Boehmer et al v. Davis

Filing 103

MEMORANDUM AND ORDER granting in part and denying in part 61 Plaintiffs' motion for determination of method for proof of damage causation is granted to the extent that the court finds that the trial-within-a-trial method of proof is not a lega l prerequisite under Missouri law for establishing claims of loss of settlement value. This ruling is not a finding that plaintiffs' proof of damages and causation will be sufficient to prevail upon a summary judgment motion or at trial. Pro hac vice attorneys must obtain sealed document(s) from local counsel. Signed by District Judge Richard D. Rogers on 10/28/14. Pro hac vice attorneys must obtain sealed document(s) from local counsel. Signed by District Judge Richard D. Rogers on 10/28/14. (meh)

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS SCOTT BOOTH, KATIE M. BOOTH, COLTEN S. BOOTH, BRIAN C. BOOTH, Plaintiffs, v. Case No. 10-4010-RDR GRANT DAVIS, Defendant. --------------------------------------------------------------KIMBERLY CARRELL, Plaintiff, v. Case No. 10-4124-RDR GRANT DAVIS, Defendant. ---------------------------------------------------------------VIRGIL WILLE, Plaintiff, v. Case No. 11-4121-RDR GRANT DAVIS, Defendant. --------------------------------------------------------------PRUDENCE KIRKEGAARD, Plaintiff, v. Case No. 10-4125-RDR GRANT DAVIS, Defendant. ---------------------------------------------------------------- RONALD M. BOEHMER, RONDA CARRANZA, Plaintiffs, v. Case No. 11-4059-RDR GRANT DAVIS, Defendant. PEGGY S. WALDON, JAMES C. WALDON, MARILYN SMITH, Plaintiffs, v. Case No. 11-4060-RDR GRANT DAVIS, Defendant. -------------------------------------------------------------DOROTHY SCHMITZ, JILL SCHMITZ-NOBLE, BILL SCHMITZ, LADONNA OLIPHANT, NEELEY SCHMITZ, DAVID SCHMITZ, Plaintiffs, v. Case No. 10-4011-RDR GRANT DAVIS Defendant. MEMORANDUM AND ORDER These cases are before the court upon a motion titled: “Plaintiffs’ Motion for Determination of Method for Proof of Damage Causation.” Defendant in these cases is an attorney. Plaintiffs allege that defendant committed negligence, fraud and breach of fiduciary duty while he was representing plaintiffs during the settlement of cases brought against drug companies 2 that were sued for negligence involving the dilution chemotherapy drugs by a pharmacist named Robert Courtney. of It was alleged that the drug companies had knowledge of Courtney’s dilution activity. The court shall treat the motion as seeking a ruling that there is no requirement under Missouri law that plaintiffs try the issues of their underlying claims against the drug companies to a jury (the so-called “trial-within-a-trial” or “case-within-a-case” method) in order to prove the elements of causation and damages from defendant’s alleged misconduct. As shall be explained, the court finds that Missouri law does not require, as a legal prerequisite, proof by a trial-within-atrial method and that the record before the court is insufficient at this stage for the court to make any decision regarding the causation, adequacy regardless of of plaintiffs’ which method proof of damages of proof and plaintiffs employ.1 I. BACKGROUND This cases. court has diversity jurisdiction to decide these It is agreed that the state law of Missouri must be applied. Plaintiffs’ motion states that defendant represented them and other persons in 240 cases related to Courtney and the drug 1 Defendant has requested oral argument upon plaintiffs’ motion. Upon due consideration, the court is not convinced that oral argument would be of material benefit. Therefore, the request for oral argument shall be denied. 3 companies, and that he represented a plaintiff named Georgia Hayes in a case which was scheduled for trial in October 2002. After jury selection in Hayes’ case, a Global Settlement Agreement (“GSA”) was negotiated between defendant and counsel for the drug companies. An amount of $75 million was stipulated in the agreement to settle all pending cases, including the Hayes case, and cases that had not yet been filed. The trial of the Hayes case continued against Courtney and a jury returned a verdict of $225 million in actual damages and $2 billion in punitive damages. Plaintiffs emphasize that they are not alleging negligence or misconduct in the “litigation” phase, only in the settlement phase. They assert that defendant did not make adequate disclosures regarding the GSA and did not involve plaintiffs in the settlement process. They claim that they were coerced and required to sign releases without knowing how much money they would get in return or how other settlement participants would be compensated. Plaintiffs assert that the GSA violated the aggregate settlement rule found in Rule 4-1.8(g) of the Supreme Court Rules governing the Missouri Bar and the Judiciary. Plaintiffs’ motion is an effort to obtain a preliminary ruling regarding what method of proof is not required in order for plaintiffs to establish damages and causation. allege that defendant’s misconduct 4 resulted in Plaintiffs a loss of settlement value. Plaintiffs state that they “intend