Spur Products Corp. v. Stoel Rives Llp, 30433.

• Decision Date: 30 September 2005
• Docket Number: No. 30433.,30433.
• Citation: 142 Idaho 41,122 P.3d 300
• Parties: SPUR PRODUCTS CORPORATION, an Idaho corporation, Eagle Data Works, Inc., an Idaho corporation; and Talon Enterprises, Inc., an Idaho corporation, Plaintiffs-Appellants, v. STOEL RIVES LLP, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 300

122 P.3d 300

142 Idaho 41

SPUR PRODUCTS CORPORATION, an Idaho corporation, Eagle Data Works, Inc., an Idaho corporation; and Talon Enterprises, Inc., an Idaho corporation, Plaintiffs-Appellants, v. STOEL RIVES LLP, Defendant-Respondent.

No. 30433.

Supreme Court of Idaho, Boise, February 2005 Term.

September 30, 2005.

Ellis, Brown & Sheils, Chartered, Boise and Strother Law Office, Boise for appellants. Jeffrey A. Strother argued.

Holland & Hart, LLP, Boise, for respondent. Amanda K. Brailsford argued.

SCHROEDER, Chief Justice.

This is an action brought by Spur Products Corp., Eagle Dataworks, Inc. and Talon Enterprises, Inc. (collectively Spur) against Stoel Rives, LLP (Stoel) for alleged improper conduct during Stoel's representation of Spur. The parties filed cross-motions for summary judgment. The district court denied Spur's motion and granted summary judgment for Stoel. Spur appealed.

I. FACTUAL AND PROCEDURAL BACKGROUND

Stoel represented Spur in a dispute against IKON Office Solutions, Inc. (IKON). Spur sued IKON for alleged breach of an agreement to exclusively distribute and market its products and for misappropriation of proprietary, confidential and trade secret information. On August 24, 1999, Stoel and Spur entered into a Letter Agreement which was intended to memorialize an oral agreement made between Stoel and Spur in early August 1999 regarding outstanding debts that Spur owed Stoel, primarily fees and costs incurred during the course of Stoel's representation of Spur in the IKON dispute. The essence of the Letter Agreement was that Stoel would withdraw from representing Spur unless Spur accepted a settlement from IKON and paid all outstanding debts, by the completion of the IKON dispute mediation conference. Spur owed Stoel approximately $243,600.

Prior to offering the Letter Agreement, counsel for Spur in the IKON dispute consulted with Peter Jarvis (Jarvis), a Portland-based Stoel attorney, regarding Stoel's ethical obligations and potential withdrawal as counsel from the IKON dispute. Jarvis sent out two intra-firm memoranda related to Spur's failure to pay its outstanding legal debts and Stoel's potential withdrawal. The first was dated August 3, 1999, and the second, August 24, 1999. The memoranda were circulated to Stoel's Professional Response Practice Group. Brent Giauque (Giauque) was among the committee members to whom Jarvis sent the memoranda. Giauque was a Stoel attorney in the firm's Salt Lake City office, who at one time had represented IKON's wholly-owned subsidiary BCS Integration, Inc. (BCS). Giauque had previously signed an affidavit that he would not have any involvement with the Spur/IKON dispute as part of Stoel's traditional conflicts screening process. Both Spur and IKON were aware of Giauque's potential conflict and consented to Stoel's representation in the IKON dispute on the condition no confidential information would be passed to either party. Stoel did not inform Spur of the communication sent to Giauque prior to offering the Letter Agreement.

Stoel represented Spur during mediation, and on August 26, 1999, Spur accepted IKON's $3,500,000 settlement offer. Nearly eighteen months later, Spur Products Corp. filed suit against Stoel to recover damages for alleged improper conduct by Stoel in its representation of Spur. Spur Products Corp. alleged two negligence claims and requested an amount in excess of $6,300,000 in damages. Eagle Dataworks, Inc. and Talon Enterprises, Inc. subsequently filed identical complaints that were consolidated with Spur Products Corp.'s initial complaint.

In or around April 2001 Spur sought to have Jarvis deposed. Stoel objected on the basis that Jarvis' testimony was privileged as attorney-client communications. Stoel persisted in this objection until November 2002 when it agreed to allow Jarvis to be deposed. Jarvis was deposed on February 4, 2003. Two weeks prior to his deposition Stoel sent copies of Jarvis' two August memoranda to Spur. Subsequent to receiving these documents and taking Jarvis' deposition, Spur filed a second motion to amend its complaint, alleging additional claims for negligence on the basis that Jarvis had revealed confidential client information, namely, Spur's settlement posture to Giauque and had failed to inform Spur of this breach. The district court denied Spur's second motion to amend its complaint.

