Christensen & Jensen v. Barrett & Daines

• Decision Date: 16 September 2008
• Docket Number: No. 20061044.,20061044.
• Citation: 194 P.3d 931,2008 UT 64
• Parties: CHRISTENSEN & JENSEN, P.C., fka Christensen, Jensen & Powell, P.C.; and L. Rich Humpherys, Individually, Plaintiffs/Counterclaim Defendants and Appellees, v. BARRETT & DAINES; W. Scott Barrett, fka Barrett & Brady; Robert Slusher, Defendants/Counterclaim Plaintiffs and Appellants.
• Court: Utah Supreme Court

194 P.3d 931

2008 UT 64

CHRISTENSEN & JENSEN, P.C., fka Christensen, Jensen & Powell, P.C.; and L. Rich Humpherys, Individually, Plaintiffs/Counterclaim Defendants and Appellees, v. BARRETT & DAINES; W. Scott Barrett, fka Barrett & Brady; Robert Slusher, Defendants/Counterclaim Plaintiffs and Appellants.

No. 20061044.

Supreme Court of Utah.

September 16, 2008.

Roger P. Christensen, David G. Williams, Rodney R. Parker, Karra J. Porter, Salt Lake City, for plaintiffs.

Charles R. Brown, E. Barney Gesas, Walter A. Romney, Jr., Salt Lake City, N. George Daines, Logan, for defendants.

DURHAM, Chief Justice:

INTRODUCTION

¶ 1 Appellants Scott Barrett and Robert Slusher, a client of Barrett's and former client of Appellees, appeal the trial court's rulings in favor of Christensen & Jensen, P.C. (formerly Christensen, Jensen and Powell, P.C.) and its attorney, L. Rich Humpherys (collectively, Appellees) on claims arising from the Campbell v. State Farm case.¹

BACKGROUND

¶ 2 In 1981, Curtis Campbell, Robert Slusher, and Todd Ospital were involved in an automobile accident that claimed the life of Todd Ospital and left Slusher permanently paralyzed. Curtis was insured by State Farm Mutual Automobile Insurance Company (State Farm) with policy limits of $25,000 per claim. As a result of the accident, Slusher sued Curtis and Todd Ospital's estate for personal injuries, and the estate—represented by Todd's parents, John and Winnifred Ospital (the Ospitals), cross-claimed against Curtis for wrongful death (1981 Trial). During that litigation, the Ospitals were represented by Appellees, Slusher was represented by Barrett, and Curtis was represented by an attorney retained by State Farm, Wendell E. Bennett. State Farm and its representatives misrepresented to Curtis the pertinent facts and issues concerning the litigation and failed to settle or attempt to settle with Slusher or the Ospitals despite having the opportunity to do so. Ultimately, in 1983, Barrett obtained a $133,098.25 judgment against Curtis on behalf of Slusher, and Humpherys obtained a $51,845.68 verdict against Curtis (1983 Judgment) on behalf of the Ospitals.

¶ 3 Because of State Farm's representation during the 1981 Trial, Curtis and his wife Inez (the Campbells) brought a bad faith claim against State Farm (1983 Trial).² Barrett and Appellees undertook Curtis' representation on that claim. Subsequently, pursuant to a retainer agreement signed by Inez on January 25, 1994, Appellees solely represented Inez on that claim.

THE CLIENT AGREEMENTS

¶ 4 In 1984, after obtaining their respective judgments against Curtis, Slusher and the Ospitals agreed to abstain from executing against Curtis' personal assets, and in return, Curtis agreed to share with them any recovery from his bad faith claim against State Farm. In keeping with that agreement, Slusher, the Ospitals, and Curtis executed a joint-representation agreement (1984 Agreement).

¶ 5 The 1984 Agreement stipulated, amongst other things, that Slusher and the Ospitals "are willing to covenant not to execute against [Curtis'] personal assets in turn for [Curtis'] agreement herein to share with them the recovery against State Farm." The agreement also stipulated that Curtis would retain "Christensen, Jensen and Powell" and "Barrett and Brady" as his attorneys in the litigation against State Farm, and required Curtis' cooperation and assistance in litigating against State Farm. Furthermore, the agreement provided that any recovery left after expenses and the payment of the 1983 judgments would be shared amongst the parties, with 45% of the recovery going to Slusher and the Ospitals respectively, and the remaining 10% going to Curtis. Slusher and the Ospitals were to be kept fully advised of the progress and status of the claim, and their approval was required for any settlement of the claims against State Farm. All parties to the 1984 Agreement agreed to be represented by Barrett and Humpherys, though each party retained his initial attorney separately in regards to his personal rights and obligations under the 1984 Agreement.

¶ 6 In 1995, the 1984 Agreement was modified through an oral agreement (1995 Agreement) to include Inez as a party to the agreement and to divide any net recovery equally amongst the parties, with one-third going to the Campbells, the Ospitals, and Slusher, each. All other terms regarding the agreement remained the same.

