Bristol Co., Lp v. Osman
| Decision Date | 27 December 2007 |
| Docket Number | No. 06CA1498.,06CA1498. |
| Citation | 190 P.3d 752 |
| Parties | BRISTOL COMPANY, LP, a Nevada limited partnership, Plaintiff-Appellant, v. Lee OSMAN and Holland & Hart, LLP, Defendants-Appellees. |
| Court | Colorado Court of Appeals |
Opinion by Judge CARPARELLI.
In this legal malpractice proceeding, plaintiff, Bristol Company, LP (Bristol), appeals the judgment entered on orders dismissing claims against defendants, Lee Osman and Holland & Hart, and denying its requests to amend the complaint. Bristol also appeals the trial court's order denying its motion requesting clarification of the order denying leave to amend the complaint. We affirm.
In 1997, Bristol suspected that Basic Technologies Corporation (Basic) was infringing some of its patents. At that time, Lee Osman, an attorney employed by Holland & Hart, advised Bristol regarding communications with Basic regarding the patents. Notwithstanding Bristol's concern about Basic's infringement, Bristol did not file suit.
In August 2000, Osman left Holland & Hart and joined Dorsey & Whitney, LLP. Although Osman continued to represent Bristol, Holland & Hart was no longer his employer and provided no further legal services to Bristol.
In 2004, Bristol learned that, if it sued Basic, Basic could assert a presumption of the equitable defense of laches, and, thereby, hinder or preclude Bristol's ability to recover the full amount of its pre-suit damages. Thereafter, two law firms declined to sue Basic on behalf of Bristol on a contingent fee basis.
In January 2005, Bristol filed suit against Osman, Holland & Hart, and Dorsey & Whitney, alleging various failures to advise it that undue delay in filing an infringement suit could give rise to a laches defense.
Between January and November 2005, Bristol filed a complaint (Complaint 1), an amended complaint (Complaint 2), and four proposed amended complaints (Complaints 3 through 6). In March 2005, before any defendant answered Complaint 1, Bristol filed Complaint 2. Complaint 2 asserted claims against all defendants for breach of fiduciary duty and negligent failure to advise Bristol that, based on the doctrine of laches, delaying a patent infringement suit against Basic could prevent enforcement of Bristol's rights.
Dorsey & Whitney and Osman filed a motion to dismiss and for summary judgment on April 20, 2005, and, the next day, Holland & Hart and Osman filed three motions to dismiss. In May 2005, Bristol responded in part by submitting Complaint 3. In June 2005, before the trial court ruled on the various motions to dismiss, Bristol submitted Complaint 4 in place of Complaint 3. Neither Complaint 3 nor Complaint 4 was accompanied by a motion for leave to amend.
In July 2005, the trial court denied Osman's and Dorsey & Whitney's motion, but dismissed with prejudice the claims in Complaint 2 against Osman and Holland & Hart with regard to Osman's legal services while at Holland & Hart. In the same order, the court also denied, without prejudice, Bristol's request to further amend the complaint.
In August 2005, Bristol filed a motion for leave to file another amended complaint. This motion was accompanied by Complaint 5, which added a claim for relief against Holland & Hart for negligent prosecution of patents. The trial court denied Bristol's motion in October 2005.
Bristol attempted to file Complaint 6 in November 2005. This complaint did not include any claims against Holland & Hart. The trial court denied the motion to file Complaint 6 on December 1, 2005. Bristol settled its dispute with Osman and Dorsey & Whitney and filed a stipulation for dismissal with prejudice. The court accepted the stipulation on June 9, 2006.
Bristol contends that the trial court erred when it dismissed its claims against Osman and Holland & Hart. We disagree.
We review a trial court's order dismissing claims de novo. When reviewing a motion to dismiss, we accept all allegations of fact in the complaint as true and read the complaint in the light most favorable to the plaintiff. Because a motion to dismiss tests the sufficiency of the complaint, the trial court must base its decision solely on the complaint itself. A trial court may properly grant dismissal when the plaintiff's complaint fails to state a claim upon which relief can be granted. BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 71 (Colo.2004).
(2) the attorney breached that duty, and
(3) the attorney's breach proximately caused it harm.
