Bella Monte Owners Ass'n, Inc. v. Vial Fotheringham LLP

• Decision Date: 15 December 2021
• Docket Number: 2:19-cv-00212-TC-JCB
• Parties: BELLA MONTE OWNERS ASSOCIATION, INC., Plaintiff, v. VIAL FOTHERINGHAM, LLP, Defendant.
• Court: U.S. District Court — District of Utah

BELLA MONTE OWNERS ASSOCIATION, INC., Plaintiff, v. VIAL FOTHERINGHAM, LLP, Defendant.

No. 2:19-cv-00212-TC-JCB

United States District Court, D. Utah

December 15, 2021

Magistrate Judge Jared C. Bennett

ORDER AND MEMORANDUM DECISION

TENA CAMPBELL, United States District Judge

Defendant law firm Vial Fotheringham, LLP (VF) formerly represented Plaintiff Bella Monte Owners Association, Inc. in a construction defect case in Utah state court (the “Underlying Action”). After the trial court excluded a critical expert report from evidence, the Underlying Action settled. Bella Monte was dissatisfied with how the case turned out, so it sued VF for legal malpractice. VF has now moved for summary judgment. It asks the court to find that Bella Monte has failed to meet its burden on “collectability”-i.e., that Bella Monte has failed to prove that it would have recovered more money in the Underlying Action had the expert report not been excluded. It also argues that each of the Underlying Claims would have failed, and so the court should find that VF cannot be liable for damages flowing from those claims. For the following reasons, the court GRANTS IN PART and DENIES IN PART VF's motion.

FACTUAL BACKGROUND^[1]

Bella Monte is the management association for its namesake condominium complex in Draper, Utah. Construction on the complex began in 2006 and continued through 2013. The project can be divided into two phases: Phase 1 (Buildings 1 through 13) and Phase 2 (Buildings 14 through 23 and the Clubhouse). Bella Monte noticed structural problems at the complex, which led to Bella Monte hiring VF to file the Underlying Action in 2015 against the developers of the complex-Bella Monte, LLC, Compass Investments L.C., and Compass Development Group, Inc. (collectively, the “Developers”)-alleging construction defects. The complaint (the “Underlying Complaint”) was filed on October 5, 2015. The Developers filed a third-party complaint against 21 Construction (the “General Contractor”). The General Contractor filed a fourth-party complaint against several Subcontractors. (The Developers, General Contractor, and Subcontractors are collectively the “Underlying Defendants.”) Bella Monte's Underlying Complaint asserted eighteen claims against the Developers. Ten were tort claims, seven were contract claims, and one claim sought to pierce the corporate veil.^[2]

During the Underlying Action, Bella Monte (VF) retained an expert Sean Gores, who prepared an expert report (the “Gores Report”). The Gores Report concluded that the total cost to repair the defects at the complex would be $7, 263 594, and it apportioned the damages among the Underlying Defendants. Of this sum, the cost to repair Buildings 14 through 23 and the Clubhouse was $3, 507, 251. The Underlying Defendants had two expert witnesses who were prepared to testify to the repair cost being between $236, 086.41 and $502, 302. In the Underlying Action, fact discovery closed in March 2018. Bella Monte (VF) disclosed the Gores Report in April-past the deadline.

As a result, the Underlying Defendants moved to preclude evidence or argument about damages at trial. The motion requested that Bella Monte be prohibited from submitting the Gores Report, due to its failure to provide an estimate of damages in its initial disclosures or in response to the Underlying Defendants' interrogatories. Bella Monte (VF) opposed the motion, arguing that there had been no way to provide an estimate earlier in the case because its investigation into the scope of defects was ongoing throughout the litigation.

Three months later, the trial court granted the motion to exclude the Gores Report. The trial court found that Bella Monte (VF) did not comply with the initial disclosure requirements imposed by Utah Rule of Civil Procedure 26. Rather than appeal the order, Bella Monte settled the Underlying Action for $500, 000 in October 2018. Each Underlying Defendant paid a portion of this settlement, with the money coming from their respective insurance companies. (Opp'n Ex. S, ECF No. 124-4.) Some of the Underlying Defendants' insurance policies had policy exclusions that could have excluded coverage for some of Bella Monte's alleged construction defects. But apart from the insurers sending reservation of rights letters to Bella Monte, coverage was not an issue in the Underlying Action.

