Mainor v. Nault

• Decision Date: 22 November 2004
• Docket Number: No. 39561,39561
• Parties: W. RANDALL MAINOR, INDIVIDUALLY; RICHARD A. HARRIS, INDIVIDUALLY; MAINOR & HARRIS, LAWYERS, A PARTNERSHIP OF PROFESSIONAL CORPORATIONS; W. RANDALL MAINOR, A PROFESSIONAL CORPORATION; AND RICHARD A. HARRIS, A PROFESSIONAL CORPORATION, Appellants/Cross-Respondents, v. PHILIP M. NAULT AND WENDY R. NAULT, CO-GUARDIANS OF THE PERSON AND ESTATE OF JASON NAULT, AN ADULT WARD, Respondents/Cross-Appellants.
• Court: Nevada Supreme Court

120 Nev. 750

101 P.3d 308

W. RANDALL MAINOR, INDIVIDUALLY RICHARD A. HARRIS, INDIVIDUALLY;MAINOR & HARRIS, LAWYERS, A PARTNERSHIP OF PROFESSIONAL CORPORATIONS;W. RANDALL MAINOR, A PROFESSIONAL CORPORATION;AND RICHARD A. HARRIS, A PROFESSIONAL CORPORATION, Appellants/Cross-Respondents,

v. PHILIP M. NAULT AND WENDY R. NAULT CO-GUARDIANS OF THE PERSONAND ESTATE OF JASON NAULT, AN ADULT WARD Respondents/Cross-Appellants.

No. 39561

SUPREME COURT OF NEVADA

Decided: November 22, 2004

Lemons Grundy & Eisenberg and Robert L. Eisenberg, Reno; Wait Law Firm and Eugene J. Wait Jr., Reno, for Appellants/Cross-Respondents.

Gary Logan, Las Vegas, for Respondents/Cross-Appellants.

BEFORE THE COURT EN BANC. ¹

OPINION

PER CURIAM:

Appellants and cross-respondents W. Randall Mainor and Richard A. Harris individually, as professional corporations and as a partnership appeal from the district court's entry of final judgment pursuant to a jury verdict against Mainor and Harris. Respondents and cross-appellants Philip Nault and Wendy Nault, as co-guardians of the person and estate of Jason Nault, cross-appeal from a district court order offsetting the final judgment by $400,000 from a prior settlement with another attorney involved in the underlying case. We conclude that insufficient evidence supports the jury's verdict and therefore reverse the district court's judgment.

FACTUAL AND PROCEDURAL HISTORY

Jason Nault, a Southwest Airlines baggage handler, was rendered in a permanent vegetative state after anesthesia equipment failed during his hernia surgery. His pregnant wife, Louise Nault, brought a medical malpractice claim on behalf of herself and Jason. Louise sought the advice of attorney Joe Rolston, for whom she had worked as a secretary. Rolston agreed to assist Louise but advised her that, as medical malpractice was outside of his area of expertise, she should hire an attorney with experience in this area. Louise and Rolston entered into a contingency fee agreement.

After Louise and Rolston interviewed several personal injury attorneys Louise decided to retain W. Randall Mainor and the law firm of Mainor & Harris. On June 13, 1994, Louise, Mainor and Richard A. Harris signed a contingency fee agreement, which established that Mainor and Harris would receive 33.3 percent of the gross recovery prior to suit and 40 percent after suit was filed. The agreement incorporated the previous retainer agreement with Rolston.

On June 16, 1994, before the family court had granted guardianship of Jason to Louise, Mainor filed a lawsuit on behalf of Jason and Louise, seeking damages for Jason's injuries and Louise's loss of consortium. In March 1996, after nearly two years of contentious litigation, the parties participated in a full-day settlement conference during which the mediator valued the case at $6-7 million. The case settled for approximately $17 million.

After settlement, the parties held a meeting to allocate the $17 million. Louise insisted that Jason's needs were the first priority. Attorney Jamie Chrisman, who represented the workers' compensation division for Southwest Airlines, was primarily responsible for monitoring Jason's medical care and medical bills. The estimated cost for all of Jason's needs, including twenty-four-hour nursing care, physical therapy and all other medical needs, was $20,000 per month. Because the persons attending the meeting desired a large financial cushion for Jason, they decided on payments of $32,000 per month that would automatically increase by 2 percent every year for Jason's life. They determined to use the settlement proceeds to purchase an annuity for Jason to pay a guaranteed stream of tax-free money. Any remaining settlement money was to be used to provide for Louise and Louise and Jason's baby, Rene.