To demonstrate causation, the plaintiff must also show that the claim underlying the malpractice action would have been successful, but for the attorney's negligence. Bebo Constr. Co. v. Mattox & O'Brien, P.C., 990 P.2d 78, 83 (Colo.1999).
Thus, to state a malpractice claim against Osman and Holland & Hart, Bristol was required to plead that between October 1997 and August 2000:
(1) Osman and Holland & Hart had a duty to Bristol in an attorney-client capacity;
(2) Osman and Holland & Hart breached that duty;
(3) Osman and Holland & Hart's breach proximately caused harm to Bristol; and
(4) Bristol's claim against Basic would have been successful but for Osman and Holland & Hart's negligence.
Laches is an equitable defense that acts to bar an award of pre-suit damages. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1041 (Fed.Cir.1992). As an equitable defense, it is committed to the sound discretion of the trial court, and the trial court decision is reviewed for abuse of discretion. Aukerman, 960 F.2d at 1028.
A trial court may apply laches when the plaintiff unreasonably and inexcusably delays bringing a legal claim and the delay prejudices or injures the defendant in some material way. Aukerman, 960 F.2d at 1028-29. The prejudice to the defendant may be either economic or evidentiary. Economic prejudice to a defendant may include liability for greater damages or the loss of monetary investment that a timelier lawsuit would likely have prevented. Evidentiary prejudice may include a defendant's inability to present a full and fair defense on the merits due to the loss of records, the death of witnesses, or the adverse effect that the passage of time has on witnesses' memories of relevant events. Aukerman, 960 F.2d at 1033. A trial court must balance, on the one hand, the length of the delay in filing the infringement suit and the plaintiff's explanation for the delay, against, on the other hand, the prejudice to the defendant resulting from the delay. Thus, it involves a weighing of equities and depends on the trial court's evaluation of the circumstances. Giddens v. Isbrandtsen Co., 355 F.2d 125, 127 (4th Cir. 1966).
In a patent infringement case, a rebuttable presumption of laches arises six years after a plaintiff discovers infringement of its patent and does not bring a suit. Aukerman, 960 F.2d at 1034. When the presumption is triggered, "undue delay and prejudice are deemed established," absent evidence rebutting the presumption. John W. Schlicher, Patent Law: Legal and Economic Principles § 1.111 (2007).
Although the defense of laches is not a statute of limitations, courts often compare these two principles. See generally Aukerman, 960 F.2d 1020. This is true, in part, because "[c]ourts faced with patent infringement actions `borrowed' the six-year damage limitation period in the patent statute now set out in [35 U.S.C.] section 286, as the time period for giving rise to a rebuttable presumption of laches." Aukerman, 960 F.2d at 1034.
In pertinent part, Complaint 2, which was the complaint of record when the trial court issued its order dismissing the claims, alleged the following:
• from October 1997 through May 1998, Osman, while at Holland & Hart, drafted and helped draft letters to Basic alerting it to Bristol's patents, asking Basic to review the patents, advising Basic that Bristol was represented by Holland & Hart, and urging Basic to respond;
• after Basic denied any infringement of Bristol's patents, Osman counseled against suing Basic;
• at that time, Osman and Holland & Hart failed to make Bristol aware of the equitable defense of laches;
• after Osman left Holland & Hart and joined Dorsey & Whitney, two other Dorsey & Whitney attorneys failed to advise Bristol regarding laches and failed to "explain that it would bar any claim brought after unreasonable delay to the prejudice of another";
• beginning not later than 1997, Basic was infringing on Bristol's patents;
• two other law firms refused to pursue claims against Basic in 2004, apparently because of the vitality of the laches defense;
• Osman owed Bristol a duty to employ the degree of knowledge, skill, and judgment ordinarily possessed by members of the legal profession at the time the task was undertaken;
• all defendants breached their duties to exercise reasonable knowledge, skill, and judgment when they did not advise Bristol against unreasonable delay in enforcing its rights because laches could and would prevent later enforcement where Bristol was aware of its claims and its delay prejudiced Basic; and
• Bristol was damaged as a direct and proximate result of defendants' negligence.
Relying on Brown v. Silvern, 45 P.3d 749 (Colo.App.2001), and Luttgen v. Fischer, 107 P.3d 1152 (Colo.App.2005), the trial court ruled that, as a matter of law, Complaint 2 did not state sufficient facts to allege that Osman's representation before he left Holland & Hart caused...
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