to prove damages and causation with objective evidence of the strength of the underlying case, the drug companies’ opinions of their damage exposure, expert opinions on valuation of the case and its settlement value, and examples of the settlement of cases that actually began trial.” Doc. No. 210, p. 1. What plaintiffs desire from this court is a ruling that plaintiffs are not required to conduct a trial of the underlying claims against the drug companies within the trial against defendant Davis, as is often done in legal malpractice cases, in order to establish that defendant’s alleged malfeasance caused a loss of settlement value. Plaintiffs contend a determination that plaintiffs would have prevailed upon their claims if they had been tried against the drug companies and an estimate from a jury of the judgment value of those claims, is not required to determine whether defendant caused a loss in the settlement value of plaintiffs’ claims. As stated, we find that there is no hard and fast rule in Missouri which would require in these cases that plaintiffs employ the trial-within-a-trial method of proving causation and damages. We reach this decision for the following reasons. II. THE ELEMENTS OF PROVING PLAINTIFFS’ CLAIMS DO NOT MAKE TRIAL-WITHIN-A-TRIAL PROOF A LEGAL PREREQUISITE. 5 Missouri case law does not state that a trial-within-atrial approach to proving causation and damages is an element of proof in cases alleging attorney misconduct. been listed Blackwell in various Sanders, forms. LLP, 436 See, S.W.3d The elements have e.g., 556, Nail 561 v. (Mo. Husch 2014)2; Selimanovic v. Finney, 337 S.W.3d 30, 35 (Mo.App. 2011)3; London v. Weitzman, 884 S.W.2d 674, 677 (Mo.App. 1994).4 None of the listings require proof that a plaintiff litigate all of the issues in an underlying plaintiff’s former attorney. claim in the case against the Sometimes, it is stated that proof must be shown that but for an attorney’s conduct, the client would have been successful in the prosecution of the underlying claim. See Nail, supra; Coin Acceptors, Inc. v. Haverstock, Garrett & Roberts, LLP, 405 S.W.3d 19, 24 (Mo.App. 2013). But, a significant settlement can be considered a successful end to litigation. settlement So, the court finds that proof that a substantial would have been achieved in the absence attorney’s misconduct will satisfy that requirement. 2 of an Indeed, in In Nail, the elements are listed as follows: “’1) that an attorney-client relationship existed; 2) that the defendant acted negligently or in breach of contract; 3) that such acts were the proximate cause of the plaintiff[‘s] damages; [and] 4) that but for defendant’s conduct the plaintiff[] would have been successful in prosecution of their underlying claim.’” (Quoting Donahue v. Shughart, Thomson & Kilroy, P.C., 900 S.W.2d 624, 626 (Mo. banc 1995)). 3 In Selimanovic, the elements were listed as follows: “’(1) an attorneyclient relationship; (2) negligence or breach of contract by the defendant; (3) proximate causation of plaintiff's damages; (4) damages to the plaintiff.’” (Quoting Klemme v. Best, 941 S.W.2d 493, 495 (Mo. banc 1997)). 4 In London, the court listed the elements as: “1) that the defendant lawyer was negligent . . .; 2) that plaintiff sustained some loss or injury; and 3) a causal connection between the negligence and the loss.” 6 Nail, 436 S.W.3d at 562, the court described the necessary proof as “the difference between what the result would have been [absent the alleged misconduct] and what it was,” and does not mention the absence of trial-within-a-trial proof as grounds for finding that causation was not established in that case. This is probably because the alleged malpractice in Nail did not involve the litigation of a claim to judgment. Instead, it involved exercise advice (or lack thereof) regarding the of stock options and the drafting of a settlement agreement (as also alleged in the cases at bar). Since trial-within-a-trial proof is not an explicit element of plaintiffs’ believes the claims type of according proof to Missouri plaintiffs law, employ to the court prove the elements of their claims should be limited only by the rules of evidence. This is consistent with comments from other sources which describe “trial within a trial” as a method of proof as opposed to an element of proof. See Viner v. Sweet, 30 Cal.4th 1232, 1240 n.4 (Cal. 2003); see also, John H. Bauman, “Damages for Legal Malpractice: The Threatening An Appraisal of the Crumbling Dike and Flood,” 61 TEMPLE L. REV. 1127, 1133 (1988)(stating that the trial-within-a-trial “method” of proof “is at best one method of trying to estimate the loss caused by the malpractice”). 