Opinion ID: 4284733
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: In November 2013, David LeRette, Jr., individually and as the owner of Master Blaster, Inc., filed a complaint against Steven H. Howard and his law firm, alleging, among other things, that Howard committed legal malpractice and breached his duty as LeRette’s attorney when he failed to advise LeRette of his conflicts of interest and when he acted adversely to LeRette’s interests. A jury trial was held on the matter in early 2017. From the evidence presented, we adduce the following set of facts. M aster Blaster’s Judgment Against A nderson In 2006, LeRette sold certain assets of his business, Master Blaster, to Johnnie Anderson. Pursuant to the purchase agreement, Anderson executed a promissory note to Master Blaster for $350,000 with 12 percent annual interest. After three payments, Anderson defaulted on the note. Master Blaster filed suit for the balance owed. During those proceedings, Master Blaster was represented by Sandra L. Maass. Anderson then filed for bankruptcy. Master Blaster’s suit against Anderson was stayed. In the bankruptcy proceeding, Master Blaster challenged the discharge of Anderson’s debt to Master Blaster. The bankruptcy court ultimately granted Master Blaster’s request after finding that omissions and misstatements in Anderson’s schedules and statements of financial affairs were inaccurate, unreliable, and constituted intentional or reckless indifference to the truth. Thereafter, the stay was lifted from Master Blaster’s suit against Anderson. In 2009, Master Blaster secured a judgment against Anderson for $470,020.39 plus interest. - 131 - Nebraska Supreme Court A dvance Sheets 300 Nebraska R eports LeRETTE v. HOWARD Cite as 300 Neb. 128 Legal M alpractice Action Against A nderson’s Bankruptcy Attorneys LeRette’s bankruptcy attorney thought Anderson’s bankruptcy attorneys may have been negligent in their representation of Anderson and suggested to LeRette that Anderson could pursue a legal malpractice claim against them in order to generate funds that could be used to satisfy his debt to Master Blaster. Based on this information, LeRette contacted Maass, who told LeRette that she thought her former classmate, Howard, might be able to help. With LeRette’s approval, Maass called Howard to discuss the matter. Howard indicated that he was interested in the case. Thereafter, Maass gave Howard’s contact information to LeRette, who then called Howard. After talking to Howard, LeRette contacted Anderson and asked him if he was interested in pursuing a legal malpractice claim against his bankruptcy attorneys. Anderson indicated that he was, and LeRette and Anderson met at a fast food restaurant to discuss it. According to LeRette, he told Anderson that he would hire the attorney. LeRette then called Howard and scheduled a meeting in Howard’s law office for May 1, 2009. Howard told LeRette to bring Anderson, which he did. At the meeting, Howard advised LeRette and Anderson that any proceeds from the suit would be used to satisfy the judgment against Anderson. Howard advised LeRette not to execute on the judgment against Anderson, because it would make the case more difficult for Howard. LeRette did not execute on the judgment. According to LeRette, Howard told him that he could not be named in the malpractice action, because malpractice suits cannot be assigned. But Howard represented that the suit would be successful and that LeRette would “get [his] money and get paid.” Howard filed the legal malpractice claim against the bankruptcy attorneys in October 2009. - 132 - Nebraska Supreme Court A dvance Sheets 300 Nebraska R eports LeRETTE v. HOWARD Cite as 300 Neb. 128 Mediation and Settlement Agreement In March 2012, a mediation of the legal malpractice suit against Anderson’s bankruptcy attorneys occurred. Howard, LeRette, and Anderson were all present. According to LeRette, he met with Howard before the mediation to discuss what settlement amounts might be acceptable. The mediation ultimately reached an impasse. Thereafter, the mediator issued a proposal in which he recommended that the parties settle for $350,000, with Anderson to receive $0, LeRette to receive $300,000, and Howard to receive $50,000 for his fees. The proposal was not accepted. On July 23, 2012, without discussing the matter with LeRette, Howard settled the legal malpractice action for $350,000. Howard deposited the settlement proceeds into his firm’s trust account and dispersed $235,964.78 to Anderson, retaining the remaining $114,035.22 in payment of his fees and expenses. Anderson did not pay LeRette, and LeRette never received any of the settlement proceeds. According to LeRette, he stopped receiving information from Anderson and Howard after the mediation. When LeRette followed up with the malpractice case, he was told that the trial was to occur on October 29, 2012. Sometime later, LeRette learned about the settlement and the payment and filed the suit against Howard and his law firm. Evidence of Damages At the trial, LeRette sought to prove that Howard’s legal malpractice and fraudulent misrepresentations caused him damages. As evidence of those damages, LeRette called a university finance professor to testify. The witness calculated what Master Blaster’s judgment against Anderson would have been worth beginning in April 2009 through February 2017. A document of his calculations was entered into evidence. According to the document, the value of Master Blaster’s judgment at the - 133 - Nebraska Supreme Court A dvance Sheets 300 Nebraska R eports LeRETTE v. HOWARD Cite as 300 Neb. 128 time of the trial was either $1,209,614 or $1,276,038, depending on whether a penalty was included. Relevant to the value of Anderson’s claim against his bankruptcy attorneys, an offer of judgment filed by Howard was admitted into evidence. In the offer, Anderson offered to accept an entry of judgment against the bankruptcy attorneys in the amount of $1 million. Jury Verdict At the conclusion of the evidence, the jury was instructed on two theories: legal malpractice and fraudulent misrepresentation. After the case was submitted, the jury returned a general verdict for LeRette and Master Blaster with damages of $775,000. Damages R educed After trial, Howard and his law firm filed a motion for JNOV, to alter or amend judgment, and for a new trial. In the motion, Howard and his firm alleged, among other things, that the judgment was not supported by sufficient evidence and that the jury awarded excessive damages. A hearing on the motion was held, and on May 5, 2017, the district court issued an order reducing the damages from $775,000 to $235,968.78, which was the amount Anderson received in the settlement. In reducing the damages to the amount that Anderson received in the settlement, the district court reasoned: There was no evidence adduced at trial that . . . Howard could have obtained a more favorable settlement for Anderson or that he performed deficiently in reaching the settlement. It is clear from the evidence at trial that Anderson was the only one with a legal claim against the bankruptcy attorneys, and he agreed to settle the case for $350,000 in which he received $235,968.78. The only damages [LeRette and Master Blaster] could have sustained, as a proximate cause of . . . Howard[’]s negligence or misrepresentations, was not seeing that LeRette [and Master Blaster] received all or part of the - 134 - Nebraska Supreme Court A dvance Sheets 300 Nebraska R eports LeRETTE v. HOWARD Cite as 300 Neb. 128 settlement proceeds received by Anderson. Under the facts presented to the jury, the amount Anderson received would equal the most [LeRette and Master Blaster] could have received as damages. The Court finds, as a matter of law, that this amount was the only damages that [LeRette and Master Blaster] are entitled [to]. Motion for Sanctions After the trial, LeRette filed a motion for sanctions, requesting that the trial court strike Howard and his law firm’s answer, award attorney fees and costs to LeRette and Master Blaster, and disgorge the attorney fees received by Howard and his law firm in the underlying legal malpractice suit. The district court overruled the motion. On appeal, LeRette and Master Blaster argue that the district court erred in overruling the motion, because the evidence shows that Howard failed to comply with discovery requests and committed fraud upon the court. LeRette and Master Blaster argue that a pattern of misconduct by Howard and his law firm warranted sanctions and that the trial court’s failure to impose sanctions constituted an abuse of discretion. ASSIGNMENTS OF ERROR LeRette and Master Blaster assign that the trial court erred in reducing the jury’s award of damages and in overruling the motion for sanctions. Howard and his law firm cross-appeal, assigning that the trial court erred in failing to dismiss LeRette and Master Blaster’s complaint for want of subject matter jurisdiction.