Goran Pleho, LLC v. Lacy

Citation439 P.3d 176
Decision Date10 April 2019
Docket NumberSCWC-12-0000025
Parties GORAN PLEHO, LLC, a Hawai‘i Limited Liability Company (dba Resorts Limousine Services), Goran Pleho and Ana Maria Pleho, Petitioners/Plaintiffs-Appellants/Cross-Appellees, v. David W. LACY, Lacy and Jackson, LLLC, a Hawai‘i Limited Liability Law Company, Respondents/Defendants-Appellees/Cross-Appellants, and Dragan Rnic, Respondent/Defendant-Appellee.
CourtSupreme Court of Hawai'i

This case requires us to consider a series of rulings by the trial court in a complex commercial dispute involving the sale of a limousine service. Goran and Ana Maria2 Pleho purchased Resorts Limousine Services (RLS), a Kona-based business, from their acquaintance, Dragan Rnic, in 2005. David W. Lacy, Esq., of the firm Lacy & Jackson LLLC (collectively, "Lacy Parties"), represented Goran and Maria in the transaction. At Lacy’s recommendation, Goran and Maria formed a corporation, Goran Pleho, LLC (GPLLC), and the transaction was completed in GPLLC’s name. Goran and Maria discovered problems with the business several months after the purchase. Goran and Maria, and GPLLC (collectively, "Pleho Parties"), brought the present action in the Circuit Court for the Third Circuit (circuit court)3 , alleging that Rnic and Lacy Parties intentionally misrepresented the value of RLS.

Pleho Parties asserted numerous claims against the defendants, including fraud and legal malpractice, and they asked the court to rescind or reform the sale of RLS and award compensatory and punitive damages. Rnic counterclaimed for breach of contract and other counts related to Pleho Parties' failure to make payments on the purchase price, and cross-claimed against Lacy Parties.

After extensive pretrial motions and discovery, Rnic settled all claims with Lacy Parties and Pleho Parties. Additionally, the circuit court dismissed or granted summary judgment on most of Pleho Parties' claims against Lacy Parties prior to trial.

Meanwhile, Goran and Maria filed for bankruptcy in Nevada, which led to a stay of the action in the circuit court for eleven months. Lacy Parties filed a motion in limine requesting that Pleho Parties be barred from presenting any evidence regarding their assets that conflicted with Goran and Maria’s submissions in the bankruptcy proceeding, which the circuit court denied.

At trial, the circuit court granted judgment as a matter of law (JMOL) against Pleho Parties on most remaining claims, and only their legal malpractice claim based on Lacy’s representation of GPLLC went to the jury. The jury found Lacy Parties not liable by special verdict. The circuit court entered judgment against Pleho Parties on all counts, awarding attorney’s fees and costs to Lacy Parties.

On appeal, the Intermediate Court of Appeals (ICA) partially vacated the circuit court’s judgment, finding that the circuit court had erroneously dismissed or granted summary judgment on Goran and Maria’s claims as individuals for fraud, legal malpractice, and punitive damages. The ICA also vacated the circuit court’s denial of the motion in limine, finding that Lacy Parties had demonstrated all of the elements of judicial estoppel. The ICA affirmed the circuit court’s judgment in all other respects.

In their application for writ of certiorari, Pleho Parties argue that the ICA erred in failing to revive their remaining claims against Lacy Parties. These include claims by Goran and Maria, as individuals, for conspiracy to commit fraud, intentional infliction of emotional distress (IIED), negligent infliction of emotional distress (NIED), and unfair and deceptive trade practices (UDAP); and claims by GPLLC for fraud and punitive damages. Pleho Parties also argue that the ICA erred when it vacated the trial court’s order denying Lacy Parties' motion in limine.

We conclude that the dismissal of Goran and Maria’s claims for IIED and NIED was in error, as they stated colorable claims on both counts. We also conclude that the grant of JMOL on GPLLC’s claims for fraud and punitive damages was in error. Viewing the evidence in the light most favorable to the nonmoving party, a reasonable jury could have returned a verdict in favor of Pleho Parties on these counts. We also conclude that the ICA erred in vacating the trial court’s order denying Lacy Parties' motion in limine.

Finally, a majority of this court concludes that the grant of summary judgment as to Goran and Maria Pleho’s UDAP claim was in error.

We affirm the ICA on all remaining issues.

A. Sale of RLS4

Before the sale of RLS to GPLLC, Rnic signed an agreement in June 2005 with a third individual, Don Rullo, to sell RLS for $800,000 in cash. The sale did not close. Rullo, a real estate agent, was a client of Lacy’s who consulted with him about business matters frequently, and Lacy testified that he represented Rullo in this potential transaction. Rnic testified that Rullo introduced him to Lacy.

