Watkiss & Saperstein v. Williams
| Decision Date | 26 November 1996 |
| Docket Number | No. 940294,940294 |
| Citation | 931 P.2d 840 |
| Court | Utah Supreme Court |
| Parties | 304 Utah Adv. Rep. 15 WATKISS & SAPERSTEIN, a Utah professional corporation, formerly Watkiss & Campbell, and Robert S. Campbell, Jr., Plaintiffs, Counterclaim Defendants, and Appellees, v. David R. WILLIAMS, an individual, Deanna Williams, an individual, and Intermountain Broadcasting, Inc., a Utah corporation, Defendants, Counter claimants, and Appellants. |
Glenn C. Hanni, Stuart H. Schultz, Salt Lake City, and Jacob A. Stein, Washington, DC, for plaintiffs.
R. Paul Van Dam, Glen D. Watkins, Bruce Wycoff, Salt Lake City, for defendants.
Defendants David and Deanna Williams and Intermountain Broadcasting, Inc. (Intermountain), appeal from judgments dismissing their legal malpractice counterclaims against plaintiffs Watkiss & Saperstein (formerly Watkiss & Campbell) and Robert S. Campbell, Jr. (collectively, Watkiss & Campbell). Watkiss & Campbell had represented defendants in preparing and filing a legal malpractice complaint against their District of Columbia lawyers in the United States District Court for the District of Columbia. However, the complaint was dismissed by that court on the ground that the claims were time-barred by the applicable statute of limitations.
Watkiss & Campbell subsequently filed an action in Utah against Intermountain and the Williamses, seeking unpaid attorney fees. Intermountain and the Williamses filed a counterclaim against Watkiss & Campbell for malpractice for failing to file their complaint in a timely manner. With respect to defendants' counterclaim, which is at issue in this appeal, the trial court held as a matter of law that Watkiss & Campbell was not liable for the dismissal of defendants' complaint in the District of Columbia since that dismissal was based upon a significant change in the law effectuated by a case decided in that jurisdiction after Watkiss & Campbell had filed the complaint. In addition, the trial court held that the Williamses had no standing as individuals to assert malpractice claims against plaintiffs because the only injury they alleged was to their corporation, Intermountain Broadcasting, Inc. We affirm.
David and Deanna Williams organized Intermountain Broadcasting, Inc., and were its sole shareholders. 1 In 1981, Intermountain learned that the Federal Communications Commission (FCC) was accepting applications for a license to construct and operate a television station in Salt Lake City, Utah. Intermountain decided to apply for the license and sought the assistance of Arent, Fox, Kinter, Plotkin & Kahn (Arent Fox), a District of Columbia law firm with experience in such matters. Intermountain's application included a commitment, or an "integration statement" in the vernacular of the FCC, by the Williamses as owners of Intermountain to devote full-time participation in the management of the station if awarded the broadcasting license. The FCC looked favorably on such commitments, and the inclusion of the statement in Intermountain's application would improve its chances of obtaining the license. The application, including the integration statement, was filed with the FCC on March 10, 1981.
In late 1982, while the FCC's review of applications for the television license was still pending, the Williamses learned that the FCC was also accepting applications for a license to operate a cellular radio facility in Salt Lake City. Utah Telecourier, Inc. (UTI), another corporation of which the Williamses were the sole shareholders, decided to apply.
To assist them in pursuing the cellular radio license, UTI retained the District of Columbia law firm of Bloosten & Mordkofsky. Harold Mordkofsky and his firm had previously represented another corporation of which the Williamses were the sole shareholders, Industrial Communications, which provided common carrier mobile radio facilities licensed by the FCC.
Mordkofsky knew that UTI's application for the cellular radio license would be more likely to succeed if it too contained an integration statement. However, Mordkofsky also knew of Intermountain's television application and the Williamses' commitment therein to devote their full attention to the management of the proposed television station and that the Williamses intended to divest themselves of the cellular radio business if the television license was granted. Nevertheless, on its own initiative, Bloosten & Mordkofsky included in UTI's application the Williamses' commitment to participate on a full-time basis in the management of the proposed cellular radio facility if awarded the cellular radio license.
