bunch, PLLC is a professional limited liability company
organized under the laws of the state of North Carolina and engaged in the
practice of law in this state, with offices in Wake and Orange Counties.
{8} Defendant Kenneth R. Crockett (“Mr. Crockett”) resides and/or
regularly conducts business in Wake County, North Carolina.
{9} Defendant Robert W. Winston, III (“Mr. Winston”) resides and/or
regularly conducts business in Wake County, North Carolina.
{10} Winston Hospitality, Inc. (“Winston Hospitality”) is a corporation
organized under the laws of the state of North Carolina, with its principal
place of business in Raleigh, North Carolina. At all times relevant to this
lawsuit, Messrs. Crockett and Winston have been officers of Winston
Hospitality, each owning an equity interest therein.

B.
LEGAL MALPRACTICE, BREACH OF FIDUCIARY DUTY, TORTIOUS
INTERFERENCE CLAIMS

{11} The claims against Mr. Bunch and Brown & Bunch, PLLC arise out
of a proposed development project in Durham County near the Research
Triangle Park called the “RTP Westin.” The RTP Westin is one of thirteen
potential developments contemplated by an agreement between Inland, Winn
LP, and Crockett Capital Corporation (“Crockett Capital”) 2 , which was signed
on or about July 30, 2007 and made effective July 1, 2007. (Defs.’ Summ. J.
Br. 2, Ex. 26: Agreement Regarding Development Projects (“Master
Agreement”); Pl.’s Resp. Br. 4.)
{12} Prior to July 1, 2007, Winston Hotels was engaged in the business of
acquiring, developing and constructing hotels. (Compl. ¶ 9.) At that time,
Mr. Crockett served as Winston Hotels’ Executive Vice President and Chief
Development Officer, and Mr. Winston served as its Chief Executive Officer.
(Defs.’ Summ. J. Br. 3.) Mr. Crockett had been working to acquire the RTP
Westin site since early 2007. (Crockett Dep. 300:7−11.) On July 1, 2007,
Inland acquired all the capital stock of Winston Hotels. (Defs.’ Summ. J. Br.
3.)
{13} From 1994 until the merger with Inland, Mr. Bunch served as legal
counsel to Winston Hotels and its related entities, including Winn LP. (Dep.
of William W. Bunch, III (“Bunch Dep.”) 6:22−5; Pl.’s Resp. Br. 1.) Mr.