The district court denied Spur's motion for partial summary judgment and granted Stoel's cross-motion for summary judgment. Spur appeals, arguing that it was error to deny its motion to file a second amended complaint and to grant Stoel's motion for summary judgment.

II. STANDARD OF REVIEW

"The denial of a plaintiff's motion to amend a complaint to add another cause of action is governed by an abuse of discretion standard of review." Estate of Becker v. Callahan, 140 Idaho 522, 527, 96 P.3d 623, 628 (2004) (quoting Thomas v. Med. Ctr. Physicians, P.A., 138 Idaho 200, 210, 61 P.3d 557, 567 (2002)). In reviewing an exercise of discretion, this Court must consider: "(1) whether the court correctly perceived that the issue was one of discretion; (2) whether the court acted within the outer boundaries of its discretion and consistently with the legal standards applicable to the specific choices available to it; and (3) whether it reached its decision by an exercise of reason." Id.

Review by the Supreme Court of an entry of summary judgment is the same as that required by the district court when ruling on the motion. Friel v. Boise City Hous. Auth., 126 Idaho 484, 485, 887 P.2d 29, 30 (1994). A district court determines a motion for summary judgment based on whether there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. I.R.C.P. 56(c)(2004); id. In determining whether there are genuine issues of material fact the court reviews all evidence in the light most favorable to the non-moving party. Id. (citations omitted). If the evidence shows no disputed issues of material fact, what remains is a question of law over which the appellate court exercises free review. Id. (citation omitted).

III. THE DISTRICT COURT ABUSED ITS DISCRETION WHEN IT DENIED SPUR'S MOTION TO FILE A SECOND AMENDED COMPLAINT

The district court denied Spur's motion on the grounds that there was insufficient evidence to support the additional claim, the added claim would change the focus of the lawsuit, and Stoel would suffer undue prejudice in the amendment.

I.R.C.P. 15(a) provides:

A party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, the party may so amend it at any time within twenty (20) days after it is served. Otherwise a party may amend a pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires, and the court may make such order for the payment of costs as it deems proper. A party shall plead in response to an amended pleading within the time remaining for response to the original pleading or within ten (10) days after service of the amended pleading, whichever period may be the longer, unless the court otherwise orders.

I.R.C.P. 15(a)(2004)(emphasis added).

In considering whether to grant a motion for leave to amend, a trial court may consider whether the amended pleading sets out a valid claim, whether the opposing party would be prejudiced by any undue delay, or whether the opposing party has an available defense to the newly added claim. Black Canyon Racquetball Club, Inc. v. Idaho First Nat'l Bank, N.A., 119 Idaho 171, 175, 804 P.2d 900, 904 (1991) (citation omitted). The court may not, however, weigh the sufficiency of the evidence related to the additional claim. Becker, 140 Idaho at 528, 96 P.3d at 628; Thomas v. Med. Ctr. Physicians, P.A., 138 Idaho 200, 210, 61 P.3d 557, 567 (2002); Carl H. Christensen Family Trust v. Christensen, 133 Idaho 866, 871, 993 P.2d 1197, 1202 (1999) (court may not consider the sufficiency of evidence in determining whether to allow a party to amend because that is more properly an issue for summary judgment state). Timeliness of a motion for leave to amend is not decisive, but it "is important in view of. . . factors such as undue delay, bad faith, and prejudice to the opponent." Christensen, 133 Idaho at 871, 993 P.2d at 1202 (citation omitted).

Spur sought to amend its complaint to include a claim for negligence based on Stoel's alleged breach of confidentiality in disclosing Spur's settlement posture to Giauque prior to mediation and prior to offering the Letter Agreement. Becker addressed the elements necessary to assert a claim for attorney malpractice or attorney negligence. A plaintiff must show:

(1) the creation of an attorney-client relationship; (2) the existence of a duty on the part of the lawyer; (3) the breach of the duty or the standard of care by the lawyer; and (4) that the failure to perform the duty was a proximate cause of the damages suffered by the client.

Becker, 140 Idaho at 526, 96 P.3d at 627. Spur alleged that the parties maintained an attorney-client relationship; Stoel had a duty to maintain all attorney-client communications as confidential; Jarvis delivered a copy of Spur's Letter Agreement to Giauque, a Stoel attorney who was representing a wholly owned subsidiary of IKON; Stoel did not disclose this communication to Spur; and, as a proximate result of this negligent action Spur was deprived of its opportunity to enter into arbitration and thereby incurred damages. In support of its motion Spur submitted copies of Giauque's affidavit, Jarvis' circulated memoranda, and the testimony of Dennis Hicks, Spur's President, indicating he would not have agreed to the Letter Agreement had he known of Stoel's inadvertent...