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Barkerding v. Whittaker

Court of Appeals of Louisiana, Fourth Circuit

December 28, 2018


          APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2017-07702, DIVISION "F" Honorable Christopher J. Bruno, Judge


          Martin A. Stern Don S. McKinney Timothy M. Brinks ADAMS & REESE LLP Adam V. Vickers William F. Large Mark J. Graffagnini CARA STONE, LLP COUNSEL FOR DEFENDANT/APPELLEE

          Court composed of Judge Edwin A. Lombard, Judge Rosemary Ledet, Judge Tiffany G. Chase


         This is a complex commercial litigation suit. In the various iterations of the petition, [1] the plaintiff, Thomas Pike Barkerding, named over fifty defendants and asserted almost a dozen causes of action. At this juncture, only six defendants and four causes of action remain. Those six defendants can be divided into the following two groups:

(i) Stone Pigman Walther Wittmann, LLC ("Stone Pigman"); Scott Whittaker; and William Bishop (collectively, the "Stone Pigman Defendants"); and
(ii) Cara Stone, LLP ("Cara Stone"); Graffagnini, A Law Corporation; and Mark Graffagnini (collectively, the "Cara Stone Defendants").

         The first remaining cause of action, which is asserted only against the Stone Pigman Defendants, is "legal malpractice and breach of fiduciary duty" (the "Malpractice Claims").[2] The other three remaining causes of action, which are asserted against all six remaining defendants, are "fraudulent and/or intentional misrepresentations and/or detrimental reliance" (the "Fraud Claims"); Louisiana Unfair Trade Practice Act ("LUTPA") violations (the "LUTPA Claims"); and conspiracy (the "Conspiracy Claims").

         In response to Mr. Barkerding's claims, the Stone Pigman Defendants and the Cara Stone Defendants both filed various peremptory exceptions-including exceptions of prescription, [3] no cause of action, and no right of action. Following several hearings, the trial court rendered multiple judgments. The effect of those judgments was to dismiss all the claims against both the Stone Pigman Defendants[4]and the Cara Stone Defendants.[5] From those judgments, Mr. Barkerding appeals. Both the Stone Pigman Defendants and the Cara Stone Defendants answered the appeal. For the reasons that follow, we affirm.


         In November 2013, Mr. Barkerding formed SmartPak, LLC ("SmartPak") to finance and develop a patented invention-an integrated "koozie"[6] and carry-case for packages (four and six) of bottled beverages, such as beer (the "Invention"). Robert Post, an experienced cardboard package designer, assisted Mr. Barkerding in developing the Invention.

         Using an on-line legal form, Mr. Barkerding drafted SmartPak's first operating agreement, which was dated November 21, 2013.[7] In the agreement, Mr. Barkerding was designated as SmartPak's manager and its chief executive officer. The agreement also included a requirement of unanimous written consent of the existing SmartPak members to admit new members.

         In July 2014, Mr. Barkerding met with the chief marketing officer of one of the major beer conglomerates, who confirmed the potential market demand for the Invention. Thereafter, Mr. Barkerding sought to obtain additional capital for SmartPak. Two principals of SmartPak members-Jack Carrere (Carrere Consulting LLC) and Alex Goss (Goss Ventures LLC)-also were involved with a new local funding group called NO/LA Angel Network ("NOLAAN").[8] Mr. Carrere and Mr. Goss urged Mr. Barkerding to approach NOLAAN for the capital. In August 2014, Mr. Carrere and Mr. Goss introduced Mr. Barkerding to Dann Schwartz, a prominent NOLAAN member. Mr. Schwartz forwarded to Mr. Barkerding an email from Mr. Whittaker regarding the newly launched, Stone Pigman CornerStone Program, which was designed to provide start-up businesses with legal services to help them grow and to protect their businesses.

         On September 27, 2014, Mr. Barkerding first communicated with the Stone Pigman Defendants. On that date, he submitted a CornerStone Program application "on behalf of SmartPak, LLC." The application expressly indicated that it would not create an attorney-client relationship. The following week Mr. Barkerding met with representatives of Stone Pigman.

         In October 2014, Mr. Schwartz became a SmartPak member. At this time, Mr. Schwartz was serving on NOLAAN's board. In November 2014, Mr. Schwartz advised Mr. Barkerding that, in order for NOLAAN to invest in SmartPak, the company needed to obtain corporate counsel. Mr. Barkerding's first choice for corporate counsel was Carver Darden-a law firm that Mr. Barkerding had previously engaged before he formed SmartPak to assist with the intellectual property ("IP") rights, especially in obtaining the patents for the Invention. In response to Mr. Barkerding's inquiry as to whether Carver Darden could expand their representation to include the company, Carver Darden sent an outline of complex legal steps that were required before they could switch from representing Mr. Barkerding, individually, to representing the company itself. Those legal steps included a unanimous consent resolution, signed by all of SmartPak's members, authorizing SmartPak to sign a summary engagement memorandum; an arbitration disclosure and consent document; and an appropriate conflicts waiver.