¶ 7 In 2001, after the receipt from State Farm of a settlement letter (Settlement Letter),³ the 1995 Agreement was memorialized in a December 7, 2001 agreement (2001 Agreement).⁴ By then, State Farm had paid the 1983 Judgment plus interest and costs to Slusher and the Ospitals, and this was referenced in the 2001 Agreement. In addition, the 2001 Agreement memorialized the disbursement schedule as agreed to in 1995 by the parties. Though the 2001 Agreement did not stipulate as to the representation of the parties, it was assumed by all parties to the 2001 Agreement that the representations as stipulated in 1984 were still in effect. As for Inez, she was solely represented by Appellees. Thus the 2001 Agreement was signed by Slusher, Curtis, the Ospitals, and Inez (collectively, the Clients), with Slusher, Curtis, and the Ospitals being represented by both Appellees and Barrett, while Inez was solely represented by Appellees.

¶ 8 Also in 2001, Humpherys mailed two letters to the Clients and to Barrett. The first letter was sent out in January (January Letter) and the second letter was sent out eleven months later, in December (December Letter). In the January Letter, Humpherys referenced the 1995 Agreement that acceptance of any settlement offers required their unanimous consent. In addition, the January Letter explained to the Clients that they could settle their claims individually by approaching State Farm to seek a prorated settlement or by seeking an arrangement with a litigation financing company. Humpherys also requested that the Clients inform him if they wanted to pursue any of these alternative means of settlement. The December Letter specifically requested that the Clients communicate their decisions and proposals regarding settlement to Humpherys in writing.

THE SETTLEMENT LETTER

¶ 9 The bad faith claims against State Farm resulted in a bifurcated trial with jury verdicts of $2,600,000 in compensatory damages and $145,000,000 in punitive damages against State Farm. The trial court reduced the compensatory damages to $1,000,000 and the punitive damages to $25,000,000. State Farm appealed and the Campbells cross-appealed. On October 19, 2001, the Utah Supreme Court reversed and reinstated the original jury verdict (October Opinion).

¶ 10 Sometime in October of 2001, prior to the Utah Supreme Court's issuance of its opinion, State Farm made a settlement offer of $10,000,000, which was unanimously rejected by the Clients. After the October Opinion, but prior to the receipt of the Settlement Letter, Humpherys had several conversations with State Farm attorney, Michael Zimmerman, regarding the possibility of the Campbells requesting a vacatur of the October Opinion from the Utah Supreme Court in exchange for a substantial payment from State Farm. Humpherys informed Zimmerman that such a request was unlikely. On November 16, 2001, Humpherys received the Settlement Letter dated November 14, 2001 from State Farm. In the letter, State Farm proposed to escrow the sum of $150,000,000 to be paid immediately to the Campbells upon the Utah Supreme Court's vacatur of its October Opinion. The relevant part of the letter reads:

State Farm proposes to settle on the following terms:

(i) State Farm will immediately escrow the sum of $150,000,000, to be paid to you and your clients upon the Utah Supreme Court's vacating the opinion and decision issued on October 19, 2001; and

(ii) you and your clients will join State Farm in filing with the Utah Supreme Court a notice, pursuant to Utah Rules of Appellate Procedure 37, that the matter has been settled in its entirety and is now moot, as well as a request that the court vacate its opinion and decision in the matter;

The terms of this proposed settlement are confidential and shall not be admissible in this or any other court proceeding. State Farm requests that you present this offer to your clients and respond to me in writing by noon on Friday, November 16, 2001.

In addition, the Settlement Letter stated that State Farm intended to file a Petition for Certiorari in the United States Supreme Court.

¶ 11 Upon receiving the Settlement Letter on November 16, 2001, Humpherys first contacted the Campbells and then the Ospitals regarding its contents. They declined to accept the offer if it required a vacatur of the October Opinion, as it clearly did. Thereafter, Humpherys contacted Slusher and informed him about the settlement offer and also informed him of the others' refusal to accept the offer based on the vacatur condition. It is unclear from the record if Slusher accepted or rejected the settlement offer, but it is clear that he did not approve an outright rejection of the offer. However, the record shows that the Clients and attorneys understood that pursuant to the provisions of the 1984 and the 1995 Agreements, all settlement offers had to be accepted unanimously. After speaking with the Clients, but without corresponding with Barrett, Humpherys delivered a letter to Zimmerman rejecting the $150,000,000 and explaining that his clients would not stipulate to the vacation of the opinion. After the rejection of the offer, but before the execution of the December 2001 Agreement, Humpherys mailed the Settlement Letter and the rejection letter to the Clients and to Barrett. Upon receipt of the letters, Slusher contacted Humpherys and expressed his dissatisfaction with Humpherys' handling of the settlement offer, especially his failure to initiate a meeting to discuss the issue. Slusher also expressed dissatisfaction...