Goran Pleho and Rnic met in Las Vegas in 2004, and Goran subsequently served as Rnic’s realtor in a number of real estate purchases. Rnic told Goran about his intention to sell RLS. Goran testified that Rnic gave him financial documents detailing RLS’s profits and losses; when Goran told Rnic that he did not understand the documents, Rnic said that they should consult "David Lacy, the best attorney on the island." Goran and Maria met Lacy on July 11, 2005, where, according to Goran:

Mr. Rnic introduced Mr. Lacy as his attorney, but he also introduced him as the best attorney on the island, and only he was the one capable of doing all the business transactions, very capable. And at that point I said, "Well, okay. But that is your attorney, and if we are going to even consider this, I have to have my attorney to represent me." Rnic said, "Well, then I don't need an attorney, and Mr. Lacy can be your attorney." And Mr. Lacy said, "Well, I'm not sure I can do it. I got to think about it."

Lacy described his introduction to Goran as follows:

Dragan Rnic was trying to sell his limousine company to Don Rullo. Don Rullo introduced Dragan Rnic to me. That fell through. And some, a week, five days, I forget what it was after that, Dragan brought Goran to my office. And I met him. And then they had all the terms and conditions of the deal that they had agreed to. And so I agreed to do the paperwork on behalf of Mr. Pleho as an LLC.
[T]hey both came in and had agreed upon the terms and conditions of the sale, and I think I told 'em they needed lawyers. Mr. Rnic said he didn't, and I should just be Mr. Pleho’s lawyer. And then after thinking about it and I guess I talked to [Lacy’s partner] Kim [Jackson], I agreed to be his lawyer, if he wanted me to.

Lacy agreed to represent Goran in the transaction, and referred Goran to a certified public accountant (CPA) to obtain an appraisal of RLS. However, the CPA told Goran that he was not available to do the appraisal. Goran testified that he expressed concern about proceeding with the sale without an appraisal at his next meeting with Rnic and Lacy on July 19, 2005:

So I said, "I can't go forward with this. I need an appraisal. I need to see what is this company’s worth."
And Mr. Rnic said, "Well, what do you mean? This is a unique company, only one of this kind. There’s nobody to appraise this company. It’s worth $2 million, and $1.5 is just a great price." And Mr. Lacy repeated the same thing to me.

Goran testified that he and Lacy went over hundreds of documents provided by Rnic pertaining to RLS’s finances, and that Lacy assured him that the "financials" were "satisfactory." Lacy testified that he "would never tell any client that his business was unique and could not be appraised."

Lacy recommended that Goran form a limited liability company to purchase RLS, and on July 25, 2005, Goran executed GPLLC’s incorporation documents, which Lacy drafted. Goran was GPLLC’s sole member at the time of incorporation.

Also on July 25, 2005, Rnic and GPLLC executed a Sale of Assets Agreement (Sale Agreement), by which Rnic sold RLS to GPLLC for a price of $1,500,000. As a down payment, Goran and Maria agreed to transfer three Las Vegas properties worth approximately $378,000 to Rnic, with the rest of the sale price to be paid back by GPLLC in monthly installments based on the gross income of RLS. The agreement provided that closing would take place upon the transfer of Rnic’s Public Utilities Commission (PUC) license to GPLLC.

That same day, GPLLC executed a $1,122,000 promissory note in favor of Rnic and a Management Services Agreement, whereby GPLLC agreed to manage and operate RLS until the transfer of Rnic’s PUC license. Lacy prepared the Sale Agreement, the promissory note, and the Management Services Agreement. He also prepared a limited power of attorney allowing GPLLC to manage RLS on Rnic’s behalf before the PUC license was transferred to GPLLC, and a warranty bill of sale, both executed on July 25, 2005. Although the Sale Agreement provided that closing would occur once the PUC license was transferred, the bill of sale was transferred to GPLLC that same day.

After July 25, 2005, Goran and Maria received some training from RLS employees and began running the business. Goran testified that in November 2005, he received a phone call about RLS from a friend, who informed him that "the numbers were altered before it was sold." Goran testified that he subsequently met with Lacy several times and told him that "this surely looks like fraud," but Lacy downplayed Goran’s concern and advised him to wait for the completion of the PUC license transfer before taking any action "as far as fraud." According to Lacy’s notes from a February 14, 2006 meeting with Goran, "Mr. Pleho wanted to wait until he had the [PUC] license and then approach Mr. Rnic and try and resolve the problems...." Rnic’s PUC license was transferred to GPLLC on March 10, 2006.

B. Circuit Court Proceedings
1. Pretrial

Pleho Parties filed a complaint on July 6, 2006, naming Rnic and Lacy Parties as defendants. P...

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