Gregory & Swapp, PLLC v. Kranendonk

• Decision Date: 26 July 2018
• Docket Number: No. 20160377,20160377
• Court: Utah Supreme Court
• Parties: GREGORY & SWAPP, PLLC, and Erik Highberg, Appellants and Cross–Appellees, v. Jodi KRANENDONK, Appellee and Cross–Appellant.

424 P.3d 897

GREGORY & SWAPP, PLLC, and Erik Highberg, Appellants and Cross–Appellees,

v.Jodi KRANENDONK, Appellee and Cross–Appellant.

No. 20160377

Supreme Court of Utah.

Filed July 26, 2018

Gregory J. Sanders, Clemens A. Landau, Patrick C. Burt, Michael D. Zimmerman, Troy L. Booher, Salt Lake City, for appellants and cross-appellees

Shaun L. Peck, John D. Luthy, Brandon J. Baxter, Matthew David Lorz, Logan, for appellee and cross-appellant

Chief Justice Durrant authored the opinion of the Court, in which Associate Chief Justice Lee, Justice Pearce, Justice Petersen, and Judge Mortensen joined.

Having recused himself, Justice Himonas did not participate herein; Court of Appeals Judge David N. Mortensen sat.

On Direct Appeal

Chief Justice Durrant, opinion of the Court:

Introduction

¶ 1 Erik Highberg, a personal injury attorney for Gregory & Swapp, PLLC, failed to bring a claim against two truck drivers who severely injured Mr. Highberg’s client, Jodi Kranendonk, before the statute of limitations ran on Ms. Kranendonk’s claim. Mr. Highberg then failed to disclose to Ms. Kranendonk for ten months the fact that he missed the statute of limitations. During that time, he sought other legal avenues to correct his mistake. Ms. Kranendonk ultimately sued Mr. Highberg and Gregory & Swapp (collectively, the Swapp Defendants) for legal malpractice, breach of contract, breach of fiduciary duty, and negligent hiring, training, and supervision.

¶ 2 At trial, Mr. Highberg testified that he withheld information from Ms. Kranendonk because he wanted to protect her from stress and worry. In response to this testimony, she sought to admit two statements in which he had written that she was becoming "a pain [in] the ass" and was "a moron." The district court refused, under rule 403 of the Utah Rules of Evidence, to admit these statements and the trial went forward.

¶ 3 The four claims ultimately went to a jury, which found in favor of Ms. Kranendonk on each. The jury first awarded her $750,000, the amount the jurors believed she would have received if Mr. Highberg had timely brought her personal injury claim against the truck drivers. The jury also awarded her $2.75 million for non-economic damages, i.e., emotional distress she sustained as the result of Mr. Highberg’s malpractice in this case. This second award did not relate in any way to the emotional distress she sustained from the original personal injury. The jury did not award punitive damages.

¶ 4 After the jury’s decision, Ms. Kranendonk moved for attorney fees and litigation expenses on the ground that the Swapp Defendants had breached their fiduciary duties. The district court awarded her $1,166,666.67 in attorney fees—the amount she owed under her contingency fee agreement—but did not award her litigation expenses.

¶ 5 After trial, the Swapp Defendants moved for judgment notwithstanding the verdict on the jury’s second award of $2.75 million, arguing that non-economic damages unrelated to the original personal injury claim should not be awarded in this instance. The district court denied their motion.

¶ 6 The Swapp Defendants challenge this decision on appeal. Specifically, they argue that this case does not qualify as one of the "rare" cases where non-economic damages can be recovered for breach of contract, because emotional distress was not a foreseeable result of a breach in this case and was not explicitly contemplated by the parties when they formed their agreement. They also argue that the non-economic damage award cannot be supported under a breach of fiduciary claim, because there is insufficient evidence to establish an actionable breach of fiduciary duty. We agree with both arguments and so vacate the jury’s $2.75 million award for non-economic damages.

¶ 7 We also vacate the court’s attorney fees award because Ms. Kranendonk’s breach of fiduciary duty claim failed and this was the only claim that could support this award. And, for the same reason, we hold that the district court correctly denied her litigation expenses.

¶ 8 Lastly, Ms. Kranendonk challenges the district court’s decision to exclude Mr. Highberg’s two written statements—statements she argues are necessary to support her prayer for punitive damages. But because she fails on her breach of fiduciary claim, punitive damages cannot be awarded in this case. Any decision we could render on this issue therefore would be meaningless and so we hold that this issue is moot.

