Opinion ID: 2147333
Heading Depth: 1
Heading Rank: 15

Heading: Negligent Conduct

Text: In summary, McGrath North argues that it advised Bellino in accordance with Nebraska case law that provides an undefined exception to the fiduciary duty rule prohibiting corporate officers and directors from competing against the corporation they serve. The law firm asserts that it did not commit legal malpractice even though it was unsuccessful in qualifying Bellino for this exception because it cannot be liable for making an error in judgment over an unsettled point of law. The district court determined that the evidence in a light most favorable to Bellino established that he was never informed about any exception to the fiduciary duty rule and that when looking at all the evidence in a light most favorable to Bellino, reasonable minds could conclude that McGrath North committed legal malpractice in failing to inform Bellino about an exception to the rule. We conclude that McGrath North's argument concerning the undefined exception is without merit. In Anderson v. Bellino, 265 Neb. 577, 658 N.W.2d 645 (2003), we held that Bellino breached a fiduciary duty owed to Anderson and Lottery. The contract to operate keno in La Vista was a corporate opportunity that Bellino, as a director, diverted from Lottery by forming a new corporation to bid against Lottery. See id. The issue in the present case is whether McGrath North negligently advised Bellino, which advice resulted in a loss to Bellino. In a civil action for legal malpractice, a plaintiff alleging attorney negligence must prove three elements: (1) the attorney's employment, (2) the attorney's neglect of a reasonable duty, and (3) that such negligence resulted in and was the proximate cause of loss (damages) to the client. Borley Storage & Transfer Co. v. Whitted, 271 Neb. 84, 710 N.W.2d 71 (2006). The general rule regarding an attorney's duty to his or her client is that the attorney, by accepting employment to give legal advice or to render other legal services, impliedly agrees to use such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake. Baker v. Fabian, Thielen & Thielen, 254 Neb. 697, 578 N.W.2d 446 (1998). A director or corporate officer cannot acquire an interest adverse to that of the corporation while acting for the corporation or when dealing individually with third persons. Anderson v. Bellino, supra ; Anderson v. Clemens Mobile Homes, 214 Neb. 283, 333 N.W.2d 900 (1983). Our opinion in Anderson v. Clemens Mobile Homes, 214 Neb. at 288, 333 N.W.2d at 904, contains dicta stating: It has been held that although an officer or a director of a corporation is not necessarily precluded from entering into a separate business because it is in competition with the corporation, his fiduciary relationship to the corporation and its stockholders is such that if he does so he must prove by a preponderance of the evidence that he did so in good faith and did not act in such a manner as to cause or contribute to the injury or damage of the corporation, or deprive it of business; if he fails in this burden of proof, there has been a breach of that fiduciary trust or relationship. This language does not provide a defense to McGrath North. Although McGrath North asserts that it relied on this language and in good faith believed that a situation was possible in which an officer or director could compete with the corporation and not breach his or her fiduciary duty, the facts in this case clearly do not support such an argument. McGrath North claims it believed Bellino's best strategy was to be up front and honest with Anderson when bidding against Lottery for the La Vista keno contract and to give Lottery an opportunity to also bid on the contract. See brief for appellees on cross-appeal at 37. None of these actions could relieve Bellino of his fiduciary duty not to act adversely to the corporation of which he was the president, a director, and a 50-percent shareholder. McGrath North asserts that Bellino's claim for legal malpractice was based on the attorneys' failure to pursue a particular strategy. And they argue that under Nebraska law, a dispute over a choice of strategies or an error of judgment by the attorney on unsettled law is not actionable. The problem is there was no strategy to pursue. Anderson v. Clemens Mobile Homes does not set forth an undefined exception to the factual situation presented in the case at bar. A director or other corporate officer cannot acquire an interest adverse to that of the corporation while acting for the corporation or when dealing individually with third persons. Anderson v. Bellino, 265 Neb. 577, 658 N.W.2d 645 (2003); Anderson v. Clemens Mobile Homes, supra . An officer or director of a corporation occupies a fiduciary relation toward the corporation and its stockholders and should refrain from all acts inconsistent with his or her corporate duties. Electronic Development Co. v. Robson, 148 Neb. 526, 28 N.W.2d 130 (1947). In addition, this court has held that shareholders in a close corporation owe one another the same fiduciary duty as that owed by one partner to another in a partnership. Russell v. First York Say. Co., 218 Neb. 112, 352 N.W.2d 871 (1984), disapproved on other grounds, Van Pelt v. Greathouse, 219 Neb. 478, 364 N.W.2d 14 (1985). See, also, I.P. Homeowners v. Radtke, 5 Neb.App. 271, 558 N.W.2d 582 (1997) (holding that stockholders in close corporation owed fiduciary duty to corporation). Partners must exercise the utmost good faith in all their dealings with the members of the firm and must always act for the common benefit of all. Bode v. Prettyman, 149 Neb. 179, 30 N.W.2d 627 (1948). A partner has a duty to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership. Neb.Rev.Stat. § 67-424 (Reissue 2003). Accordingly, Bellino, as the president, a director, and a shareholder in a close corporation, had a duty to act in the best interests of Lottery. No justification for his conduct existed in Nebraska law, and McGrath North negligently advised Bellino to act contrary to such duty. We reject McGrath North's argument that its advice to Bellino was not negligent. The trial court was correct in refusing to find as a matter of law that McGrath North's conduct did not constitute professional negligence.