McDaniel v. Blust, No. 10-1776

Decided Feb. 9, 2012

James Mark McDaniel, Jr. and C. Richard Epes are former officers of EBW Laser, Inc., a company that entered bankruptcy in 2005. The court appointed Charles Ivey as trustee, and Ivey subsequently hired his law firm, IMGT, to prosecute an adversary proceeding against McDaniel and Epes alleging that they had preferentially transferred or fraudulently conveyed property belonging to EBW Laser worth hundreds of thousands of dollars and had also engaged in breaches of fiduciary duty and unfair and deceptive trade practices. McDaniel and Epes alleged that during discovery for the adversary proceeding, attorney Edwin Gatton of IMGT presented documents to certain deponents that he claimed were tax returns of EBW Laser, Inc., when Gatton in fact knew or should have known that the documents were not EBW Laser’s returns. The complaint further alleged that Gatton allowed expert witnesses to rely on those documents to conclude that Appellants had committed fraud in their capacity as EBW Laser’s officers. McDaniel and Epes asserted a cause of action for civil obstruction of justice on these grounds. The complaint further alleged that IMGT sought court orders to obtain McDaniel’s personal income tax records twice during the adversary proceeding and that both times the bankruptcy court denied IMGT’s request, ruling that the returns had no relevance to the proceeding. IMGT nevertheless obtained McDaniel’s tax returns from 1997 to 2001 without McDaniel’s knowledge or permission and Gatton refused McDaniel’s request to return them. On this basis, McDaniel and Epes asserted a cause of action for conversion. Finally, the complaint alleged that IMGT’s source for the aforementioned returns was Stanaland, who had obtained them from McDaniel to assist him in preparing McDaniel’s 2002 tax returns. McDaniel and Epes assert claims for invasion of privacy, breach of fiduciary duty, and civil conspiracy based on this fact. The claims against the IMGT Defendants were dismissed under the Barton doctrine. McDaniel and Epes appealed. The Fourth Circuit affirmed, concluding that the Barton doctrine was properly applied.

Full Opinion

-Sara I. Salehi

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