SKMDV Holdings, Inc. v. Green Jacobson, P.C.

Decision Date12 April 2016
Docket NumberED 102493
Citation494 S.W.3d 537
Parties SKMDV Holdings, Inc., Respondent, v. Green Jacobson, P.C., Appellant.
CourtMissouri Court of Appeals

FOR APPELLANT: Joseph F. Yeckel, 7710 Carondelet Ave., Suite 208, St. Louis, Missouri 63105, Michael Gross, 231 South Bemiston Ave., Suite 250, St. Louis, Missouri 63105.

FOR RESPONDENT: A. Elizabeth Blackwell, Jan Paul Miller, One U.S. Bank Plaza, St. Louis, Missouri 63101.

ROY L. RICHTER
, Judge

Green Jacobson, P.C. (Appellant) appeals from the trial court's judgment on a jury verdict, finding Appellant negligent and liable for the difference between the amount of money the jury believed Appellant's former client, DataVerify, should have received under a contract, and the amount it did receive, based on an admitted error in drafting the contract. We affirm in part and reverse in part.

I. Background

Appellant, a law firm, represented DataVerify, a mortgage fraud detection company, in its sale to Credit Bureau of Columbus, or CBC. Prior to Appellant's engagement, however, in August 2007, DataVerify and CBC signed a letter of intent memorializing the terms of the sale in the “asset purchase agreement,” which provided for a first contingent payment of up to $12 million if certain conditions were met, and a second contingent payment that included a “revenue multiplier” in the formula calculating it.

Through the representation of Appellant, and specifically, Jonathan Andres, an attorney at Appellant's firm, DataVerify signed the final asset purchase agreement, which did not contain any provision for the revenue multiplier in the calculation for the second contingent payment. During trial, Mr. Andres testified that he expressed a view to CBC's attorney that the revenue multiplier needed to be in the contract, but CBC's attorney convinced him that it was adequately covered based on its presence in a corresponding exhibit to the contract. Mr. Andres further testified that he assured DataVerify that the asset purchase agreement would require the use of a revenue multiplier as part of the second contingent payment. Mr. Andres agreed that it had been reasonable for DataVerify to rely on his opinion about the contract at that time.

When the second contingent payment came due three years after the asset purchase agreement was executed, DataVerify requested that CBC pay the $42.1 million it believed was due based on the revenue multiplier. CBC's new president and CEO, Jonathan Price, however, denied that CBC owed DataVerify anything, pointing to their agreement's second contingent payment provision. Moreover, when DataVerify looked for an explanation and advice, Mr. Andres stated that DataVerify agreed to eliminate the revenue multiplier from the deal, and thus, was entitled to nothing under the contract.

DataVerify retained new counsel, Thompson Coburn, to assist in the mitigation of the $42.1 million loss. Given that Mr. Andres was then claiming DataVerify had agreed to eliminate the multiplier from the asset purchase agreement, DataVerify decided to accept CBC's offer to make a second contingent payment of $25 million to DataVerify, rather than take a chance at reforming the contract. Thereafter, DataVerify filed suit against Mr. Andres's firm1 , Appellant, to recover the difference between the amount it should have been paid under the asset purchase agreement—$42.1 million—and the $25 million it was able to recover from CBC. Following a jury trial, the trial court entered judgment on the jury's verdict and ordered Appellant to pay DataVerify $10.5 million—the difference between the approximately $35 million CBC conceded it would have owed DataVerify if the asset purchase agreement had properly included the revenue multiplier, and the $25 million CBC actually paid DataVerify.2

Thereafter, the trial court denied Appellant's motion for judgment notwithstanding the verdict, or, in the alternative, for a new trial. The trial court later filed an amended judgment, specifically ordering that “interest shall accrue under RSMo. § 408.040

on the Judgment at the per annum interest rate of 5.25%.” This appeal follows.