2 Crockett Capital is a North Carolina corporation formed on July 11, 2007. Messrs. Crockett
and Winston each own a 50% share of the business. (Pl.’s Resp. Br. 3 n.1.)
Crockett was one of Mr. Bunch’s primary contacts in connection with his
representation of Winston Hotels. (Bunch Dep. 7:1−4.)
{14} As part of the acquisition of Winston Hotels, Inland acquired the
ownership of hotel properties then under construction and the right to
develop other properties, including the RTP Weston, which “may be suitable
for development as hotel projects . . . .” (Master Agreement, Recital A.)
These properties were identified as “Pipeline Properties” and listed in Exhibit
B of the Master Agreement. (Master Agreement, Ex. B.) After the merger,
Inland continued to engage in the business of acquiring, developing and
constructing hotels. (Compl. ¶ 9.)
{15} In conjunction with the merger, Inland, Winn LP, and Crockett
Capital entered into the Master Agreement, pursuant to which Crockett
Capital would use its “expertise in the development, construction, and
management of hotel properties” to perform various development services for
Inland. (Master Agreement, Recital B.) Crockett Capital was to provide
Inland with development proposals for each of the thirteen proposed projects.
(Pl.’s Resp. Br. 4−5.)
{16} If Inland agreed to a final proposed development plan for a
particular property in the pipeline, the parties would pursue the project
further by negotiating and entering into a succession of preset contractual
agreements to develop it. (Master Agreement ¶¶ 3−4.) If Inland rejected a
particular property, then Crockett Capital could develop it on its own or with
a third party, provided Crockett Capital paid Inland the acquisition costs
Inland incurred for that property. (Master Agreement ¶ 5.) Inland would
transfer its rights in any such property to Crockett Capital or its assignee
and would execute all documentation reasonably necessary to accomplish the
transfer. (Master Agreement ¶ 5.)
{17} In June 2007, Mr. Bunch understood from Messrs. Crockett and
Winston that Winston Hotels was in merger talks with Inland’s parent, and
that as a result of a pending merger, a joint venture was to be formed
between the surviving entity (Inland) and various entities owned by Messrs.
Crockett and Winston. (Bunch Dep. 24:2−19.) Mr. Crockett advised Mr.
Bunch that after the merger, he and Mr. Winston would be “in essence, the
development arm” under the joint venture, and that Mr. Bunch would deal
with Mr. Crockett in the same way as he did before the merger. (Bunch Dep.
89:18−25, 90:1−5.) It would be “business as usual” with respect to Mr.
Bunch’s work on the developments. (Bunch Dep. 89:18−25, 90:1−5.)
{18} As set forth in the Master Agreement and acknowledged by Inland’s
representative, John Brown, Mr. Crockett was to research and evaluate the
Pipeline Properties. (Dep. of John Brown (“Brown Dep.”) 618:14−621:11.) He
was to perform all predevelopment work with regard to the Pipeline
Properties, including: conducting market studies; evaluating sites;
negotiating land contracts (including the RTP Westin contract); and hiring
vendors and lawyers (including Mr. Bunch). (Brown Dep. 618−621.) He also
had the authority to hire and to deal with architects and engineers for those
properties. (Brown Dep. 619:23−620:6.)
{19} The negotiations leading to the execution of the Master Agreement
at times were contentious. For example, on June 28, 2007, Mr. Crockett sent
an email to Mr. Bunch about the ongoing negotiations in which he stated that
Inland had not been treating him very well and was reneging on prior
commitments. (Pl.’s Resp. Br., Ex. 6: Email from Kenneth Crockett to
William Bunch (June 28, 2007, 22:01 EDT).) Mr. Crockett indicated that he
might reassess the situation the following week. (Pl.’s Resp. Br., Ex. 6: Email
from Kenneth Crockett to William Bunch (June 28, 2007, 22:01 EDT).)
{20} After sending the June 28, 2007 email, Mr. Crockett spoke via
telephone to Inland’s Chairman, Dan Goodwin. (Crockett Dep. 310:23−
311:9.) Mr. Crockett believed that Mr. Goodwin had assured him that Inland
intended to go forward with the Agreement. (Crockett Dep. 310:23−311:9.)
Mr. Crockett informed Mr. Bunch of these assurances in early July, prior to
the execution of the RTP Westin contract on July 11th, and Mr. Bunch
understood at that time that the parties wanted to “do as many deals” as they
could. (Bunch Dep. 85:4−87:5.)
{21} In June 2007, Mr. Bunch was working with Mr. Crockett to finalize
the purchase contract for the RTP Westin site. (Defs.’ Summ. J. Br. 5.) Mr.
Crockett was the point of contact for Mr. Bunch with regard to the RTP
Westin contract negotiations. (Defs.’ Summ. J. Br. 5.) Gregory Sanchez, the
seller’s representative, had been in ongoing negotiations with Mr. Crockett to
finalize the RTP Westin contract. (Dep. of Gregory Sanchez (“Sanchez Dep.”)
32:10−23, 33:23−34:4, 35:19−36:20.) Prior to his departure for a family
vacation in June 2007, Mr. Crockett left a signed copy of the purchase
contract for the RTP Westin site with his secretary and instructed Mr. Bunch
to release the signature page upon confirmation that Mr. Sanchez had
obtained his clients’ consent to the final terms. (Defs.’ Summ. J. Br., Ex. 4;
Sanchez Dep. 38:3−39:17; Crockett Dep. 300:1−304:2.) Mr. Crockett signed
the purchase contract in his capacity as an officer of Winston Hotels, which
was at the time the sole general partner of Winn LP. (Bunch Dep.
82:25−83:1.) Although the contract for the sale of the RTP Westin site had
not been executed as of July 1, 2007 (the day Inland acquired all rights to
Winston Hotels’ assets), drafts, all of which named Winston Hotels or Winn
LP as the purchaser, had been prepared and circulated. (Answer of Defs.
Robert W. Winston, III, Kenneth R. Crockett, and Winston Hospitality, Inc.
(“Westin Answer”) ¶ 16; Crockett Dep. 300:1−304:2; Bunch Dep. 80−81.)
{22} As of July 1, 2007, the parties to the RTP Westin contract had not
reached agreement on all of its terms. (Defs.’ Summ. J. Br. 5.) Mr. Sanchez
was putting pressure on Mr. Crockett to execute the contract, because Mr.
Sanchez was under pressure to present it to the seller’s investment
committee contemporaneously with the lease for a proposed office building
that would be adjacent to the RTP Westin. (Defs.’ Summ. J. Br. 5.) Mr.
Sanchez gave Mr. Crockett an ultimatum: if the contract terms could not be
imminently finalized, he would take the RTP Westin opportunity to another
qualified hotel developer with whom he had a longstanding business
relationship. (Sanchez Dep. 53:17−58:11; Bunch Dep. 131:13−132:15) Mr.
Bunch was aware that Mr. Sanchez was pushing Mr. Crockett to close the
deal. He also was aware of Mr. Sanchez’s threat to present the RTP Westin
opportunity another qualified developer. (Bunch Dep. 131:13−132:15.)
{23} With the merger between Inland and Winston Hotels concluded,
neither Mr. Crockett nor Mr. Winston was an officer or an employee of the
surviving entity. (Defs.’ Summ. J. Br. 6; Pl.’s Resp. Br. 7.) Neither party had
the authority to sign a contract on behalf of Winston Hotels or Inland. Yet,
Mr. Crockett’s involvement in procuring the RTP Westin project for the joint
venture was essential for Inland and Crockett Capital to move forward with
the business opportunity. Mr. Sanchez was under a deadline, and without
Mr. Crockett’s participation, he would have been inclined to recommend
selling the property to another developer with whom he had a previous
relationship rather than to Inland, an organization lead by unknowns.
(Sanchez Dep. 69:25−70:17.) The other developer was a competitor to
Winston Hotels and Inland.
{24} Mr. Crockett had the contract for the RTP Westin site put in the
name of Winston Hospitality, a Winston-Crockett entity. (Defs.’ Summ. J.
Br., Ex. 8: Email from Kenneth Crockett to William Bunch (July 11, 2007,
14:05 EDT); Bunch Dep. 126:7−12, 131:1−7.) Mr. Crockett sent Mr. Bunch a
contract signed by Mr. Winston on behalf of Winston Hospitality on July 12,
2007. (Bunch Dep. 144:20−3; Tr. of Hr’g 97, Inland Am. Winston Hotels, Inc.
v. Winston, No. 08 CVS 21786 (N.C. Super. Ct.) (argued Sep. 23, 2010);
Compl. ¶ 21; Westin Answer ¶ 21.) It was executed by the seller on July 19,
2007. (Compl. ¶ 21; Westin Answer ¶ 21.)
{25} Mr. Crockett explained the reason for the name change in a July 11,
2007 email to Mr. Bunch, which stated,
Bill: You will see that, in my discussions with Greg Sanchez, we
have changed the purchasing entity to Winston Hospitality for
signature by Bob Winston. The change is necessary to maintain
momentum and timeliness in pursuit of this transaction.
Among other things, Greg needs to present a signed contract for
his investment committee tomorrow. Bob and I fully intend to
develop this property under the terms of our joint venture
arrangement being negotiated with Inland. The assignment
provisions within the purchase agreement will allow us to form
the [joint venture] with Inland without further approvals from
seller. Ken.

