Lerner v. Mann
| Decision Date | 08 May 2023 |
| Docket Number | 83364-2-I |
| Parties | ROBERT A. LERNER, Respondent v. PHILIP P. MANN and ANDREA T. MANN, husband and wife and the marital community property composed thereof, d/b/a MANN LAW GROUP, PLLC., Appellant |
| Court | Washington Court of Appeals |
UNPUBLISHED OPINION
Appellant Phillip Mann, appeals the judgment and decision in favor of Robert Lerner (Mann's former client), which found that Mann committed legal malpractice when representing Lerner in Lerner v. Cascade Designs, Inc., King County Superior Court (2019) (the "underlying action"). Mann argues that the trial court committed error in allowing the scope and content of Lerner's expert witness's testimony. Mann further argues that the evidence presented during the bench trial did not support the court's decision that he violated the standard of care. Finally, Mann argues that the court erred in awarding and calculating the damages granted. Finding no error, we affirm the court's decision and judgment.
Citations and pin cites are based on the Westlaw online version of the cited material.
In 1996, Lerner, an inventor, entered into an asset purchase agreement (APA) with Cascade Designs, Inc. (CDI). Lerner v. Cascade Designs, Inc., No. 78570-2-I, slip op. at 2 (Wash.Ct.App. Aug. 26, 2019) (unpublished), https://www.courts.wa.gov/opinions/pdf/785702.pdf. Lerner sold certain business assets to CDI in exchange for royalties. The APA allowed Lerner to view CDI's business records under certain conditions.
In the event of a disagreement, the APA required the parties to use arbitration as envisioned by state law. Lerner, No. 78570-2-I, slip op. at 2. Specifically, section 25.1 (Governing Law) stated, "Except for emergency injunctive relief, any controversy arising from this Agreement or its breach shall be determined by arbitration pursuant to RCW 7.04." RCW 7.04A is the state's Uniform Arbitration Act.
As to the applicable process, section 25.2 (Selection of Arbitrators) of the APA mandated:
Within twenty (20) days after a notice by either party to the other requesting arbitration and stating the basis of the party's claim, one arbitrator shall be appointed by each party. Notice of the appointment shall be given by each party to the other when made. The two arbitrators shall immediately choose a third arbitrator to act with them.
Further, the APA required the parties to use arbitration under the rules of the American Arbitration Association (AAA), stating at section 25.3 (Procedure), that, "The arbitration shall be governed by the rules of the American Arbitration Association."
Finally, the APA stated that in the event of litigation or arbitration relating to the APA, the prevailing party is entitled to recover court costs and reasonable attorney's fees.
For almost 20 years, Lerner received royalties from CDI. After he stopped receiving royalties in 2015, Lerner tried to obtain CDI's records to understand the reasons for the cancelation, and CDI refused. In 2016, Lerner hired Philip Mann to represent him in the dispute.
Mann recommended that Lerner file an injunction in superior court to access CDI's records. According to correspondence admitted at trial, Lerner was sensitive to the cost of pursuing any legal action. Mann had his associate, Tim Billick (Billick), work on the case to reduce costs. On July 16, 2016, Mann filed the action, on behalf of Lerner, against CDI in King County Superior Court, alleging a breach of the record inspection provisions of the APA. Lerner, No. 78570-2-I, slip op. at 2 (again, the "underlying action").
On July 21, 2016, Billick emailed Lerner, copying Mann, to update Lerner on their strategy. Billick wrote that CDI "was taking the position that this issue needs to be arbitrated by the AAA." "[O]ur plan at the moment is:
The email also included the costs associated with starting an arbitration with AAA and included AAA's fee schedule.
CDI did not answer the superior court complaint. Lerner, No. 78570-2-I, slip op. at 2. Instead, on July 26, 2016, CDI moved to dismiss or stay the proceedings pending arbitration, and the court granted CDI's motion to stay on August 18, 2016. Id. Further, the superior court ordered the parties to proceed with arbitration and file joint status reports with the court every 90 days until the stay was lifted or the case dismissed.
