McConwell v. FMG of Kansas City, Inc.

• Decision Date: 22 October 1993
• Docket Number: No. 66366,66366
• Citation: 18 Kan.App.2d 839,861 P.2d 830
• Parties: Edward A. McCONWELL, Appellant/Cross-Appellee, v. FMG OF KANSAS CITY, INC., and FMG of Omaha, Inc., Appellees/Cross-Appellants, and David H. McMullen, Appellee.
• Court: Kansas Court of Appeals

Page 830

861 P.2d 830

18 Kan.App.2d 839

Edward A. McCONWELL, Appellant/Cross-Appellee, v. FMG OF KANSAS CITY, INC., and FMG of Omaha, Inc.,

Appellees/Cross-Appellants,

and

David H. McMullen, Appellee.

No. 66366.

Court of Appeals of Kansas.

Oct. 22, 1993.

Review Denied Feb. 2, 1994.

Syllabus by the Court

1. To recover on a legal malpractice claim, the plaintiff/client must establish the existence of an attorney-client relationship giving rise to a duty, that the attorney breached that duty by act or omission, that the attorney's breach of duty proximately caused injury to the client, and that the client sustained actual damages.

2. While an attorney should not be judged by hindsight for not settling a case, an attorney nonetheless has a duty to keep clients informed and to consult with them regarding important strategy decisions.

3. Whether an attorney has a duty to settle a case varies with each case's unique facts.

4. An attorney is obligated to his or her client to use reasonable and ordinary care and diligence in the handling of cases; to use his or her best judgment; and to exercise that reasonable degree of learning, skill, and experience which is ordinarily possessed by other attorneys in the community. The duty of an attorney to exercise reasonable and ordinary care and discretion remains the same for all attorneys, but what constitutes negligence in a particular situation is judged by the professional standards of the particular area of the law in which the practitioner is involved.

5. Expert testimony is generally required and may be used to prove the standard of care by which the professional actions of the attorney are measured and whether the attorney deviated from the appropriate standard. Expert testimony is required with respect to a question that an ordinary person is not equipped by common knowledge and skill to judge.

6. The client asserting a malpractice claim against an attorney based upon a lost settlement opportunity theory must prove not only a breach of duty but also that the breach proximately caused damages. An element of this cause of action is proof that the client and the party against whom a claim has been asserted would have reached agreement upon a settlement in an ascertainable amount.

7. Generally, it is within the sound discretion of the trial court to determine from all the circumstances whether alleged misconduct of counsel may have influenced a verdict, and its conclusion in the matter will not be disturbed unless, under all the circumstances, it is plainly error. Remarks of counsel result in reversible error when, because of them, the parties have not had a fair trial.

8. In the absence of a basis for awarding actual damages, a claim for punitive damages must also fail.

9. The court's summary ability to permit or deny submission of a punitive damages claim, as provided by K.S.A.1992 Supp. 60-3703, is constitutional.

10. There is no vested right to punitive or exemplary damages until judgment is rendered for them, and the legislature may, at its will, restrict or deny the allowance of such damages.

Mark V. Bodine and Richmond M. Enochs of Wallace, Saunders, Austin, Brown and Enochs, Chartered, Overland Park, for appellant/cross-appellee.

Randy W. James, John C. Risjord, and Aaron N. Woods, of Risjord & James, Overland Park, for appellees/cross-appellants.

Alan P. Blinzler, Overland Park, for appellee David H. McMullen.

Before BRISCOE, C.J., RON ROGG, District Judge, Assigned, and E. NEWTON VICKERS, District Judge Retired, Assigned.

BRISCOE, Chief Justice:

Plaintiff Edward A. McConwell filed this breach of contract and quantum meruit action, seeking recovery of unpaid attorney fees he claimed were owing from defendants FMG of Kansas City, Inc., FMG of Omaha, Inc., and David H. McMullen as a result of legal services he had performed for all defendants. Defendants responded by filing separate answers and counterclaims, alleging McConwell had committed legal malpractice which caused them to be damaged in amounts in excess of $10,000. The jury returned a verdict disallowing McConwell's claim for additional fees, but allowing his retention of fees that had already been paid. The jury also returned a verdict against McConwell on defendants' legal malpractice claims and on their misappropriation and commingling of funds claims.

McConwell appeals from all adverse rulings and judgments, including the trial court's denial of his motion for summary judgment, his motion for directed verdict, and his motion for new trial. He also appeals the partial denial of his motion for judgment notwithstanding the verdict. Defendants FMG cross-appeal the court's partial granting of McConwell's motion for judgment notwithstanding the verdict on the misappropriation and commingling of funds claims and the court's denial of defendants' request to submit a punitive damage claim to the jury.