Within six months of the settlement, Bella Monte brought the Malpractice Action against VF, arguing that VF's failure to comply with the Rule 26 disclosure requirements had damaged Bella Monte in the amount of around $7, 000, 000. VF moved to dismiss the Malpractice Action (ECF No. 8), which the court denied. (ECF Nos. 27 & 28.) Later, Bella Monte moved for partial summary judgment on two of VF's affirmative defenses, along with some elements of legal malpractice. (ECF No. 41.) The court granted the motion on the defenses but denied it for the rest. (ECF No. 73.) Now VF has moved for summary judgment on all Bella Monte's claims.^[3](ECF No. 107.)

LEGAL STANDARD

In general, summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and [that] the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A fact is ‘material' if, under the governing law, it could have an effect on the outcome of the lawsuit. A dispute over a material fact is ‘genuine' if a rational jury could find in favor of the nonmoving party on the evidence presented.” Tabor v. Hilti, Inc., 703 F.3d 1206, 1215 (10th Cir. 2013) (quoting E.E.O.C. v. Horizon/CMS Healthcare Corp., 220 F.3d 1184, 1190 (10th Cir. 2000)).

When evaluating a motion for summary judgment, the court must view the facts and draw all reasonable inferences in favor of the nonmoving party. Id. (quoting Turner v. Pub. Serv. Co., 563 F.3d 1136, 1142 (10th Cir. 2009)). But this is true only if “there is a ‘genuine' dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 380 (2007). “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.'” Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)). “If the movant meets this initial burden, the burden then shifts to the nonmovant to set forth specific facts from which a rational trier of fact could find for the nonmovant.” Talley v. Time, Inc., 923 F.3d 878, 893-94 (10th Cir. 2019) (quoting Teets v. Great-W. Life & Annuity Ins. Co., 921 F.3d 1200, 1211 (10th Cir. 2019)).

ANALYSIS

“[W]hen bringing a legal malpractice suit, ‘[c]lients . . . may sue for damages based on breach of contract, breach of fiduciary duty, or negligence.” Gregory &amp Swapp, PLLC v. Kranendonk, 2018 UT 36, ¶ 25, 424 P.3d 897, 904. Accordingly, Bella Monte's Malpractice Complaint states all three claims against VF: professional negligence, breach of contract / breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty. (Compl., ECF No. 2-1.)

Because malpractice suits only arise out of some alleged failure of the attorney-client relationship, “a malpractice action . . . necessarily presents a ‘case within a case.'” Gregory & Swapp, 2018 UT 36, ¶ 22, 424 P.3d at 903. Here, the case within the case is VF's alleged failure to win more than $500, 000 on behalf of Bella Monte in the Underlying Action. In the Malpractice Action, not only must Bella Monte prove that the Underlying Action had value beyond the $500, 000 settlement, but it must also establish the familiar elements of negligence. “[A] plaintiff must plead and prove (i) an attorney-client relationship; (ii) a duty of the attorney to the client arising from their relationship; (iii) a breach of that duty; (iv) a causal connection between the breach of duty and the resulting injury to the client; and (v) actual damages.” Crestwood Cove Apartments Bus. Trust v. Turner, 2007 UT 48, ¶ 30, 164 P.3d 1247, 1255.

The first two elements are not in dispute: VF was Bella Monte's attorney, and it owed duties to Bella Monte because of this relationship. VF essentially argues on summary judgment that Bella Monte has failed to prove “collectability” (a mix of causation and damages) and that it is thus entitled to judgment as a matter of law. VF also contests the validity of Bella Monte's Underlying Claims. Its five primary arguments are:

1. Bella Monte failed to offer evidence showing that (a) any insurance company would have covered any hypothetical judgment against the Underlying Defendants and (b) any of the Underlying Defendants had the financial ability to pay for a hypothetical judgment.

2. Bella Monte's Underlying Claims for Buildings 1 through 13 were barred by Utah's statute of repose.

3. Bella Monte's Underlying Negligence Claims were barred by the economic-loss rule, and even if they were not, Bella Monte did not present evidence to support these claims.

4. Bella Monte lacked privity to pursue the Underlying Contract Claims.

5. Bella Monte's claim against VF for breach of fiduciary duty fails because it is impermissibly duplicative of its professional negligence claim.

The court will address each argument in turn.

I. Collectability

VF argues that for Bella Monte to succeed in the Malpractice Action, it must present the following evidence of causation and damages:

(i) its total damages; (ii) the degree of fault that would have been allocated to each of the Underlying Defendants; (iii) the amount of Bella Monte's damages that each Defendant would have been liable to pay to Bella Monte; and (iv) that each Defendant had the ability to pay their portion of Bella Monte's total damages.

(Mot. at 26, ECF No. 107.) For purposes of its motion, VF assumes that (i), (ii), and (iii) are...