It was not until between September 2017 and February 2018 that the parties selected the three-person panel pursuant to section 25.2 reviewed above. Lerner, No. 78570-2-I, slip op. at 2. Concurrently, CDI and Lerner continued to negotiate, albeit unsuccessfully, on Lerner's access to CDI's records. At the same time, while some steps were taken toward pursuing arbitration, Lerner never filed a demand for arbitration, no one paid the AAA fee, and no arbitration proceedings were held at that point. Lerner, No. 78570-2-I, slip op. at 2.
On April 26, 2018, CDI moved to dismiss the underlying action pursuant to CR 41(b)(1). Lerner, No. 78570-2-I, slip op. at 3.
When appraising Lerner of a proposed response to CDI's motion, Mann said he found the motion "puzzl[ing]" and that CDI was trying to hold them to the "letter of your prior agreement, and, in particular, the procedures for instituting arbitration." Mann did not mention that CDI could seek its attorneys' fees if the motion was granted.
In his brief in opposition to the motion to dismiss, Mann, on behalf of Lerner, argued that, despite section 25.1 above, the court should strike its previous referral to arbitration, lift the stay, and proceed with the case on the merits. Mann further noted that CDI only recently claimed that the arbitration had to be initiated through the AAA. Mann did not take any additional action other than to oppose the motion to dismiss on the merits.
On May 14, 2018, the trial court granted CDI's motion to dismiss and awarded CDI attorney fees and costs of $130,835.47 plus 12% interest per annum.
Lerner appealed the dismissal and award of attorney fees and costs to this court. Lerner, No. 78570-2-1, slip op. at 3. Mann continued to represent Lerner in the 2019 appeal. On August 26, 2019, this court affirmed the trial court's dismissal of the underlying action, concluding in pertinent part:
Lerner, No. 78570-2-1, slip op. at 5-6. This court granted CDI additional attorneys' fees on appeal, awarding a new total of $183,118.99 plus 12% interest per annum.
At the time of this court's decision on Lerner's first appeal, no arbitration had yet occurred.
After Lerner's appeal failed, he hired new counsel, Michael Matesky, to represent him in his still-pending arbitration with CDI regarding the royalty records. The arbitration proceeded and, on December 9, 2019, Lerner prevailed against CDI. Arbitration Case No. 01-18-0003-2661. The arbitrator awarded Lerner $84,535 in attorney fees and $33,700 in arbitration costs, for a total award of $117,535, and allowed the requested document inspection.[2] Further, the order stated its ruling was "without prejudice to any claim for fees, or costs, or damages for any matter or cause of action outside the limited scope of this arbitration."
As each party attempted to collect on its respective judgments, on April 9, 2020, the King County Superior Court granted CDI's motion to consolidate the cases involving Lerner and CDI "to equitably determine the judgments owed to each party as the parties owed each other money between the two cause numbers."
The court ordered, in pertinent part, that all judgments in favor of Lerner be offset by and with net amounts awarded in favor of CDI in the prior case regarding CDI's motion to dismiss. The court deducted $117,535 from Lerner's arbitration award, reducing what CDI owed to Lerner to $0. As to CDI's judgment against Lerner in the underlying action, which the court found "originated as $183,118.99 shall now be $149,418.99 with an attorney's lien against it of $84,535." As the court described it, the court "deducted the $33,700 amount owed but kept in the attorney's fees award due to the Notice of Attorney Lien."
The judgment further ordered that "Lerner shall be entitled to that document review and production described in the [arbitration award] upon satisfaction of and compliance with the [judgment against Lerner] and paying in advance for the . . . document review and production."
Lerner appealed the judgment, in a separate action. This court issued an opinion on November 29, 2021. Lerner v. Cascade Designs, Inc., No. 81445-1-I (consolidated with 82105-9-I), slip op. at 1 (Wash.Ct.App. Nov. 29, 2021) (unpublished) https://www.courts.wa.gov/opinions/pdf/814451.pdf. In pertinent part, this court reversed the superior court's...
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