(Defs.’ Summ. J. Br., Ex. 8: Email from Kenneth Crockett to William Bunch
(July 11, 2007, 14:05 EDT) (emphasis added).)
{26} As of July 11, 2007, Mr. Bunch understood that Mr. Crockett, Mr.
Winston, and Inland had reached an agreement for the development of the
Pipeline Properties, the terms of which were being finalized in the Master
Agreement. (Bunch Dep. 85:4−86:4, 86:23−87:5, 88:7−11, 93:25−94:8,
109:8−17.) Mr. Crockett told Mr. Bunch in July 2007 that it did not matter
which entity ultimately entered into contracts and vendor relationships
because Mr. Crockett and Mr. Winston were pursuing deals for the joint
venture and because the Master Agreement allowed Inland’s pursuit costs to
be “trued up.” (Bunch Dep. 22:20−23:6.) The goal was to get the property
under contract, then proceed in accordance with the joint venture. (Bunch
Dep. 110:20−5.)
{27} Mr. Bunch understood that although Winston Hospitality was
named in the contract to purchase the RTP Westin, Messrs. Crockett and
Winston intended to assign the contract rights to the joint venture with
Inland and negotiated an assignment provision permitting them to do so.
(Defs.’ Summ. J. Br. 7, Ex. 8.) Mr. Bunch made Petula Prolix Development
Company, the seller of the RTP Westin site, aware of this intent in a letter
dated September 13, 2007. (Defs.’ Summ. J. Br., Ex. 11.) He explained that
the proposed insured under the Title Commitment is WINN
Limited Partnership . . . (“WINN”), whose sole general partner is
[Inland] . . . , with WINN or a joint venture entity among WINN
and Purchaser[, Winston Hospitality,] being the intended
assignee of Purchaser as contemplated by Section 19 of the
Contract.