McConwell was hired by FMG in a lawsuit filed against FMG and its incorporators by Entre Computer Centers, Inc. The directors of FMG at that time were David McMullen, Gary Fox, Donald Gutekunst, and Porter Guttery. McMullen, Fox, and Guttery, along with their spouses, held 51 percent of the stock in the FMG corporations. After rejecting a contingency fee agreement, McConwell agreed to a fee of $125 per hour and a reduced hourly rate for services by others in his office. McConwell subsequently filed a separate action against Entre on behalf of his clients, and the two actions were consolidated for trial. Before the FMG/Entre trial began, a new fee agreement was approved by the FMG directors which provided that, in addition to the hourly fee, McConwell would receive a contingency fee of 40 percent of any amount recovered that exceeded the amount necessary to discharge FMG of its obligations under certain promissory notes. Whether the new fee agreement was enforceable or was the product of duress became an issue in the present case.

The FMG/Entre trial resulted in a jury verdict favorable to FMG and two of its incorporators, McMullen and Fox, on their counterclaims in the amount of $1 million actual damages for breach of contract and $4 million actual and punitive damages for fraud. The case was appealed to the United States Court of Appeals, Fourth Circuit.

While the case was pending on appeal before the Fourth Circuit, James Quarles, an attorney for Entre, offered to settle the case for $1.3 million. The offer was made in November 1986 when counsel appeared to orally argue the appeal. The settlement was not accepted. McConwell and his associate Clay Dickey testified they immediately conveyed this offer to McMullen. McMullen and Guttery stated the offer was never conveyed to them. Fox and Gutekunst testified they knew of the offer. Quarles testified that, after the initial offer, there was no contact from McConwell's office in an attempt to settle the case. Quarles also testified that he did not inform McConwell that the $1.3 million offer was a final offer. He further testified that, had McConwell counteroffered, Quarles would have reported the offer to Entre.

Wesley Howell, another Entre attorney, testified that he made what was referred to as a "global" offer to McConwell on behalf of Entre in December 1986. By this global offer, Entre offered $2.4 to $2.7 million to settle not only the FMG litigation but also two cases McConwell had filed against Entre on behalf of other clients. As an additional part of the settlement proposal, McConwell was to agree he would not sue Entre on behalf of other claimants or, in the alternative, he was to agree to be retained by Entre for a year or two. If the offer was accepted, McConwell and his clients were to be responsible for determining how the settlement amount would be divided. This offer was also rejected. McConwell testified the offer was immediately rejected because of what he believed were unethical conditions imposed by the offer. Defendants assert this was a bona fide offer to settle the FMG litigation for a sum certain. McConwell states these discussions were no more than general conversations regarding settlement, which referenced conditions that were totally unacceptable. Howell testified that he did not recall any demands or counteroffers on behalf of the FMG litigants, except maybe a comment by McConwell that the case could be settled for an amount between $3-4 million.

In May 1987, Howell received authority from Entre to make a unilateral (non-global) settlement offer to the FMG litigants. On June 4, 1987, at 10:30 a.m., Howell contacted McConwell and offered $2.4 million to settle the FMG litigation. McConwell testified that Howell stated he might be able to obtain more, perhaps up to $2.7 million. Howell denied indicating to McConwell that Entre was willing to offer significantly more, although he conceded there may have been an indication that a small amount in excess of the $2.4 million was available. Howell testified that McConwell stated something like, " 'Oh, that won't do it but I will talk to my folks and get back to you.' " McConwell attempted to contact McMullen to convey this offer, but was unable to speak with him because he was in Texas.

At 1:00 p.m. on June 4, 1987, McConwell returned from lunch and received notification from the Fourth Circuit that the court had reversed the $4 million fraud judgment, leaving the approximately $1 million breach of contract judgment intact (Entre Computer Centers v. FMG of Kansas City, Inc., 819 F.2d 1279 [4th Cir.1987].

In the present action, McConwell sued FMG and McMullen for attorney fees, and they responded with legal malpractice claims. The trial court refused to submit defendants' claims for punitive damages against McConwell to the jury. The jury returned a verdict against McConwell on his claim for unpaid attorney fees but allowed him to keep those fees already received, awarded FMG $511,000 and McMullen $30,000 on their malpractice claims against McConwell for failure...