Upon seeing the drafted application, the Williamses expressed concern about the apparent conflict between their fulltime commitment included in the cellular radio application and their full-time commitment in the television application. To allay their fears, Mordkofsky informed them that different divisions of the FCC review television and cellular radio applications and that if the FCC granted the television license, UTI could withdraw the cellular radio license. Assured by Mordkofsky's response, UTI submitted its application to the FCC.
Despite Mordkofsky's assurances, Mr. Williams was subsequently compelled to admit to the FCC the conflict between the applications. In August 1984, during a hearing before an FCC administrative law judge, Mr. Williams testified in support of Intermountain's television application. After Mr. Williams repeated his commitment to participate on a full-time basis in the station's management, a competing applicant cross-examined him about the conflicting UTI integration statement. Mr. Williams replied that he always intended the television application's commitment to have priority over the statements in the other application. That evening, Arent Fox attorneys told the Williamses that due to the exposed conflicting integration statement in the UTI application, Intermountain's television application was in "deep trouble" unless the conflict could be explained. The Williamses replied that the conflict was due to Mordkofsky's advice and that in view of their long-standing relationship with Mordkofsky, Mordkofsky would not mind explaining that he and his law firm were responsible for the inconsistency.
On November 5, 1984, the administrative law judge scheduled an additional hearing to determine whether Mr. Williams misrepresented himself or lacked candor in submitting conflicting integration statements. Arent Fox had performed additional legal work to prepare for these proceedings, for which it billed Intermountain a total of $7,235. The billing statements sent to Intermountain clearly designated the work performed as necessary to overcome the setback caused by the exposed UTI cellular radio application.
One of the Arent Fox attorneys met with Mordkofsky to determine whether he could testify during the FCC proceedings to counteract the conflict between the television and the cellular radio applications. Although Mordkofsky initially indicated that he knew nothing about the television application, he later indicated that he would testify in an attempt to resolve the inconsistency.
However, prior to the hearing in which he was to testify, Mordkofsky submitted a written statement to the FCC that failed to state that his law firm, on its own initiative, had inserted the conflicting integration statement into UTI's application. And at the hearing on January 7, 1985, Mordkofsky again declined to admit that the conflict between the television and the cellular radio applications was of his own making. Mordkofsky's testimony all but confirmed the allegations of Mr. Williams's lack of candor and misrepresentation. On May 20, 1985, the administrative law judge issued an opinion denying Intermountain's application. The judge refused to give Intermountain credit for its integration statement and assessed a demerit for lack of candor.
Intermountain appealed the decision to an FCC review board. Intermountain again beseeched Mordkofsky to explain his inclusion of the integration statement. He refused, and on December 10, 1985, the review board denied Intermountain's appeal. Intermountain initially sought further review but later withdrew its appeal in exchange for a $1 million settlement from a competing applicant who was ultimately awarded the broadcasting license.
In September 1986, following the settlement and the dismissal of Intermountain's appeal, the law firm of Watkiss & Campbell was retained to bring a malpractice action against Bloosten & Mordkofsky in a District of Columbia court. Because the Williamses expressed concern about the running of the applicable statutory limitation period for the malpractice suit, Watkiss & Campbell researched District of Columbia case law and determined that the statute of limitations for legal malpractice actions was three years, running from the date of injury rather than the date of the actionable advice. It further determined that Intermountain's injury occurred on May 20, 1985, the day the administrative law judge denied it a television broadcasting license worth $15 million. Hence, the attorneys concluded, Intermountain's complaint need only be filed by May 20, 1988.
The Williamses continued to express concern to Watkiss & Campbell that the time to file their malpractice claims might be expiring. During the spring of 1987, Watkiss & Campbell again reviewed the statute of limitations issues. It decided, as a precautionary measure, to file the complaint earlier than planned on the possibility that a court could find that the claims accrued on January 7, 1985, when Mordkofsky testified unfavorably before the FCC administrative law judge, instead of when the application for the television broadcasting license was denied on May 20, 1985. Accordingly, Watkiss & Campbell filed the complaint against Bloosten & Mordkofsky in the United States District...
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