(Defs.’ Summ. J. Br., Ex. 11.)
{28} It is undisputed that the Master Agreement was signed on July 30,
2010 and made retroactive to July 1, 2010, thus ratifying Mr. Crockett’s
actions on behalf of the joint venture during July.
{29} On August 21, 2007, Crockett Capital tendered to Inland an
investment package to develop the RTP Westin. (Reply of William W. Bunch,
III and Brown & Bunch, PLLC in Supp. of Mot. for Summ. J. 3.) Ultimately,
however, the RTP Westin site never was assigned to Inland. Instead, it was
sold to a third party. (Pl.’s Resp. Br. 11.)
{30} Inland claims that Mr. Bunch improperly permitted Winston
Hospitality rather than an entity controlled by Inland to be named the
purchaser in the contract for the RTP Westin site. (Pl.’s Resp. Br. 1.)
{31} Inland has asserted three claims against Mr. Bunch and Brown &
Bunch, PLLC: (1) legal malpractice; (2) breach of fiduciary duty; and (3)
tortious interference with prospective advantage. Inland contends that Mr.
Bunch was liable for malpractice because he failed to protect Inland’s interest
when he allowed Winston Hospitality to be identified as the purchaser in the
contract for the RTP Westin site. Inland’s claims are based upon the fact
that Mr. Bunch took no steps to advise Inland of the change in the name of
the entity purchasing the RTP Westin site or to seek Inland’s permission to
make the change. Inland asserts that as a proximate result of Mr. Bunch’s
actions and omissions, it has been deprived of its rights in the RTP Westin
site.

III.
THE MOTION
{32} Mr. Bunch and Brown & Bunch, PLLC have moved for summary
judgment on all claims against them on the grounds that there is no genuine
issue as to any material fact and that they are entitled to a judgment as a
matter of law.
A.
LEGAL STANDARD
{33} Summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with affidavits, if
any, show that there is no genuine issue as to any material fact and that any
party is entitled to a judgment as a matter of law.” N.C. R. Civ. P. 56(c). The
moving party bears the burden of showing that there is no genuine issue of
material fact. Pembee Mfg. Corp. v. Cape Fear Constr. Co., Inc., 313 N.C.
488, 491, 329 S.E.2d 350, 353 (1985) (citing Texaco, Inc. v. Creel, 310 N.C.
695, 314 S.E.2d 506 (1984)). The moving party may meet its burden by
showing that an essential element of the non-moving party’s claim is
nonexistent. See Collingwood v. G.E. Real Estate Equities, 324 N.C. 63, 66,
376 S.E.2d 425, 427 (1989). The burden then shifts back to the non-moving
party to establish the existence of a prima facie case. See id.