Background

¶ 9 On June 19, 2006, Jodi Kranendonk suffered severe injuries when two semi-trucks collided with her car outside of Portland, Oregon. She retained Gregory & Swapp, PLLC dba Craig Swapp & Associates and Erik Highberg to bring a negligence action against the truckers. Mr. Highberg filed a complaint in Oregon, but failed to properly serve the truckers within sixty days, as required under Oregon law. A year later, in June 2008, he filed the complaint a second time and again failed to timely serve the truckers. But this time his failure was fatal—the statute of limitations had run on the claim. Ms. Kranendonk’s negligence claims against the truckers were subsequently dismissed with prejudice.

¶ 10 After realizing that Ms. Kranendonk’s claim was time-barred, and in an attempt to fix his error in missing the limitation deadline, Mr. Highberg moved in an Oregon state court for an extension of time to serve the truckers, which was denied in November 2008. He filed an appeal of his denial in February 2009, which failed. During this ten-month period, Mr. Highberg failed to disclose to Ms. Kranendonk, despite having multiple conversations with her about her case, that her claim was now time-barred. Finally, in May or June of 2009, he revealed to her that he had failed to bring a valid action within the applicable statute of limitations and that she could no longer bring a successful personal injury claim against the truckers.

¶ 11 Ms. Kranendonk was "devastated" at the news. As Mr. Highberg was aware, she was a "very anxious person" and the news was catastrophic to her. She retained a new law firm that filed legal malpractice claims against the Swapp Defendants on her behalf. Her complaint alleged claims of legal malpractice, breach of contract, breach of fiduciary duty, fraudulent non-disclosure, and negligent hiring, training, and supervision.¹ Ms. Kranendonk also sought punitive damages. The case went to trial in 2015.

¶ 12 At a pre-trial hearing, Ms. Kranendonk unsuccessfully attempted to bring in two statements Mr. Highberg had written describing his interaction with her. The first indicated that he felt she was becoming "a pain [in] the ass," and the second showed that he believed she was "a moron." The district court kept out these statements under rule 403 of the Utah Rules of Evidence. At trial, Mr. Highberg testified that he did not disclose to Ms. Kranendonk the fact that the statute of limitations had run on her claim, because he cared for her and did not want to cause her more stress. In response to this testimony, Ms. Kranendonk moved to introduce the two statements to show that Mr. Highberg’s actions were not motivated by his solicitude for her well-being, but rather that he harbored ill will toward her. The district court rejected this motion, stating that the two statements were "not directly on point" and "hardly suggest that he was acting against her interest intentionally" or "that he didn’t care about her."

¶ 13 When the trial concluded, the district court provided the jury with instructions regarding each of the five claims brought by Ms. Kranendonk. Importantly, the court instructed the jury that the conduct required to establish her legal malpractice claim was not the same as the conduct required to establish her breach of fiduciary duty claim. The court defined legal malpractice as failing "to use the same degree of care, skill, judgment and diligence used by reasonably careful attorneys under similar circumstances." But the court instructed the jury that it need not determine whether the Swapp Defendants committed legal malpractice because it "ha[d] found the [Swapp Defendants] negligently performed legal services." Accordingly, the jury was only asked to determine whether the Swapp Defendants’ legal malpractice "was a cause of harm to [Ms.] Kranendonk."

¶ 14 The jury was asked, however, to determine whether the Swapp Defendants had breached their fiduciary duties in this case. The court then set forth the conduct that would constitute a breach of fiduciary duty. It explained that in order for Ms. Kranendonk to prevail on this claim she must show that the Swapp Defendants "conceal[ed] important facts or law from [her]; ... deceiv[ed] [her]; ... plac[ed] their own interests ahead of the interests of [her] by failing to inform [her] of a conflict of interest created by the [Swapp Defendants’] acts or omissions;" or "fail[ed] to advise [her] to seek competent counsel after a conflict of interest arose between the [Swapp Defendants] and [her]." The court also stated that Ms. Kranendonk must prove that "[t]he acts or omissions of the [Swapp Defendants] were a cause of [her] injury."

¶ 15 The jury rendered a verdict in favor of Ms. Kranendonk on legal malpractice, breach of contract, breach of fiduciary duty, and negligent hiring, training, and supervision grounds, and awarded her $750,000 to compensate for the injuries she suffered in the underlying accident. These damages included $80,000 in economic damages and $670,000 in non-economic damages related to the accident. The jury also awarded her an additional $2.75 million for non-economic damages she sustained as a result of the Swapp Defendants’ malpractice. The jury did not award punitive damages.

¶ 16 The Swapp Defendants thereafter filed a motion for judgment notwithstanding the verdict (JNOV) under rule 50(b) of the Utah Rules of Civil Procedure. They sought to negate Ms. Kranendonk’s entitlement to the $2.75 million jury award of non-economic damages under all four legal...