The attorney fee agreements provided for fees totaling 40 percent of the settlement, or approximately $6.8 million. Southwest Airlines had a workers' compensation lien on the settlement for approximately $600,000. Jason's annuity cost $2,503, 470 and was expected to pay approximately $39 million if Jason lived a full life expectancy. Louise's annuity cost $4,081, 142.53 and had an expected payout of $24.8 million. Even though Rene had no claim, an annuity was also purchased for her at a cost of $437,348, with payments beginning when Rene reached age eighteen and an expected lifetime payout of $7.4 million. The difference in costs between Jason's annuity and Louise's annuity was based on their significantly different life expectancies. The total cost of all three annuities was about $7 million, leaving approximately $2.5 million, which everyone agreed should go to Louise.

On April 11, 1996, Mainor petitioned the district court for approval of the compromise of Jason's claim. The petition specifically set forth the fact that the defendant would pay a guaranteed amount of $32,000 per month, compounded annually for Jason's lifetime, with an expected value of approximately $39 million if Jason lived a full life expectancy.

On April 19, 1996, the district court, Judge Lee Gates presiding, held a hearing on the settlement of all claims. The attorneys informed the district court that the total settlement was $17 million and that $7 million would be paid in the form of annuities. The attorneys informed the district court that Jason's annuity would pay $32,000 per month for the rest of his life and that the amount would provide a cushion of over $100,000 per year for unexpected contingencies. They further informed the district court that Jason's daughter, Rene, possessed a contingent claim against the defendants in the tort case, and that Rene's annuity would start paying when Rene turned eighteen, for an estimated $7,494, 090 during her lifetime. They informed the district court that the attorney fees charged to Jason's portion of the settlement would be $1,668, 980 and to Rene's portion would be $291,565.64.

Judge Gates, who had been the trial judge in the underlying tort case, found that the compromise of Jason's claim and Rene's contingent claim was fair and reasonable. Accordingly, the district court approved the compromise, as well as the payment of attorney fees.

Three months after the settlement, Louise offered to buy Jason's parents a new house for $150,000. They preferred a cash gift, but Louise could not gift $150,000 in cash because of tax consequences. However, she did give them $30,000 and another $120,000 for a total of $150,000. She also gave $50,000 to Jason's brother, Kelly Nault, so that he could attend school to become a physical therapist. She arranged and paid for a ten-day religiouspilgrimage for Jason, which included Jason's nursing staff, Jason's family and Louise's family, to Lourdes, France, totaling $70,000 in travel expenses.

Louise housed Jason from December 1996 to May 1997. At the end of April 1997, Louise asked Wendy and Philip Nault if they could care for Jason in their home, as Louise wished to return to college to finish her degree. On May 3, 1997, Jason began to reside at his parents' house.

Louise's relationship with the Naults subsequently deteriorated. They felt that Louise was mismanaging Jason's estate because several checks to Jason's nurses had been returned for insufficient funds. In February 1998, the Naults obtained a temporary restraining order against Louise, which prevented her from taking Jason from his parents' home to visit her home on his birthday. They also brought a successful guardianship action against Louise to obtain control over Jason's person and estate.

After Louise relinquished guardianship, the Naults released Louise from all other claims. On May 11, 1998, the Naults signed a stipulated settlement agreement, in which they acknowledged the compromise of Jason's claims in the prior tort action and Louise's acceptance of the compromise on behalf of Jason, Rene and herself. They also acknowledged that the lump sum payments and annuities had been allocated to Louise, Jason and Rene. Finally, they expressly agreed not to contest the final settlement of the tort action or any other issue relating to the $17 million settlement. On June 9, 1998, the district court entered an order approving the settlement between Louise and the Naults.

As newly appointed guardians, the Naults used Jason's settlement money for the down payment on a 3, 500 square foot home for Jason, but they put title to the house in their own names, allegedly because the mortgage company would not allow them to put the house in Jason's name due to his poor credit. They also paid themselves a $4,500 monthly salary and $5,000 per month for Jason's housing.

Soon after settling with Louise, the Naults, as guardians, retained an attorney and on April 8, 1999, commenced the present action against Louise, Rolston, Mainor, Harris and the law firm of Mainor & Harris. The complaint essentially alleged that the attorneys should have recognized that they had a conflict of interest by representing both Jason and Louise, that the attorneys and Louise conspired to deprive Jason of his money and that Jason received insufficient compensation in the settlement.

The Naults settled with Rolston for $400,000. They settled with Louise for no money, in spite of the fact that they alleged that Louise had breached her fiduciary duties to her husband and conspired to obtain a larger portion of the settlement money than Jason. In the second settlement with Louise, the Naults obtained a divorce for Jason from Louise, Louise withdrew an objection she had filed to the Naults' guardianship accounting, Louise dismissed a complaint she had filed against Jason's parents and Kelly Nault to recover large amounts of money she had allegedly loaned to them and Louise renounced any claims she might have had to any money recovered in the present action.

The action proceeded to trial against Mainor and Harris. After a twelve-day trial, the jury awarded $3.25 million to Jason's estate against Mainor and...