B.
ANALYSIS
1.
LEGAL MALPRACTICE/BREACH OF FIDUCIARY DUTY
a.
Violation of Standard of Care
{34} In a legal malpractice action based on an attorney’s negligence, the
plaintiff must prove by the greater weight of the evidence that the attorney
breached a duty owed to the client and that the attorney’s negligence is the
proximate cause of the loss suffered. Rorrer v. Cooke, 313 N.C. 338, 355, 329
S.E.2d 355, 366 (1985);Cornelius v. Helms, 120 N.C. App. 172, 175−76, 461
S.E.2d 338, 340 (1995) (citing Summer v. Allran, 100 N.C. App. 182, 184, 394
S.E.2d 689, 690 (1990), disc. rev. denied, 328 N.C. 97, 402 S.E.2d 428 (1991)).
“[A] breach of fiduciary duty claim is essentially a negligence or professional
malpractice claim.” Teague v. Isenhower, 157 N.C. App. 333, 334, 579 S.E.2d
600, 602 n.1 (2003) (quoting Childers v. Hayes, 77 N.C. App. 792, 795, 336
S.E.2d 146, 148 (1985); see also NationsBank v. Parker, 140 N.C. App. 106,
113, 535 S.E.2d 597, 602 (2000) (“Breach of fiduciary duty is a species of
negligence or professional malpractice.”). Thus, the following analysis
controls the claims for legal malpractice and breach of fiduciary duty.
{35} Mr. Bunch argues that Inland has failed to forecast competent
evidence that he breached the applicable standard of care for real estate
attorneys practicing in Wake County, North Carolina or a similar locality and
that Inland cannot establish that any conduct of Mr. Bunch proximately
caused any damages.
{36} The duties an attorney owes to his client are delineated in Hodges v.
Carter, 239 N.C. 517, 80 S.E.2d 144 (1954).
Ordinarily when an attorney engages in the practice of the law
and contracts to prosecute an action on behalf of his client, he
impliedly represents that (1) he possesses the requisite degree of
learning, skill, and ability necessary to the practice of his
profession and which others similarly situated ordinarily
possess; (2) he will exert his best judgment in the prosecution of
the litigation entrusted to him; and (3) he will exercise
reasonable and ordinary care and diligence in the use of his skill
and in the application of his knowledge to his client’s cause.

