Opinion ID: 2147333
Heading Depth: 1
Heading Rank: 19

Heading: belling's appeal: award of damages

Text: The jury found that the negligence of Bellino's attorneys caused him $1.6 million in damages. The district court in part sustained McGrath North's motion for judgment notwithstanding the verdict, concluded that the evidence did not support the $1.6 million verdict, and reduced the award of damages to $229,036.40, the amount Bellino paid for legal and accounting services in defending the Anderson lawsuit. The court reasoned that Bellino's goals were to terminate his business relationship with Anderson and retain the La Vista keno contract. In order to attain his goals, the court found, Bellino would have been required to buy out Anderson, even if the advice of the attorneys had not been negligent. It therefore concluded that the only loss to Bellino proximately caused by the negligence of McGrath North was the lawsuit brought against him by Anderson. Bellino appealed and has assigned the reduction of damages as error. In reviewing the district court's grant of judgment notwithstanding the jury verdict, we are guided by well-established principles. To sustain a motion for judgment notwithstanding the verdict, the court resolves the controversy as a matter of law and may do so only when the facts are such that reasonable minds can draw but one conclusion. Munstermann v. Alegent Health, 271 Neb. 834, 716 N.W.2d 73 (2006). The party against whom the motion is directed is entitled to the benefit of all proper inferences deducible from the relevant evidence. Id. The jury was instructed that the general measure of damages in a legal malpractice action is the amount of loss actually sustained by the claimant as a proximate result of the attorney's conduct. See Eno v. Watkins, 229 Neb. 855, 429 N.W.2d 371 (1988). A proximate cause is a cause that produces a result in a natural and continuous sequence and without which the result would not have occurred. Smith v. Colorado Organ Recovery Sys., 269 Neb. 578, 694 N.W.2d 610 (2005). In early 1998, Bellino sought to end his business relationship with Anderson. Each of them was a 50-percent shareholder in Lottery and an officer and a director. Lottery had a keno contract with La Vista that was set to expire July 31, 1998. Bellino wanted to continue in the keno business without Anderson. The evidence, considered in a light most favorable to Bellino, indicated that Bellino was not properly informed of his fiduciary duties as the president, a director, and a shareholder of Lottery, a close corporation. Further evidence indicated he was not properly informed that a constructive trust could result. Erroneous legal advice that causes the client to breach a fiduciary duty to such a corporation can be devastating to the client. Bellino was forced to remain in business with Anderson, via the constructive trust, under a 10-year keno contract with La Vista. Bellino presented expert testimony at trial concerning the damages proximately caused by the negligent advice of McGrath North. Panzer, a certified public accountant, testified that Bellino settled with Anderson in July 2004 to end the constructive trust, separate from Anderson, and maintain the keno operation. Panzer testified that the monetary loss sustained by Bellino due to the legal advice given by his attorneys exceeded $3.1 million. This sum included: legal and accounting fees incurred in the Anderson litigation$176,373.48 and $52,662.92, respectively; settlement payments to Anderson totaling $2,427,729.76; interest in the amount of $190,182.60 on personal loans taken by Bellino for the settlement payments; and the lost economic benefit, calculated at $325,773.27, of money Bellino was forced to use to settle with Anderson. In an action for legal malpractice, the plaintiff must establish that but for the alleged negligence of the attorney, the plaintiff would have obtained a more favorable judgment or settlement. Viner v. Sweet, 30 Cal.4th 1232, 70 P.3d 1046, 135 Cal.Rptr.2d 629 (2003). See Bowers v. Dougherty, 260 Neb. 74, 615 N.W.2d 449 (2000). The jury found that Bellino had sustained damages in the amount of $1.6 million as a proximate result of McGrath North's negligent representation. Sufficient evidence was presented to the jury to support a finding that these damages included the cost to Bellino as a result of the Anderson settlement in July 2004. In its motion for judgment notwithstanding the verdict, McGrath North argued that the jury's verdict was based on the difference between (1) the amount ($1.5 million) for which Anderson had offered to settled the case after the trial and before this court's ruling in Anderson v. Bellino, 265 Neb. 577, 658 N.W.2d 645 (2003), and (2) the expenses Bellino actually spent to settle the case after the appeal, which amount McGrath North contended was approximately $3.1 million. McGrath North argued that the jury's verdict was improper because it was based on Bellino's own decision to reject Anderson's settlement offer. The district court determined that at some point, regardless of McGrath North's negligent advice, Bellino would have been required to buy out Anderson in order to terminate their business relationship and retain the keno contract. Because a buyout was inevitable, the court found that the payment to Anderson could not be proximately caused by McGrath North's negligence. The court determined that the difference in the settlement price before and after the litigation was concluded was not proximately caused by McGrath North because Bellino made the ultimate decision to reject the first offer. We disagree. Before the litigation in Anderson v. Bellino, supra , was concluded, Anderson offered to settle for $1.5 million. McGrath North advised Bellino that he could do much better on appeal. The issue is whether the legal advice given to Bellino increased the cost of severing his business relationship with Anderson. McGrath North represented Bellino throughout the litigation with Anderson. Before trial, Bellino's attorneys told Bellino he would win on the points of law. After Bellino lost at trial, he was assured by counsel that the judge's ruling was wrong. There was evidence that in December 2002 (i.e., before this court affirmed the judgment in Anderson v. Bellino, supra ), Anderson offered to settle the litigation and yield his interest in the keno operation to Bellino for $1.5 million. Bellino was told by his legal counsel that his chances for a successful appeal of the district court's decision were favorable and that the appeal would result in a better outcome than a $1.5 million settlement. Panzer, who participated in discussions concerning a possible settlement, said that counsel persistently told Bellino that after the appeal was decided, Bellino and Anderson would split the baby, but there was no suggestion that Bellino would be required to keep paying Anderson from Keno's profits for the entirety of the La Vista contract. Bellino said that he continued to move forward with his appeal to this court due to his lawyers' advice. That advice concerning the appeal was wrong. The law in Nebraska is clear that a person who is an officer, director, and shareholder of a closely held corporation has a fiduciary duty not to act adversely to that corporation. Given the facts in this case, it was inevitable that a court would determine Bellino had breached his fiduciary duty to Lottery. Although the decision whether to settle the controversy is ultimately left to the client, see Wood v. McGrath, North, 256 Neb. 109, 589 N.W.2d 103 (1999), evidence showed that Bellino relied greatly on the ongoing legal advice of McGrath North that he would prevail on appeal when he chose to forgo settlement and wait for the appeals process to run its course. We have recognized that `litigants rely heavily on the professional advice of counsel when they decide whether to accept or reject offers of settlement, and we [have] insist[ed] that the lawyers of our state advise clients with respect to settlements with the same skill, knowledge, and diligence with which they pursue all other legal tasks.' McWhirt v. Heavey, 250 Neb. 536, 546, 550 N.W.2d 327, 334 (1996). In Streber v. Hunter, 221 F.3d 701 (5th Cir.2000), attorneys incorrectly advised their client on how to treat a large sum of money for tax purposes, and the Internal Revenue Service issued a notice of deficiency against the client. Evidence indicated that the Internal Revenue Service would have settled the case but that the attorneys insisted the client would win at trial. Based on that advice, the client did not settle. The client lost at the tax trial, and the judgment against her was substantially more than the settlement would have been. The client brought an action for legal malpractice against the attorneys. Following a trial, the jury returned a verdict in favor of the client. The largest portion of damages represented the difference between the amount of money the client would have paid the Internal Revenue Service had the attorneys advised her correctly and the amount she eventually had to pay. The attorneys appealed. The U.S. Court of Appeals for the Fifth Circuit considered whether the evidence supported the jury's determination that the lawyers' overall conduct, particularly their advice that the client would win at the tax trial and that therefore, she should not settle, fell below the standard of care. Expert testimony had been presented that the attorneys' tax advice had been wrong from the start and that the attorneys failed to adequately inform the client of the apparent outcome of the tax case. The client testified that she would have settled but did not because the attorneys told her she would be successful in the tax trial. The court found that based on the facts and in light of the applicable tax law, the attorneys performed negligently by failing to advise the client to settle. The evidence, reviewed in a light favorable to the client, was sufficient to sustain the jury's damage award. In the present case, Bellino's attorneys advised him to set up Keno and bid against Lottery for the La Vista contract. Moore, one of Bellino's experts, testified that this advice caused Bellino to become involved in litigation where there was virtually no chance of him being successful. Bellino continued to rely on his attorneys' advice throughout the resulting litigation. Moore testified that McGrath North fell below the standard of care by not advising Bellino that he was likely to lose the case. The jury could reasonably have inferred that the failure of counsel to properly advise Bellino of the apparent outcome of his appeal was a proximate cause of his decision not to pay the $1.5 million which Anderson requested to settle the matter. The district court found that Bellino would inevitably have to buy out Anderson but did not consider that the price of such buyout could have been increased as a result of McGrath North's negligent representation. The jury could reasonably have concluded, based on the evidence, that it cost Bellino more to purchase Anderson's interest after the litigation and judgment against Bellino than before such judgment. The jury could reasonably have determined that Anderson's settlement offer of $1.5 million established a baseline number for what it would have cost Bellino to buy out Anderson. After Bellino did not accept Anderson's offer, Bellino's appeal continued until this court affirmed the judgment in favor of Anderson. Friedman, one of Bellino's experts, testified that Bellino suffered terribly monetarily after the [Nebraska] Supreme Court rendered its opinion in Anderson v. Bellino, 265 Neb. 577, 658 N.W.2d 645 (2003). The constructive trust was imposed, and Bellino was locked into the existing arrangement for several more years. The evidence, viewed favorably to Bellino, indicated that following the conclusion of the appeal, it cost Bellino in excess of $3.1 million to attain his goal of separating from Anderson and continuing the keno operation. The settlement with Anderson satisfied all obligations and sums owed to Anderson as a result of the constructive trust, including all profits currently due Anderson or to which he would be entitled in the future under the La Vista keno contract. The jury could reasonably have concluded that but for the negligence of McGrath North, Bellino would have paid substantially less to attain his stated goals. On its motion for judgment notwithstanding the verdict, McGrath North was deemed to have admitted as true all the relevant evidence favorable to Bellino and Bellino was entitled to the benefit of all proper inferences deducible from the relevant evidence. See Munstermann v. Alegent Health, 271 Neb. 834, 716 N.W.2d 73 (2006). The amount of damages awarded by the jury was supported by the evidence, bore a reasonable relationship to the elements of the damages proved, and was not such that reasonable minds could draw but one conclusion on the issue of damages. See Genthon v. Kratville, 270 Neb. 74, 701 N.W.2d 334 (2005). We conclude that the district court erred in sustaining the motion for judgment notwithstanding the verdict and in reducing the damages to $229,036.40.