Elmo v. Callahan, 1:10-cv-00286

Plaintiffs Elmo, Schimpf, Guardian Fire Equipment, and Guardian Fire Equipment, LLC sue Callahan and his firms for legal malpractice, negligent misrepresentation, breach of fiduciary duty, breach of contract, and NH CPA claims.
Callahan allegedly represented both the Guardian sellers and the buyer in a roll-up through S3 Sentinel Safety Supply, creating conflicts of interest.
Engagement letters show Callahan acted as special counsel to multiple sellers and to S3, with fee arrangements including a contingent payment and stock interest.
The Guardian sale closed as an asset sale to S3; Guardian received cash plus promissory notes and stock; S3 later defaulted and collapsed, wiping out the value of the notes and stock.
Plaintiffs contend Callahan failed to disclose conflicts, failed to secure better terms for plaintiffs, did not inform about risks of subordinated debt/equity, and did not warn about securities registration; they seek damages and CPA relief.
The court granted summary judgment to defendants on malpractice, negligent misrepresentation, breach of fiduciary duty, and breach of contract, denied those claims on proximate/legal causation, but denied CPA exemption and denied default judgments; summary judgment procedure and CPA analysis are central to the decision.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Proximate causation for contract and tort claims	Elmo argues Callahan's breaches were a substantial factor causing loss	Defendants contend no evidence shows Callahan's conduct was a legal/proximate cause	Summary judgment for defendants on malpractice, negligent misrepresentation, fiduciary, and contract claims for lack of legal/proximate causation
CPA applicability and securities-regulation exemption	CPA should apply; exemption for securities regulation does not apply	Exemption applies because conduct relates to securities regulation	CPA claim survives; exemption rejected; non-exemption applies to alleged deceptive acts in legal representation
Motions for default judgment based on spoliation	Destruction of Callahan’s hard drives prejudices plaintiffs and warrants default	Destruction was negligent, not willful; lesser sanctions appropriate	Default judgment denied; adverse inference sanctions for spoliation deemed appropriate if any, but not default; sanctions limited to adverse inference where applicable
Whether the CPA exemption requires jurisdictional regulator involvement	Unclear if securities-regulator jurisdiction applies to practice of law	Trade or commerce here is the practice of law, not regulated by director of securities regulation	CPA exemption does not apply; CPA claim permissible

Exxon Co., U.S.A. v. Sofec, Inc., 517 U.S. 830 (U.S. 1996) (proximate causation and foreseeability principles in contract/tort gaps)
Empire Auto. Group, Inc. v. N.H. Banking Dept., 163 N.H. 144 (N.H. 2011) (director lacks jurisdiction over practice of law; securities context doesn't control CPA)
Rainville v. Lakes Region Water Co., 163 N.H. 271 (N.H. 2012) (exemption analysis under NH CPA framework)
Becksted v. Nadeau, 155 N.H. 615 (N.H. 2007) (CPA injuries and standing for statutory damages)
Averill v. Cox, 145 N.H. 328 (N.H. 2000) (historical CPA exemption for regulated practices)
Goss v. State, 142 N.H. 915 (N.H. 1998) (cause-in-fact and legal causation framework in contracts/torts)
Salem Eng’g & Constr. Corp. v. Londonderry Sch. Dist., 122 N.H. 379 (N.H. 1982) (foreseeability scope in contract damages)
Sicotte v. Lubin & Meyer, P.C., 157 N.H. 670 (N.H. 2008) (malpractice damages require legally caused harm)