Hodges, 239 N.C. at 519, 80 S.E.2d at 145−6. The standard for reasonable
and ordinary care and diligence is that of “members of the profession in the
same or similar locality under similar circumstances.” Rorrer, 313 N.C. at
356, 329 S.E.2d at 366.
{37} In an effort to demonstrate a breach of the duty of care by Mr.
Bunch, Inland offers the testimony of Thomas Metzloff, a Duke University
law professor with a background in ethics. Mr. Metzloff determined that Mr.
Bunch “violated the standard of care by assisting Winston, Crockett, or
entities controlled by them with respect to the [RTP Westin] development
project.” 3 (Inland’s Designation of Expert Witness, Opinions Section ¶ 9.)
Mr. Metzloff is not a practicing attorney. (Dep. of Thomas Metzloff (“Metzloff
Dep.”) 21:17−23:3.) He has not been licensed to practice law for over twenty-
five (25) years, and he has never been licensed to practice law in North
Carolina. (Metzloff Dep. 21:17−23:3.) He has never conducted any real
estate transactions as a lawyer or represented any individual, partnership,
joint venture, LLC, or corporation in any real estate transaction. (Metzloff
Dep. 26:12−8.) He does not consider himself to be an expert in the practice of
real estate development or the practice of law related to real estate
developments. (Metzloff Dep. 60:11−25.) He does not know everything that a
real estate lawyer does in representing a developer, putting together deals,
and seeing them through to closing. (Metzloff Dep. 60:11−25.) Mr. Metzloff
concedes, for example, that he does “not know for sure” what the standard of
care is for written engagement letters for an attorney handling the type of
transaction at issue in this case. (Metzloff Dep. 122:1−10.)
{38} Mr. Metzloff lacks the qualifications to give a competent opinion as
to whether Mr. Bunch’s actions with regard to the RTP Westin contract were
within the applicable standard of care for a commercial real estate
transactional attorney practicing in the Research Triangle area or a similar
community. Mr. Metzloff does claim expertise in the North Carolina Rules of
Professional Conduct, and those rules are Mr. Metzloff’s only articulated
basis for his opinion that Mr. Bunch’s actions or omissions fell short of the
standard. (Inland’s Designation of Expert Witness 3−8.)
{39} Yet, North Carolina appellate courts repeatedly have rejected the
use of the Rules of Professional Conduct to establish attorney liability. See
Baars v. Campbell Univ. Inc., 148 N.C. App. 408, 421, 558 S.E.2d 871, 879
(2002); Webster v. Powell, 98 N.C. App. 432, 439, 391 S.E.2d 204, 208 (1990),

3 In making his determination, Mr. Metzloff did not consider facts that indicate Inland

clothed Mr. Crockett with the actual and/or apparent authority to change the name on the
contract to preserve the deal for the joint venture. (See Inland’s Designation of Expert
Witness 3−8.)
aff’d, 328 N.C. 88, 399 S.E.2d 113 (1991); McGee v. Eubanks, 77 N.C. App.
369, 374, 335 S.E.2d 178, 181 (1985). In Baars, the Court of Appeals held, “a
breach of a provision of the Code of Professional Responsibility is not in and
of itself . . . a basis for civil liability . . . . ” 148 N.C. App. at 421, 558 S.E.2d
at 879 (internal quotations removed).
{40} This rule of law has been incorporated into Rule 0.2[7] of the Rules
of Professional Conduct. Id.

Violation of a Rule should not give rise itself to a cause of action
against a lawyer nor should it create any presumption in such a
case that a legal duty has been breached . . . . The rules are
designed to provide guidance to lawyers and to provide a
structure for regulating conduct through disciplinary agencies.
They are not designed to be a basis for civil liability . . . .
Accordingly, nothing in the Rules should be deemed to augment
any substantive legal duty of lawyers or the extra-disciplinary
consequences of violating such a Rule.

R. Prof. Conduct N.C. St. B. 0.2[7].
{41} The plain language of this provision, like that of McGee and its
progeny, establishes that the North Carolina Rules of Professional Conduct
cannot be used to establish civil liability. Furthermore, the Court in Webster
held that evidence offered to show a lawyer violated certain rules of
professional conduct was properly excluded by the trial court. 98 N.C. App.
at 439, 391 S.E.2d at 208; see also Baars, 148 N.C. App. at 421, 558 S.E.2d at
879 (“[E]vidence of purported rules violations is properly excluded when a
case is subject to dismissal.”)
{42} The purpose of putting on evidence as to the standard of care in a
malpractice lawsuit is to determine whether the defendants’ actions meet the
applicable standard. Progressive Sales, Inc. v. Williams, Willeford, Boger,
Grady & Davis, 86 N.C. App. 51, 56, 356 S.E.2d 372, 376 (1987). When a
plaintiff fails to offer testimony or affidavits of attorneys in the area of
practice in the defendant’s legal community, dismissal is proper. See id.;
Laws v. Priority Tr. Services of N.C., L.L.C., 610 F. Supp. 2d 528, 530−31
(W.D.N.C. 2009), aff’d, No. 09-1432 (4th Cir. Apr. 28, 2010) (per curium)
(unpublished opinion) (dismissal of a legal malpractice complaint that failed
to identify a formal legal duty independent of those articulated in the Rules
of Professional Conduct or the corresponding State Bar ethics opinions).
{43} The circumstances of this case and the complexities of the
relationships between the parties are such that a determination of a breach
of the standard of care cannot be determined by an ethics professor who does
not practice law in commercial real estate. Likewise, the applicable standard
of care cannot be determined, as Plaintiff suggests, by lay persons. Inland
must have a competent expert to provide evidence of a breach of the standard
of care.
{44} There is no admissible evidence from Inland of the standard by
which Mr. Bunch’s actions and alleged omissions are to be weighed. Thus,
Inland has failed to forecast competent evidence that Mr. Bunch violated the
applicable standard of care.
{45} Because the Court finds that Plaintiff failed to forecast any evidence
of breach, it is not necessary to reach the causation issue.