         According to Mr. Barkerding, before he had time to read and to interpret the information that Carver Darden sent to him, Mr. Schwartz instructed him to tell Carver Darden to stop any further work and to transfer all patent concerns to another firm, AdamsIP. Mr. Barkerding complied. Mr. Schwartz then arranged with Mr. Whittaker for Stone Pigman to become SmartPak's corporate counsel.

         In late November 2014, Stone Pigman began representing SmartPak in connection with obtaining Series A investment through NOLAAN (the "Series A Financing"). In connection with the Series A Financing, NOLAAN was represented by Mr. Graffagnini, who also was a NOLAAN board member.[9]

         On December 1, 2014, Mr. Barkerding made his pitch to a preliminary panel of NOLAAN's members, requesting $150, 000 in funding. At the end of his pitch, the head of NOLAAN, Mike Eckert, announced NOLAAN's interest in oversubscribing to the funding round (providing $350, 000 in funding).

         On December 5, 2014, Mr. Whittaker emailed a copy of Stone Pigman's letter of engagement to Mr. Barkerding. This letter indicated that Stone Pigman would represent SmartPak, that Mr. Whittaker would be primarily responsible for this representation, and that Mr. Bishop and other Stone Pigman lawyers would be involved as appropriate. This letter stated that the initial projects that Stone Pigman would be handling included revising SmartPak's operating agreement and closing the contemplated seed money investment round. This letter did not disclose any conflicts of interest or mention Mr. Whittaker's membership on NOLAAN's board. According to Mr. Barkerding, Mr. Whittaker told him not to sign the first letter. The first letter was never executed. In response to Mr. Schwartz's request, on December 8, 2014, Mr. Whittaker sent a revised engagement letter with SmartPak, which likewise did not disclose Mr. Whittaker's membership on NOLAAN's board. The second letter, like the first one, was never executed.

         Three days later, on December 11, 2014, Mr. Barkerding made his formal pitch to NOLAAN's full membership. Mr. Whittaker testified that he was present at the meeting when Mr. Barkerding made his formal pitch. According to Mr. Whittaker, he spoke to Mr. Barkerding at the meeting and told Mr. Barkerding that he had been a founding member of NOLAAN and that he presently was serving on NOLAAN's board. Mr. Barkerding did not recall having that conversation and denied being provided that information at the meeting.

         On December 19, 2014, Mr. Bishop, Mr. Whittaker's associate at Stone Pigman, sent a "Revised Term Sheet" to Mr. Graffagnini, NOLAAN's counsel, stating:

Attached are clean and marked drafts of the term sheet based on our meeting today. Per our discussion, the issue of dilution protection, in particular with respect to future equity raises with low valuations, remains unresolved. I am also circulating the attached to my client simultaneously and, as such, it remains subject to his further review and comment.

(Emphasis supplied).

         On January 8, 2015, Mr. Whittaker sent Mr. Barkerding a third, revised engagement letter. In the transmittal email, Mr. Whittaker stated that he had previously spoken to Mr. Barkerding, in person, about a waiver of any conflicts regarding NOLAAN. The third letter included the following new paragraph regarding conflict of interest matters:

Conflict of Interest Matters. SmartPak acknowledges that Stone Pigman represents NO/LA Angel Network from time to time in connection with certain investment transactions, and I serve on the Board of Directors of NO/LA Angel Network. Furthermore, Stone Pigman may represent certain members of NO/LA Angel Network who may participate in the contemplated Series A Financing. To the extent that these circumstances present a conflict of interest under the Louisiana Rules of Professional Conduct, SmartPak hereby grants its informed consent and waiver with respect to such conflict(s) of interest, it being understood, however, that Stone Pigman would not represent NO/LA Angel Network or any of its members in connection with Series A Financing or any other matter adverse to SmartPak.

         In the third letter, as in the prior two letters, the client is identified as SmartPak. The third letter stated that the initial services Stone Pigman would perform included revising the SmartPak operating agreement and documenting and closing the contemplated NOLAAN Series A Financing. On January 9, 2015, Mr. Barkerding, as SmartPak's CEO, signed the third letter and emailed it back to Mr. Whittaker.

         On January 21, 2015, the NOLAAN Series A Financing closed.[10] In connection with the closing, multiple contracts were signed, including the Employment Agreement and the Assignment/Non-Disparagement Agreement between SmartPak and Mr. Barkerding.[11] The Amended and Restated Operating Agreement also was executed on that date.

