J-U-B Engineers v. Security Ins.

• Decision Date: 24 September 2008
• Docket Number: No. 34239.,34239.
• Citation: 146 Idaho 311,193 P.3d 858
• Parties: J-U-B ENGINEERS, INC., an Idaho corporation, Plaintiff-Appellant, v. SECURITY INSURANCE COMPANY OF HARTFORD, a Connecticut corporation; DPIC Companies, Inc., a California corporation; and Thomas H. Lopez, an individual; Howard, Lopez and Kelly, an Idaho professional limited liability company, and John Does 1-XX, Defendants-Respondents.
• Court: Idaho Supreme Court

193 P.3d 858

146 Idaho 311

J-U-B ENGINEERS, INC., an Idaho corporation, Plaintiff-Appellant, v. SECURITY INSURANCE COMPANY OF HARTFORD, a Connecticut corporation; DPIC Companies, Inc., a California corporation; and Thomas H. Lopez, an individual; Howard, Lopez and Kelly, an Idaho professional limited liability company, and John Does 1-XX, Defendants-Respondents.

No. 34239.

Supreme Court of Idaho. Boise, May 2008 Term.

September 24, 2008.

Capitol Law Group, PLLC, Gooding, for appellant. Angelo Rosa argued.

Moffatt, Thomas, Barrett, Rock & Fields, Boise, for respondents Security Insurance Company of Hartford and DPIC Companies, Inc. Stephen Thomas argued.

Hepworth, Lezamiz & Janis, Boise, for respondents Thomas H. Lopez and Howard, Lopez & Kelly. John Janis argued.

HORTON, Justice.

This action relates to claims of legal malpractice and breach of contract and the duties of good faith and fair dealing. Appellant J-U-B Engineers, Inc. (J-U-B) appeals the district court's grant of summary judgment in favor of Respondents Security Insurance Company of Hartford (Security Insurance), attorney Tom Lopez, and the law firm Howard, Lopez and Kelly, PLLC. We affirm the decision of the district court and award Respondents attorney fees on appeal.

I. FACTUAL AND PROCEDURAL BACKGROUND

This lawsuit arises from an earlier action brought by Dick and Marlene Chapman against Kimball Engineering, P.A., a subsidiary of J-U-B. The Chapman lawsuit alleged that Kimball Engineering provided negligent engineering services to the Chapmans. Kimball Engineering was covered by a professional liability insurance policy issued by Security Insurance. Under the policy, in addition to providing coverage, Security Insurance had a duty to defend Kimball Engineering in the Chapman lawsuit and pay all litigation expenses. The insurance policy prohibited Security Insurance from settling any lawsuit without Kimball Engineering's written consent. Security Insurance retained the law firm Howard, Lopez and Kelly, PLLC to represent Kimball Engineering in the Chapman litigation. Attorney Thomas Lopez handled the case.

Lopez succeeded in obtaining a decision granting summary judgment in favor of Kimball Engineering based upon the expiration of the statute of limitations. J-U-B informed Lopez that it wished to pursue an award of attorney fees and costs in order to "punish" the Chapmans and deter future lawsuits against J-U-B. Lopez informed J-U-B that, in his opinion, they were unlikely to prevail on the motion for attorney fees and costs and that he would need to obtain approval from Security Insurance before bringing the motion. Lopez also explained that because the Chapman litigation also presented a claim against the City of Lewiston, he would need to obtain a certificate of final judgment from the trial court before pursuing the motion for attorney fees and costs. Lopez estimated that it would cost approximately $3,200 to pursue an award of attorney fees and costs. Lopez estimated that Kimball Engineering could obtain an award of approximately $850 in costs as a matter of right. To prevail on the award for attorney fees, Kimball Engineering would need to convince the trial judge that the Chapmans brought or pursued their action frivolously, unreasonably, or without foundation. Lopez estimated Kimball Engineering's chances of obtaining an award of attorney fees at twenty percent.

The Chapmans moved for reconsideration of the grant of summary judgment and Lopez moved for a certificate of final judgment pursuant to I.R.C.P. 54(b). On October 26, 2005, two days before these motions were scheduled to be heard, the Chapmans' attorney called Lopez and informed him that the Chapmans would agree to dismissal of their case with prejudice if Kimball Engineering agreed not to pursue attorney fees and costs. Lopez and the Chapmans' attorney concluded the phone call after 5:00 PM.

The next morning, on October 27, 2005, Lopez called J-U-B's chairman of the board, Kirby Vickers, but was unable to reach him. Lopez left a short message indicating that he wished to discuss the Chapman litigation, but did not convey the terms of the Chapmans' proposal. Lopez next called Security Insurance's litigation management specialist, informing Security Insurance of the Chapmans' proposal and reiterating J-U-B's position regarding pursuit of attorney fees. Lopez was advised that, under the terms of the policy, the decision whether to pursue attorney fees rested with Security Insurance, not the insured. Lopez was directed to accept the Chapmans' proposal. An associate attorney in Lopez's firm was scheduled to fly to Lewiston at noon that day in order to attend the court hearing the next day. Lopez contacted the Chapmans' attorney shortly before noon and accepted the terms of the dismissal.