b. Actual Authority
{46} Based on the facts Mr. Bunch knew on July 11, 2007, it was
reasonable for him to believe that Mr. Crockett had the actual authority from
Inland to change the name on the contract to purchase the RTP Westin from
Winn LP or Winston Hotels to Winston Hospitality in order to get the deal
closed.
{47} “Actual authority is that authority which the agent reasonably
thinks he possesses, conferred either intentionally or by want of ordinary
care by the principal.” Harris v. Ray Johnson Constr. Co., 139 N.C. App. 827,
830, 534 S.E.2d 653, 655 (2000).
{48} Mr. Crockett had been pursuing the RTP Westin site since early
2007. Before Inland and Winston Hotels merged, he had conducted
negotiations with the seller, and he already had a valuable business
relationship with Mr. Sanchez, the seller’s agent. Inland wanted the benefit
the predevelopment work Mr. Crockett had done on the RTP Westin leading
up to the date of the merger. For this reason, when Inland, Mr. Crockett, and
Mr. Winston entered into the Master Agreement at the end of July, the
parties made it retroactive to July 1, 2007. As a result of that Mr. Crockett
possessed the actual authority to act to preserve the RTP Westin opportunity
for the joint venture.
{49} Though Mr. Bunch could not have known on July 11, 2007 that the
Master Agreement would be made retroactive to July 1, 2007, Mr. Bunch did
understand on July 11th that the parties to the Master Agreement had
agreed in principle to form a joint venture and were actively negotiating the
agreement’s terms. He knew that Inland expected Mr. Crockett to engage
and direct lawyers in their work on the RTP Westin and on other
development opportunities that were in various stages of investigation and
pursuit. He knew the joint venture would develop additional hotel properties
and would do as many deals as possible. He knew that Mr. Crockett was a
necessary party to the RTP Westin deal and that Inland would lose the
opportunity to develop it if the contract was not executed quickly. Also, Mr.
Crockett informed Mr. Bunch that he was pursuing the property for the joint
venture the parties were forming. Mr. Bunch’s letter of September 13, 2010
to the seller demonstrates his belief that the opportunity was being pursued
for the joint venture. There is no evidence that Mr. Bunch knew that Mr.
Crockett was acting in any capacity other than as agent for Inland, and no
evidence that Mr. Bunch knew or understood that Mr. Crockett, Mr. Winston,
and Winston Hospitality were acting in their own interests.
{50} Inland’s representative, John Brown, stated in his testimony that
Mr. Crockett had the authority to do what was necessary for the
predevelopment work, including the authority to negotiate contracts and hire
lawyers. Mr. Brown’s testimony proved consistent with Mr. Crockett’s
comments to Mr. Bunch about his authority and with Mr. Bunch’s
understanding that Mr. Crockett was his point of contact for Inland with
respect to the joint venture’s development opportunities, including the RTP
Westin.
{51} Under the circumstances, Mr. Bunch had a reasonable belief that
Mr. Crockett had the actual authority to change the buyer to Winston
Hospitality.

