Scott Hoek v. Jason S Schnelker

CourtMichigan Court of Appeals
DecidedDecember 22, 2022
Docket358807
StatusUnpublished

This text of Scott Hoek v. Jason S Schnelker (Scott Hoek v. Jason S Schnelker) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Scott Hoek v. Jason S Schnelker, (Mich. Ct. App. 2022).

Opinion

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

SCOTT HOEK and AMY HOEK, UNPUBLISHED December 22, 2022 Plaintiffs-Appellants,

v No. 358807 Kent Circuit Court JASON S. SCHNELKER and SCHNELKER, RASSI LC No. 20-002858-NM & MCCONNELL, PLC,

Defendants-Appellees.

Before: PATEL, P.J., and CAMERON and LETICA, JJ.

PER CURIAM.

In this legal malpractice action, plaintiffs1 appeal as of right the trial court order granting defendants’ motion for summary disposition under MCR 2.116(C)(7), premised on a release. We affirm.

I. BASIC FACTS AND PROCEDURAL HISTORY

On April 6, 2020, plaintiffs filed a complaint alleging legal malpractice against defendants. They asserted that defendants provided legal advice regarding the sale of the assets of plaintiff’s company, Fixture Finders, LLC or “OldCo.” Plaintiff submitted that he founded OldCo in 2005 and worked at the company for more than 10 years. In 2015, defendants represented plaintiff in the sale of OldCo’s assets to Fixture Finders (DE), LLC or “NewCo” through an asset purchase agreement effective April 3, 2015. Defendant gave advice and negotiated and aided in the preparation of the terms of NewCo’s operating agreement. Plaintiff purchased 20% of NewCo

1 Although Scott Hoek and Amy Hoek are the named plaintiffs, the cause of action arose from the legal representation involving the interpretation of the documents addressing the sale of Scott Hoek’s business. Accordingly, the singular “plaintiff” refers to Scott Hoek only. Plaintiff was represented by defendants, attorney Jason S. Schnelker and his law firm, Schnelker, Rassi & McConnell, PLC. The singular “defendant” refers to Schnelker only.

-1- through his investment company known as Hoek Investments, LLC (Hoek Investments). The remaining 80% equity interest of NewCo was owned by Hilco Merchant Resources, LLC (Hilco).

According to the NewCo operating agreement, a management investor member could sell his interest in NewCo at any time during the first three fiscal years and the value was computed as “fair market value” of the company and a multiplier “mutually agreed upon by the Members acting reasonably and in good faith.” After three years, the operating agreement provided that the management investor purchase price would be determined by the company’s “average net operating income,” calculated by using the three-year period preceding the event triggering the purchase. According to the operating agreement terms, plaintiff had until December 31, 2017, to voluntarily quit and be bought out of NewCo with his assets calculated at fair market value instead of net operating income for the three preceding years.

Plaintiff alleged that he expressed his intentions to quit and his concern about his recovery of his investment to defendant in January 2016. However, it was asserted that defendant gave inaccurate advice regarding the terms of the buyout agreement and the timeframe to recover plaintiff’s investment computed as fair market value. Although plaintiff allegedly followed defendant’s advice to remain with the company to recoup his investment, NewCo terminated plaintiff on March 22, 2018 purportedly for cause, contending that plaintiff violated the non- competition provision of his employment agreement. It was further alleged that the company’s net operating income was negative, and therefore, plaintiff’s redemption value for his interest was zero. Plaintiff asserted that he lost nearly $1,000,000 by adhering to defendant’s direction.

Plaintiff entered into settlement negotiations with Hilco. Hilco representatives objected to defendant’s participation in the settlement talks because defendants represented Hilco in real estate and other matters. Consequently, plaintiff retained attorney Sean Fitzgerald to resolve the dispute with Hilco. In the fall of 2018, plaintiff expressed his concerns to Fitzgerald about defendant’s legal interpretation and advice pertaining to the terms of NewCo’s operating agreement as well as the charged attorney fees. Plaintiff met “face to face” with defendant, and they discussed defendant’s legal representation. Defendant advised that he would notify his insurance carrier of plaintiff’s claim. Despite plaintiff’s knowledge of the suspect legal advice given by defendant, in February 2019, he entered into a settlement agreement with Hilco that contained a release covering all the company’s current and former attorneys.

Over a year after the entry of the settlement, plaintiffs filed their legal malpractice action against defendants. Defendants moved for summary disposition, alleging that the legal malpractice claim was barred by the release that was governed by Illinois law. It was also claimed that the action was not brought by the real party in interest, specifically plaintiff’s corporate entity Hoek Investments, this failure did not constitute a misnomer, and any attempted amendment was now time-barred. Plaintiffs opposed the dispositive motion, claiming that defendant violated the Michigan Rules of Professional Conduct (MRPC) that gave rise to a rebuttable presumption of negligence, and it was not the intention of the parties to release any legal malpractice claim. It was further alleged that defendants were not intended beneficiaries of the release, paid no consideration for the release, and the defense representation of notice to their insurance carrier may rise to the level of fraud.

-2- After hearing oral argument on the motion, the trial court granted summary disposition in favor of defendants, citing the breadth of the plain language of the release as governed by Illinois law. Specifically, the settlement agreement executed by plaintiff fully and unconditionally released the current and former attorneys of Hilco. The trial court noted that defendant was a former attorney of Hilco and Hilco representatives expressly objected to defendant’s continued representation of plaintiff, causing him to hire Fitzgerald. It was observed that plaintiff had the benefit of Fitzgerald’s counsel during the negotiation and execution of the release when they were aware of the potential legal malpractice case against defendants. The trial court concluded that Hilco’s purpose in executing the expansive release was to ensure finality and protect its employees from having to participate in litigation, and it accounted for this purpose in its consideration. And, there was a “carve-out” provision of the release that expressly listed claims that were not part of the release, such as employee pension and welfare plans. Although plaintiff was represented by counsel Fitzgerald, the malpractice action against defendants was not included in the carveout provision exempting such claims from the release. The trial court did not find a violation of the MRPC in light of plaintiff’s representation by independent counsel and that the nature of the allegations, whether characterized as negligence or professional malpractice, were encompassed within the release.

The trial court inquired of the status of plaintiff Amy Hoek’s claim of legal malpractice because she was not a party to the release. Plaintiffs’ counsel agreed that her claim should also be dismissed because it was derivative of plaintiff’s claim. The trial court indicated that it would not address the real party in interest argument in light of its ruling on the release issue. Plaintiffs’ counsel did not request a ruling on the issue, stating that it was a “sensible approach.” From the trial court’s ruling, plaintiffs appeal.

II. STANDARDS OF REVIEW

A trial court’s ruling on a motion for summary disposition is reviewed de novo. Houston v Mint Group, LLC, 335 Mich App 545, 557; 968 NW2d 9 (2021).

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Bluebook (online)
Scott Hoek v. Jason S Schnelker, Counsel Stack Legal Research, https://law.counselstack.com/opinion/scott-hoek-v-jason-s-schnelker-michctapp-2022.