Bennett v. JONES, WALDO, HOLBROOK

• Decision Date: 01 April 2003
• Docket Number: No. 20010296.,20010296.
• Citation: 2003 UT 9,70 P.3d 17
• Parties: David D. BENNETT, Plaintiff and Appellant, v. JONES, WALDO, HOLBROOK & MCDONOUGH; Christopher L. Burton; Sidney G. Baucom; James S. Lowry; Post, Kirby, Noonan & Sweet; and Michael L. Kirby, Defendants and Appellees.
• Court: Utah Supreme Court

70 P.3d 17

2003 UT 9

David D. BENNETT, Plaintiff and Appellant, v. JONES, WALDO, HOLBROOK & MCDONOUGH; Christopher L. Burton; Sidney G. Baucom; James S. Lowry; Post, Kirby, Noonan & Sweet; and Michael L. Kirby, Defendants and Appellees.

No. 20010296.

Supreme Court of Utah.

April 1, 2003.

Rehearing Denied May 20, 2003.

James N. Barber, Daniel G. Moquin, Franklin Reed Bennett, Salt Lake City, for plaintiff.

R. Brent Stephens, Maralyn M. Reger, Salt Lake City, for Jones Waldo defendants.

James S. Jardine, Rick B. Hoggard, Arthur B. Berger, Salt Lake City, for Post Kirby defendants.

RUSSON, Justice:

¶ 1 This case involves an action brought by David D. Bennett ("Bennett") against the law firms of Jones, Waldo, Holbrook & McDonough ("Jones Waldo") and Post, Kirby, Noonan & Sweet ("Post Kirby") and several of the law firms' partners alleging legal malpractice through breach of fiduciary duty, breach of contract, abuse of process through wrongful institution of civil proceedings, intentional infliction of emotional distress, and deceit or collusion in violation of section 78-51-31 of the Utah Code. The action arises from the law firms' representation of Bennett in a federal securities class action lawsuit against Gen-Probe, Inc. ("Gen-Probe"), of which Bennett was a minority shareholder.

¶ 2 Bennett appeals (1) the trial court's grant of Jones Waldo, Christopher L. Burton, Sidney G. Baucom ("Baucom"), and James S. Lowrie's ("Lowrie") (collectively, "Jones Waldo defendants") motion to dismiss Bennett's fourth amended complaint for failure to state a claim upon which relief can be granted, pursuant to rule 12(b)(6) of the Utah Rules of Civil Procedure, and (2) the trial court's grant of Post Kirby and Michael L. Kirby's ("Kirby") (collectively, "Post Kirby defendants") motion to dismiss Bennett's fourth amended complaint for lack of personal jurisdiction, pursuant to rule 12(b)(2) of the Utah Rules of Civil Procedure.

BACKGROUND AND PROCEDURAL HISTORY

I. UTAH GEN-PROBE LITIGATION

¶ 3 On December 5, 1989, Bennett sued Gen-Probe and its officers and directors in United States District Court for the District of Utah ("Utah Gen-Probe litigation"), seeking to enjoin the purchase of Gen-Probe by a Japanese company because the proposed purchase price was allegedly inadequate. Bennett also asserted derivative claims on behalf of Gen-Probe against its officers and directors, and damage claims on behalf of a proposed class of the minority shareholders of Gen-Probe.

¶ 4 On April 18, 1990, Bennett and Jones Waldo entered into a retainer agreement in which Jones Waldo agreed to act as lead counsel in the Utah Gen-Probe litigation. The retainer agreement provided, among other things, that "[w]ith the exception of decisions regarding settlement, [Jones Waldo] shall have the authority to make all decisions relating to the prosecution of [the] Lawsuit in its absolute discretion" and that "Clients¹ agree that [Jones Waldo] may, at its sole discretion, retain associate counsel to assist in the prosecution of Client's Causes of Action provided associate counsel is retained at [Jones Waldo's] sole expense." Furthermore, under the retainer agreement, the clients committed "to fully cooperate with [Jones Waldo] in the prosecution of the lawsuit" and acknowledged that "[Jones Waldo's] agreement to represent Clients is contingent upon Client's active and continuous cooperation throughout the Lawsuit."

II. CALIFORNIA GEN-PROBE LITIGATION

¶ 5 On August 24, 1990, the Utah Gen-Probe litigation was transferred from Utah to the United States District Court for the Southern District of California ("California federal district court"), where Gen-Probe was headquartered ("California Gen-Probe litigation"). As a result, Jones Waldo was required to retain local California counsel. On October 24, 1990, Post Kirby became co-counsel and local counsel with Jones Waldo on the California Gen-Probe litigation. However, Post Kirby never signed or became a party to the retainer agreement between Bennett and Jones Waldo.