         Shortly after the NOLAAN Series A Financing closing on January 21, 2015, Mr. Barkerding began having conflicts with SmartPak's other board members. On September 25, 2015, Mr. Whittaker, in his capacity as SmartPak's attorney, sent a letter to Mr. Barkerding addressing Mr. Bakerding's conflicts with the other board members, which were allegedly harming the company. Mr. Whittaker informed Mr. Barkerding that he should bring his own attorney to a meeting with the other board members. On October 25, 2015, Mr. Barkerding sent an email to all the SmartPak board members addressing his concerns and stating that he did not have "legal guidance" and that he believed it would further complicate matters to bring in additional counsel. Also, in October 2015, Mr. Barkerding was removed as CEO; he remained, however, as Chief Product Officer until his employment contract expired.

         At the SmartPak January 19, 2016 board meeting, Mr. Barkerding advised the other board members that he felt they were trying to remove him from the company; and he abruptly left the meeting. During 2016, Mr. Barkerding retained three successive attorneys to represent him in his dispute with the other SmartPak board members.

         On February 7, 2016, Bob Ellis, the first attorney Mr. Barkerding retained, emailed Mr. Whittaker to request a meeting about Mr. Barkerding's concerns. At the next board meeting, Mr. Barkerding expressed his displeasure regarding the Class AA Financing round.

         On February 26, 2016, the second attorney Mr. Barkerding retained, Scott Galante, emailed Mr. Whittaker requesting certain documents; Mr. Galante stated that Mr. Whittaker "ha[d] the ability and the responsibility to clear up these issues for me and my client as attorney for the entity." Mr. Galante further stated that Mr. Whittaker was "employed to work for the organization as a professional which includes my client's interest." Later that day, Mr. Galante sent another email to Mr. Whittaker in which he stated that he believed his "client ha[d], at his disposal, several different causes of action to protect his interest." On March 1, 2016, Mr. Galante sent another email to Mr. Whittaker stating that he would be advising his client "to formally move to have [Mr. Whittaker] and [his] firm removed as counsel for SmartPak . . . [e]specially in light of the fact that [Mr. Whittaker] ha[d] disclosed that the individual investors are separately represented."

         On April 1, 2016, Mr. Galante wrote a letter to Mr. Whittaker informing him that Mr. Barkerding had an issue with the issuance of additional stock, which would expose him to dilution. In bold, Mr. Galante stated in the letter:

Please be advised at this time my client is NOT threatening to sue SmartPak as an entity in regards to the upcoming issuance as has been alleged. However, my client has significant questions arising from and issues with the individual investors of SmartPak who comprise the majority of its Management Board.

         On April 5, 2016, Mr. Whittaker responded, advising that the other SmartPak investors were "seriously considering filing suit against Mr. Barkerding for monetary and injunctive relief to recover the damages he has caused and to prevent future damage." Mr. Whittaker further summarized Mr. Barkerding's belief-that SmartPak's other board members and its attorneys were engaging in a "nefarious scheme"-as follows:

In a nutshell, the situation from the company's perspective is that Mr. Barkerding has for some reason formed a belief that the other Board members and the company attorneys are conspiring to achieve the goal of diluting Mr. Barkerding's ownership interest, rather than exercising their business judgment and rendering legal advice to achieve the goal of maximizing company value for the benefit of all members.

         At the April 15, 2016 board meeting, the issue of the "legal cloud" created by Mr. Barkerding's threat to file suit was raised. The minutes stated that "Mr. Eckert [the head of NOLAAN] reminded the Board that the legal cloud and threat of litigation from Mr. Barkerding depressed the valuation [of SmartPak]." Mr. Barkerding responded that "he engaged Mr. Galante solely to protect his own interests and that of the members that helped co-found the Company."

         On April 28, 2016, Mr. Barkerding posted online a video that he prepared and emailed a copy of a link to the video to various parties. In the video, Mr. Barkerding stated that the Stone Pigman Defendants had a "clear conflict of interest." In the video, he explained the conflict as follows:

Soon after the successful pitch to [NOLAAN], Mr. Schwartz introduced the CEO to Scott Whittaker as SmartPak's tentative corporate counsel. It was later learned that Mr. Whittaker is a long-time neighbor of Mr. Schwartz and serves on the board of directors for [NOLAAN]. Mr. Whittaker's involvement with NOLAAN was a clear conflict of interest. Before formal engagement, Mr. Whittaker prompted the CEO to waive this conflict, and by that time, the CEO had grown to trust the arrangement, and with the combined influence of good faith, the eagerness to move forward and total ignorance of the impact this could have, he signed the waiver.

         Thereafter, Mr. Barkerding offered to sell all or a portion of his shares in SmartPak (the "Buy Out"). In connection with the Buy Out, Mr. Barkerding recorded two phone calls that he had with Mr. Whittaker-one on October 28, 2016; the other on November 23, 2016. In the November 23, 2016 phone call, Mr. Whittaker recounted the events leading up to the Series A Financing and stated that "so that was your attorney negotiating for you." (Emphasis supplied).