c. Apparent Authority
{52} While it is clear that Mr. Bunch believed Mr. Crockett had the
actual authority to direct him to change the name of the purchaser, at a
minimum, insofar as Mr. Bunch was concerned, Mr. Crockett also possessed
the apparent authority to do so.
{53} Apparent authority “is that authority which the principal has held
the agent out as possessing or which he has permitted the agent to represent
that he possesses.” Zimmerman v. Hogg & Allen, P.A., 286 N.C. 24, 31, 209
S.E.2d 795, 799 (1974).
{54} In late June or early July 2007, Mr. Crockett informed Mr. Bunch
that Mr. Goodwin, Inland’s Chairman, assured him that though the Master
Agreement had not yet been executed, the parties would form a joint venture
as planned. (Bunch Dep. 85:16−88:11.) Based on Mr. Crockett’s
representations, Mr. Bunch believed that the parties would finalize the
Master Agreement. (Bunch Dep. 88:7−11.) Based on Mr. Crockett’s
representations, Mr. Bunch understood that Crockett Capital’s goal was to
get the Pipeline Properties under contract in order to preserve the business
opportunities for the joint venture, and then proceed in accordance with
future agreements for the individual properties. (Bunch Dep. 110:20−5.)
{55} Mr. Crockett communicating Mr. Goodwin’s assurances to Mr.
Bunch gave Mr. Bunch a reasonable and actual belief that Inland had
granted Mr. Crockett the authority to change the name on the RTP Westin
contract to Winston Hospitality in order to close the deal. Even if Mr.
Crockett had no actual authority to change the name, he had the apparent
authority to act to preserve the opportunity for the joint venture.
{56} Inland was aware of Mr. Crockett’s efforts to get the Pipeline
Properties under contract. Inland allowed Mr. Crockett to act on its behalf.
Inland took no action which would have communicated in any way that Mr.
Crockett did not have the authority he exercised in securing the RTP Westin
site.
{57} From Mr. Bunch’s standpoint, Mr. Crockett had the apparent
authority to change the name of the purchaser on the contract.
{58} Based upon Mr. Crockett’s actual and apparent authority, Mr.
Bunch did not violate any standard of care in following Mr. Crockett’s
instructions.

2.
TORTIOUS INFERENCE WITH PROSPECTIVE
BUSINESS ADVANTAGE

{59} To support a claim for tortious interference with prospective
economic advantage, a plaintiff must put forth evidence that a defendant
interfered with a trade or business by maliciously inducing a person not to
enter into a contract with a third person, which he would have entered into
but for the interference. Spartan Equip. Co. v. Air Placement Equip. Co., 263
N.C. 549, 559, 140 S.E.2d 3, 11 (1965). The plaintiff must further show
damages and that the interference was not done “in the legitimate exercise of
the interfering person’s rights, but with a malicious design to injure the third
person or gain some advantage at his expense.” Id.
{60} Inland has not forecast evidence to support its claim that Mr. Bunch
tortiously interfered with Inland’s prospective economic advantage with
respect to the RTP Westin transaction. First, Inland has forecast no evidence
that Mr. Bunch acted with malicious design to injure Inland. Indeed, the
evidence indicates to the contrary—that Mr. Bunch’s intent was to further
the opportunity for the benefit of the joint venture, which included Inland.
Second, the uncontroverted evidence shows that Mr. Crockett handled the
negotiations with the seller, and that Mr. Crockett made the decision with
Mr. Sanchez to change the name of the contract purchaser with no input or
consultation from Mr. Bunch. It was Mr. Crockett who changed the name on
the contract. Third, the evidence indicates that the seller likely would not
have entered into the contract with Inland absent the participation of Messrs.
Crockett and Winston.
{61} Thus, Inland cannot present evidence to satisfy a claim against Mr.
Bunch for tortious interference with prospective business advantage.

IV.
CONCLUSION
{62} Based on the foregoing, it is hereby ORDERED, ADJUDGED, and
DECREED that: Defendants William W. Bunch, III and Brown & Bunch,
PLLC’s Motion for Summary Judgment is GRANTED.

IT IS SO ORDERED, this 24th day of November, 2010.
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