II. Discussion
A. Submissibility of the case: Points I, II, IV, and V

Appellant raises seven points on appeal. First we will discuss four of Appellant's points which contend that DataVerify, a malpractice plaintiff, cannot recover for its attorney's malpractice unless it proves it could not have further mitigated its damages through subsequent litigation, and likewise, Appellant alleges trial court error in rulings regarding its affirmative defense for submissibility of its case. Point I alleges the trial court erred in denying Appellant's motions for a directed verdict and for judgment notwithstanding the verdict because DataVerify failed to make a submissible case on the element of proximate causation, in that (1) the evidence established that DataVerify elected to settle its claim for reformation of the asset purchase agreement at a substantial discount; (2) through that settlement, DataVerify voluntarily introduced a factor of speculation into the malpractice action in which it sought to recover that discount from Appellant; (3) to make a submissible showing on the element of causation, DataVerify was required to show (a) what would have happened if its reformation claim had been tried rather than settled and (b) that in light of that anticipated result, the settlement was necessary to mitigate damages; and (4) DataVerify failed to adduce evidence sufficient to satisfy that submissibility requirement.

Similar to the issue of whether DataVerify could prove proximate causation in Point I, Appellant's second point relates to the submissibility of DataVerify's case. Appellant alleges in Point II that the trial court erred in denying Appellant's motions for a directed verdict and for judgment notwithstanding the verdict because DataVerify failed to make a submissible case on the element of proximate causation, in that (1) DataVerify's President and CEO, Steve Halper, and his “right hand guy” and “head computer guru” with ownership in DataVerify, Mike Moseler, had negotiated the deal between DataVerify and CBC and demanded and obtained the revenue multiplier-based earn-out formula specified in the letter of intent; (2) they both testified that they had read the asset purchase agreement prior to signing it; (3) the consideration clause of the agreement was appropriately one and one-half pages; (4) Mr. Halper and Mr. Moseler both signed the agreement despite the patent omission of the revenue multiplier from that contingent payment formula; and (5) as a matter of law, DataVerify's own negligence thus was the intervening proximate cause of the damage.

In Point IV, Appellant alleges that, in the event this Court concludes that DataVerify presented a submissible case, the trial court erred in overruling Appellant's objections to and in submitting the verdict director (Instruction No. 6) because the submission of the issue of proximate cause did not follow the substantive law. Similar to its first point, Appellant reasons that (1) DataVerify settled its claim against CBC to reform the asset purchase agreement at a substantial discount; (2) through that settlement, DataVerify voluntarily introduced a factor of speculation into the malpractice action by which it sought to recover that discount from Appellant; (3) due to that speculation, Missouri law required DataVerify to establish as part of its proof of causation (a) what would have happened if the reformation claim had been tried rather than settled and (b) that in light of that anticipated result, the settlement was necessary to mitigate damages; (4) the verdict director did not hypothesize either of these essential facts, and thus, did not require the jury to find that DataVerify would have lost its reformation action and that its discounted settlement was necessary to mitigate damages; and (5) the verdict director thus assumed that DataVerify would have lost the reformation action and that it was necessary for DataVerify to settle the reformation claim to mitigate its damages, thereby misstating the substantive law.

Additionally, Appellant's Point V contends that, in the event this Court concludes that DataVerify presented a submissible case, the trial court erred in refusing to give an affirmative converse instruction submitting the issue of whether DataVerify would have prevailed in an action to reform the asset purchase agreement, in that (1) to prove Appellant's negligence proximately caused its alleged damages, DataVerify was required to show (a) that it would not have prevailed if the reformation action was necessary to mitigate damages; (2) the verdict director did not hypothesize this ultimate issue and thus did not require the jury to find that it was necessary for DataVerify to settle the reformation claim at a substantial discount to mitigate its damages; (3) Appellant contested the necessity of the settlement and presented substantial evidence that DataVerify would have prevailed if it had tried the reformation action; (4) an affirmative converse instruction submitting the issue of the necessity of the settlement was proper because the verdict director assumed as true or omitted that disputed ultimate issue and permitted the jury to return a verdict in favor of DataVerify without determining whether the company's settlement was the intervening cause of its alleged damages.

1. Standard of Review

The standard for reviewing the denial of Appellant's motions for a directed verdict and for judgment notwithstanding the verdict based on determining whether DataVerify presented a submissible case depends on whether legal and substantial evidence supports each fact essential to liability. Dhyne v. State Farm Fire & Cas. Co., 188 S.W.3d 454, 456 (Mo. banc 2006)

. Substantial evidence is...

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