¶ 6 Specifically, Post Kirby was hired by Jones Waldo as co-counsel in a joint representation with Jones Waldo of a class in the California Gen-Probe litigation. In a letter dated October 24, 1990, addressed to Jones Waldo, Post Kirby described the "proposed arrangement for representation" of Bennett's class action, stating:

[Jones Waldo] will continue to act as lead counsel for the plaintiffs, and [Post Kirby] will become co-counsel of record for the plaintiffs. [Post Kirby] will have considerably greater responsibility than merely acting as local counsel, but [Jones Waldo] will continue to have the ultimate decision making authority, after consultation with [Post Kirby], on any substantive or tactical decisions.

¶ 7 On December 18, 1991, two of the named plaintiffs in the California Gen-Probe litigation authorized Jones Waldo to settle the class action suit. Bennett openly opposed the proposed settlement, claiming that Jones Waldo and Post Kirby had failed to fully investigate the claims and that the amount of the settlement offer was inadequate.

¶ 8 On August 13, 1992, Bennett opted out of the proposed settlement. As a result, Jones Waldo informed Bennett by letter on August 17, 1992, that Bennett's decision to opt out of the class action settlement terminated Jones Waldo's representation of Bennett.

¶ 9 On August 26, 1992, the California federal magistrate court held a "Good Faith Settlement Hearing" at which the court approved the proposed settlement as fair, found that the class had been adequately and competently represented by counsel, and subsequently entered a final judgment and order of dismissal with prejudice the next day. Despite having opted out of the settlement, Bennett attended the hearing and was allowed to present his objections on the record. Bennett acknowledged that because he had decided to opt out of the settlement he had no standing to challenge the settlement in that forum and that he had no right to appeal the court's approval of the settlement.

III. BAR ORDER LITIGATION

¶ 10 In early to mid-1994, Jones Waldo learned that Bennett intended to sue Jones Waldo on behalf of the entire class for alleged legal malpractice because he thought the settlement was unfair and improper. Suspecting that Bennett's claims of malpractice were nothing more than a collateral attack on the fairness and adequacy of the class action settlement, Jones Waldo requested that Post Kirby obtain a court order ("bar order") from the California federal district court prohibiting litigation collaterally attacking the finality of the class action settlement.²

¶ 11 On July 5, 1994, the California federal district court issued a temporary bar order that was made permanent on October 3, 1994, after a hearing on the issue on September 6, 1994. Bennett was served in Utah with a copy of the temporary bar order which permitted him to oppose any permanent bar order in California. Bennett was present and represented by counsel at the September 6 hearing.

¶ 12 The bar order restrained Bennett from "initiating or maintaining any lawsuit against [Jones Waldo] ... or any other class counsel which in any way involves" the "sufficiency or fairness of the class action settlement," the "competency of class counsel and counsel's legal services on behalf of the class," the "award of fees and costs to class counsel," and the "award of additional compensation to any of the named Plaintiffs" in the class action. The bar order expressly did not "bar or restrain David D. Bennett from pursuing solely his own individual claims as a former Gen-Probe shareholder, except to the extent such claims have been previously adjudicated by this court."

¶ 13 Bennett appealed the bar order to the Ninth Circuit Court of Appeals. While that appeal was pending, Bennett filed the instant action in Utah district court against Jones Waldo (but not against Post Kirby) on December 30, 1994.³ Soon thereafter, on January 20, 1995, Bennett filed an amended complaint.

¶ 14 When Bennett filed his amended complaint, Jones Waldo, represented by Post Kirby, moved the California federal district court to hold Bennett in contempt of the bar order. At a hearing on the contempt motion on May 1, 1995, the California federal district court, after reviewing Bennett's complaint and the amended complaint filed in Utah district court, ordered Bennett to redact all of the allegations relating to the class action settlement and the competency of class counsel's representation of the class. Bennett agreed to file a second amended complaint, which he did on August 1, 1995.

¶ 15 In response to Bennett's second amended complaint, Jones Waldo again asked Post Kirby to move the California federal district court to hold Bennett in contempt of the bar order because the allegations in the second amended complaint continued to focus impermissibly on the adequacy and fairness of the class action settlement and class counsel's representation of the class, essentially collaterally attacking the finality of the class action settlement. The California federal district court held a hearing on the second contempt motion on January 11, 1996. At this hearing, the California federal district court held Bennett in contempt of the bar order. The court fined Bennett and once again ordered him to amend his complaint to eliminate claims concerning the class action settlement and the competency of class counsel. Bennett appealed this contempt citation to the Ninth Circuit Court of Appeals. On February 9, 1996, Bennett filed in Utah district court his third amended complaint, omitting under protest the offending allegations.

¶ 16 On June 14, 1996, the Ninth Circuit Court of Appeals affirmed the original issuance of the bar order. In doing so, the Ninth Circuit "narrowly construed" the bar order so that the "Utah court may examine the adequacy of the class settlement, but only insofar as that settlement sheds light...