The district court signed the order dismissing the Chapmans' claim against Kimball Engineering with prejudice on October 28, 2005. Consistent with the agreement between Lopez and the Chapmans' attorney, the order provided that each party would bear their own costs and attorney fees. Vickers did not return Lopez's call until nearly 5:00 PM on October 28, 2005.

Following the dismissal of the Chapman lawsuit, J-U-B filed the instant action, asserting a claim for legal malpractice against Lopez and Howard, Lopez and Kelly, PLLC, the law firm of which Lopez is a member.¹ J-U-B also brought claims against Security Insurance, asserting breach of contract and violation of the covenant of good faith and fair dealing. The underlying basis for these claims is J-U-B's contention that Lopez and Security Insurance settled the Chapman lawsuit without J-U-B's consent, resulting in damages.

Lopez and Security Insurance each moved to dismiss pursuant to I.R.C.P. 12(b)(6). At hearing on those motions, the district court indicated that it would feel more comfortable deciding this matter upon motions for summary judgment. The district court expressed concern that the exhibits attached to the complaint were not part of the pleadings and that the parties were asking the court to consider documents outside the scope of the pleadings. Accordingly, Lopez and Security Insurance filed motions for summary judgment. In opposition to the motions for summary judgment, J-U-B submitted an affidavit from Vickers. Lopez and Security Insurance moved to strike portions of Vickers's affidavit. The district court granted the motion to strike portions of Vickers's affidavit and granted summary judgment in favor of Respondents, dismissing J-U-B's claims. J-U-B timely appealed to this Court.

II. STANDARD OF REVIEW

When reviewing a ruling on a summary judgment motion, this Court employs the same standard used by the district court. Sprinkler Irrigation Co. Inc. v. John Deere Ins. Co., Inc., 139 Idaho 691, 695, 85 P.3d 667, 671 (2004). Summary judgment is appropriate "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." I.R.C.P. 56(c). This Court liberally construes all disputed facts in favor of the non-moving party and draws all reasonable inferences and conclusions supported by the record in favor of the party opposing the motion. Lockheed Martin Corp. v. Idaho State Tax Comm'n, 142 Idaho 790, 793, 134 P.3d 641, 644 (2006).

The admissibility of evidence contained in affidavits and depositions in support of or in opposition to a motion for summary judgment is a threshold question to be answered before applying the liberal construction and reasonable inferences rule to determine whether the evidence is sufficient to create a genuine issue for trial. Gem State Ins. Co. v. Hutchison, 145 Idaho 10, 13, 175 P.3d 172, 175 (2007) (citing Carnell v. Barker Mgmt., Inc., 137 Idaho 322, 327, 48 P.3d 651, 656 (2002)). This Court applies an abuse of discretion standard when reviewing a trial court's determination of the admissibility of testimony offered in connection with a motion for summary judgment. Id. at 15, 175 P.3d at 177 (citing McDaniel v. Inland Northwest Renal Care Group-Idaho, LLC, 144 Idaho 219, 221, 159 P.3d 856, 858 (2007)).

III. ANALYSIS

J-U-B's action against Respondents is based primarily on the claim that its reputation as an aggressive litigator was injured as a consequence of Respondents' failure to pursue an award of attorney fees and costs from the Chapmans. As a preliminary matter, we will address the district court's decision to strike portions of Vickers's affidavit relating to J-U-B's claimed damages before addressing the district court's grant of summary judgment in favor of Respondents.

A. The district court did not err by striking portions of Vickers's affidavit.

The district court struck the following opinions contained in Vickers's affidavit: (1) that parties that settle frivolous lawsuits are perceived as "targets" for increased litigation by members of the construction industry in Idaho; (2) that J-U-B's reputation was injured as a result of the Kimball Engineering settlement, "which has made it a target for additional frivolous lawsuits" with the result that "J-U-B will or has already been damaged in an amount of at least five thousand ($5,000) and up to four hundred thousand dollars ($400,000) as a result of increased litigation burdens resultant from reputation damages"; (3) that an insurance policy without a settlement consent clause would be worth only half the value of the premium paid ($27,089); (4) that the Chapman settlement harmed J-U-B's business reputation making it more difficult for J-U-B to secure and retain clients, resulting in damages of between $25,000 and $2.5 million. J-U-B argues that the district court abused its discretion by striking this testimony.² We disagree.

J-U-B acknowledges that these opinions are governed by evidentiary principles relating to expert testimony. The admissibility of expert...