7 The common thread to the elements listings is a requirement of proof of damages and causation. These are elements which require proof to a jury. See Williams v. Preman, 911 S.W.2d 288, 295 (Mo.App. 1995)(discussing the submission of damages and proximate cause issues to the jury); Lange v. Marshall, 622 S.W.2d 237, 238 (Mo.App. 1981)(“the question of proximate cause is usually for the jury, and [only] in rare cases and under clear and compelling circumstances, the question becomes one of law for the court”). and conjecture. The court may step in to avoid speculation Nail, 436 S.W.3d at 563; Coin Acceptors, Inc., 405 S.W.3d at 24. But, at this stage in the proceedings, the record before the court does not permit such a judgment. III. MISSOURI CASES HAVE PROCEEDED WITHOUT TRIAL-WITHIN-A-TRIAL PROOF AND RESTATEMENT AUTHORITY SUPPORTS THIS PROCEDURE. The second reason for the court’s finding that trial- within-a-trial proof is not a legal prerequisite in Missouri is that Missouri courts have not required this method in some cases involving settlements. For example, in situations where property settlements were reached in divorce actions and later malpractice actions claimed that the settlements were mishandled, courts have approved expert testimony regarding the settlement value of the cases in the form of opinions concerning the normal and fair division of marital property. S.W.2d at 677-78; Baldridge v. 8 Lacks, 883 London, 884 S.W.2d 947, 953 (Mo.App. 1994). The Restatement (Third) of Law Governing Lawyers § 53 Comment b (2000) also provides that a malpractice plaintiff “may recover without proving the results of a trial if the party claims damages other than the loss of a judgment.” There is logic to this comment since the result of a trial within a trial is an estimation of judgment value which is of limited utility here: i.e., defendant’s in the deciding the settlement conduct caused issues value a loss of of raised the by plaintiffs cases; settlement whether value to plaintiffs; and what kind of settlement the drug companies would have entered. IV. CASES CITED BY DEFENDANT MOTION ARE DISTINGUISHABLE. IN OPPOSITION TO PLAINTIFFS’ Defendant argues on the basis of several cases that trialwithin-a-trial proof is required under the facts proffered here. The court disagrees. One case cited by defendant is Novich Eppenberger, 24 S.W.3d 734 (Mo. App. 2000). v. Husch & In Novich, the plaintiff was a defendant in a case alleging damages under a lease. A default judgment was obtained against the plaintiff in the underlying case. The default judgment was set aside, but the plaintiff lost at trial and judgment was entered against him on the damages claim. In his malpractice suit, the plaintiff asserted that he was not aware that counsel accepted service on 9 his behalf, entered an appearance, and then withdrew, leading to the default judgment. The plaintiff claimed he missed out on the chance to settle the case on terms extended to other persons on the lease. The plaintiff did not deny liability on the underlying claim. He merely alleged that he would have obtained a better settlement, compared to the trial judgment, had he known that the attorneys he was counsel in the underlying case. suing had withdrawn as his The court rejected the claim, first, on the grounds that plaintiff did not prove his defense to the case would have been successful absent the alleged malpractice, and second, because plaintiff’s claim that a more favorable settlement would have occurred absent the alleged negligence was speculative and inconsistent with other evidence. The cases at bar are distinguishable because plaintiffs do allege they would have obtained favorable judgments at trial and it is undisputed settlements indicating Therefore, this attempting to that is shift plaintiffs the potential not a obtained merit situation liability for a of substantial their involving judgment claims. litigants onto their attorneys or their opponents’ attorneys, nor does it appear to be a situation in which plaintiffs are seeking compensation from their attorney for the settlement value of a baseless claim. The claims considered in Novich speculative. were At also rejected this 10 stage, because the they court were cannot determine whether the evidence of damages and causation to be advanced by plaintiffs is speculative. In sum, Novich does not state a requirement that the proof of success at trial must be demonstrated by a trial-within-a-trial method in order for plaintiffs to prove loss of settlement value. Defendant also relies upon language contained in Day Advertising, Inc. v. DeVries & Associates, P.C., 217 S.W.3d 362, 367 (Mo.App. 2007)(“Day”). In Day, the plaintiff sued its attorneys after reaching a settlement upon employment contract claims filed employee. on behalf of the plaintiff against a former The plaintiff alleged that it would have recovered liquidated damages against the employee at a trial if not for the attorneys’ negligence. established that there The attorneys prevailed because they were affirmative defenses which have prevented recovery upon the liquidated damages claim. would The court held that, “’because the alleged damages are based on the resolution of the underlying action …. the plaintiff [had to] prove a “case within a case,”’” which the plaintiff failed to do. Id. at 367 (quoting Williams v. Preman, 911 S.W.2d 288, 294 (Mo.App. 1995)). Unlike the situation in Day, the cases before the court are not alleging damages based on the resolution of the underlying actions. Plaintiffs