         On February 22, 2017, SmartPak, represented by Stone Pigman, filed suit against Mr. Barkerding in Civil District Court for the Parish of Orleans, captioned SmartPak v. Barkerding, No. 17-1715 (the "SmartPak Case"). In that suit, SmartPak sought injunctive relief, including a temporary restraining order, to enforce the non-disparagement and confidentiality provisions of the Employment Agreement and Assignment/Non-Disparagement Agreement. It also sought to recover damages for the breaches of Mr. Barkerding's breach of fiduciary duties to SmartPak. In response, Mr. Barkerding filed a motion to disqualify Stone Pigman from continuing to serve as SmartPak's counsel in the SmartPak Case. In support, Mr. Barkerding cited the fact that Stone Pigman had multiple conflicts of interest.

         On August 8, 2017, Mr. Barkerding filed this action against multiple defendants. Thereafter, he amended the petition three times. The only remaining defendants, as noted elsewhere in this opinion, are the Stone Pigman Defendants and the Cara Stone Defendants. The gist of Mr. Barkerding's allegations is that the defendants conspired to wrest control of his company, SmartPak, away from him, or knew of such a plan and benefitted from it. He alleges that the Stone Pigman Defendants conspired with other board members from NOLAAN and its attorneys, the Cara Stone Defendants, to dilute his shares by misleading him into signing contracts to his detriment. He further alleges that this was accomplished by Mr. Whittaker holding himself out to be Mr. Barkerding's personal attorney, instead of informing Mr. Barkerding that he was counsel for SmartPak, as a whole. Mr. Barkerding still further alleges that he would not have signed various foundational documents for SmartPak had he known that Mr. Whittaker was not advocating and protecting his personal interests.

         Both the Stone Pigman Defendants and the Cara Stone Defendants filed various peremptory exceptions to the iterations of the petition. Following an evidentiary hearing on the Stone Pigman Defendants' exceptions of no right of action and prescription at which three witnesses, including Mr. Barkerding and Mr. Whittaker, testified and evidence was introduced, the trial court sustained most of the Stone Pigman Defendants exceptions[12] and dismissed Stone Pigman as a defendant. Following another hearing, the trial court sustained most of the Cara Stone Defendants exceptions[13] and dismissed Cara Stone as a defendant. Both groups of defendants were dismissed based on the trial court's findings that all the claims against them with the exception of the Conspiracy Claims were prescribed. The Conspiracy Claims against them were dismissed based on the trial court's ruling sustaining their exceptions of no cause of action.

         Although Mr. Barkerding asserts multiple assignments of error on appeal, we frame the narrow issue before us as whether the trial court erred in its rulings on the various peremptory exceptions of prescription, no cause of action, and no right of action.


         In addressing the trial court's judgment sustaining the exceptions of no right of action and no cause of action, we apply a de novo standard of review because these exceptions raise a question of law. N. Clark, L.L.C. v. Chisesi, 16-0599, p. 3 (La.App. 4 Cir. 12/7/16), 206 So.3d 1013, 1015 (exception of no right of action); Herman v. Tracage Dev., L.L.C., 16-0082, 16-0083, p. 4 (La.App. 4 Cir. 9/21/16), 201 So.3d 935, 939 (exception of no cause of action).

         In addressing the trial court's judgment sustaining the exceptions of prescription, the standard of review varies based on whether evidence was introduced in the trial court at the hearing on the exception. State v. Thompson, 16-0409, p. 18 (La.App. 4 Cir. 11/23/16), 204 So.3d 1019, 1031 (citing Miralda v. Gonzalez, 14-0888, pp. 17-18 (La.App. 4 Cir. 2/4/15), 160 So.3d 998, 1009). "When prescription is raised by peremptory exception, with evidence being introduced at the hearing on the exception, the trial court's findings of fact on the issue of prescription are subject to the manifest error-clearly wrong standard of review." In re Med. Review Panel of Hurst, 16-0934, p. 4 (La.App. 4 Cir. 5/3/17), 220 So.3d 121, 125-26. When no evidence is introduced, the de novo standard applies. Denoux v. Vessel Mgmt. Servs., Inc., 07-2143, p. 6 (La. 5/21/08), 983 So.2d 84, 88 (observing that "[i]n the absence of evidence, the exception of prescription must be decided on the facts alleged in the petition, which are accepted as true").

         Ordinarily, the exceptor bears the burden of proof at the trial of the peremptory exception of prescription. Rando v. Anco Insulations, Inc., 08-1163, 08-1169, p. 20 (La. 5/22/99), 16 So.3d 1065, 1082 (citing Carter v. Haygood, 04-0646 (La. 1/19/05), 892 So.2d 1261, 1267). If prescription is evident on the face of the ...

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