are not alleging damages based on the judgment value of their claims against the drug companies. They are alleging damages based on an alleged loss 11 of the settlement value of their claims against the drug companies. Furthermore, it is not evident on this record that there affirmative were defenses to plaintiffs’ claims which apparently could not be overcome as in Day.5 Defendant also cites language in Williams, 911 S.W.2d at 297, for the proposition that if the underlying action is settled, “the plaintiff must show what would have happened if the adversarial action Doc. 229 at p. 19. had been tried rather than settled.” This language was employed in the context of “[w]hen a plaintiff has compromised an underlying claim, after having notice of the attorney’s alleged negligence . . .” because in that situation “a factor of speculation has been voluntarily introduced justification.” by the Id. (emphasis in the original). different in the instant cases. were aware of plaintiff defendant’s which requires The context is No one asserts that plaintiffs alleged negligence and misconduct before settling their claims with the drug companies. Thus, plaintiffs did not voluntarily introduce a factor of speculation as to the issues of causation and damages. The court in Williams mentioned this as a distinguishing factor in the London and Baldridge cases where expert testimony was allowed regarding 5 The court in Day determined that the plaintiff had not preserved its objection to the affirmative defense issue and therefore the court was only reviewing the point to determine whether the claim established substantial grounds for believing that a manifest injustice or miscarriage of justice had resulted. Id. at 366. 12 the range of a fair and equitable property distribution that may have resulted without the alleged ill-advised settlements.6 Id. V. PUBLIC POLICY FAVORING SETTLEMENTS DOES NOT REQUIRE TRIALWITHIN-A-TRIAL PROOF IN THESE CASES. The court is persuaded that Missouri public policy does not require the employment of proof in these cases. the trial-within-a-trial method of Defendant has alleged that plaintiffs’ proposed approach would be contrary to the public policy in favor of settlements. But, a general appeal to pro-settlement public policy was overruled in Baldridge, 883 S.W.2d at 952. This issue was also mentioned in Collins v. Missouri Bar Plan, 157 S.W.3d 726, 735 (Mo.App. 2005) where the court observed that “settlements cases. do The settlement of not court an preclude damage further underlying claims” commented lawsuit in that: injects malpractice “Although some a speculation into a claim for attorney malpractice, it does not preclude a plaintiff from proving malpractice so long as the plaintiff can establish a causal link between the alleged negligence and any loss incurred.” Id. The court did not state that a trial within a trial was required to establish the causal link and noted that expert testimony from someone with long experience in the adoption advance the issues at malpractice play in claim that beyond 6 case was summary sufficient judgment where Similar expert testimony appears to have been rendered in Bross v. Denny, 791 S.W.2d 416, 421 (Mo.App. 1990). 13 to plaintiff’s obligation was to “’prove that the settlement was necessary to mitigate . . . damages’” . . . “or ‘that plaintiff was driven to the necessity of settling because, if the case had not been settled, plaintiff would have been worse off.’” 735-36. Id. at The facts in this case are different from those in Collins, where the settlement was reached after the plaintiffs had knowledge of the alleged malpractice. But, the point remains that the public policy in favor of settlements does not prevent proof of damages and causation in a malpractice case, and, for reasons already explained, such proof does not necessarily have to be made by a trial-within-a-trial method. VI. THE COURT SPECULATION. SHALL NOT RENDER ANY RULING UPON CLAIMS OF Defendant argues that plaintiffs’ motion should be denied because plaintiffs’ proposed expert testimony regarding damages is speculative. As the court has already mentioned, under Missouri law, causation and damages are considered jury issues, but the court conjecture. can draw the line against speculation and At this time, the court does not believe the record is sufficient to make a decision upon defendant’s contention. The argument might be better presented as a motion in limine or a motion for summary judgment. 14 VII. CONCLUSION Plaintiffs’ motion for determination of method for proof of damage causation is granted to the extent that the court finds that the trial-within-a-trial method of proof is not a legal prerequisite under Missouri law for establishing claims of loss of settlement value. This ruling is not a finding that plaintiffs’ proof of damages and causation will be sufficient to prevail upon a summary judgment motion or at trial. IT IS SO ORDERED. Dated this 28th day of October, 2014, at Topeka, Kansas. s/ RICHARD D. ROGERS Richard D. Rogers United States District Judge 15

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