Court Opinion

ID: 4470832
Source: CourtListenerOpinion
Date Created: 2020-01-09 17:04:52.746128+00
Date Added: 2024-06-11T15:03:10.772997
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                  No. 18-2161
                             Filed January 9, 2020

GERI DOYLE and GERI DOYLE, INC.,
     Plaintiffs-Appellants,

vs.

MARK OTTO and OTTO LAW OFFICE, PLLC,
     Defendants-Appellees.
________________________________________________________________

      Appeal from the Iowa District Court for Jasper County, Martha L. Mertz,

Judge.

      The plaintiff appeals the grant of summary judgment to an attorney on her

malpractice claims. AFFIRMED.

      Billy J. Mallory of Brick Gentry, P.C., West Des Moines, for appellants.

      Thomas M. Boes and Janice M. Thomas of Bradshaw, Fowler, Proctor &

Fairgrave, P.C., Des Moines, for appellees.

      Heard by Doyle, P.J., and Tabor and Schumacher, JJ.
                                          2

TABOR, Judge.

       Real estate brokerage owner Geri Doyle split from her business partner,

Caren DeVoe. As part of DeVoe’s buyout, Doyle signed a covenant prohibiting

her from competing in the real estate business in Jasper County for ten years.

When Doyle joined a different real estate company and began advertising

properties in Jasper County, DeVoe reminded her of the noncompete covenant.

Doyle responded by seeking a declaratory judgment that the noncompete clause

was unenforceable. Doyle also pursued malpractice claims against Mark Otto, the

attorney who drafted the covenant and alleged other tort claims against the

attorney and DeVoe.1      The district court granted Otto’s motion for summary

judgment. We uphold the grant of summary judgment but on a different ground

than embraced by the district court.

    I. Facts and Prior Proceedings

       In 2003, Doyle and DeVoe were real estate agents and broker associates

working for a company in Newton. After several years, they decided to form their

business.   They opened Doyle & DeVoe, LLC in 2005 and Doyle & DeVoe

Properties, LLC in 2010. In 2015, Doyle sold her interest in the companies to

DeVoe’s husband, Philip Clevenger. Together, the parties hired attorney Mark

Otto to draft the purchase agreement. Otto previously had represented both

parties in personal and business matters.

1Plaintiffs in this case are Geri Doyle and Geri Doyle, Inc.; we refer to them jointly
as Doyle. The defendants remaining in the case are Mark Otto and Otto Law
Office, PLLC; we refer to them as Otto. The other defendants were Philip
Clevenger, Caren DeVoe, Doyle & DeVoe Properties, LLC, and Doyle & DeVoe,
LLC; we refer to them jointly as Clevenger and Devoe.
                                          3

       The parties disagree about how contract negotiations unfolded.             Otto

asserts Doyle negotiated the terms independently with Clevenger and Devoe and

Otto merely memorialized those terms for the parties to sign. Doyle recalls she

engaged in some discussions with Clevenger and DeVoe, and further talks ensued

after they hired Otto. Doyle testified in her deposition she agreed to have Otto act

as their attorney.   She did not ask Otto to represent her alone nor did she

compensate him. But she assumed he was “going to watch over my best interest.”

She also testified the parties arrived at all the important terms by talking in person.

Otto was not present during those discussions. She said Clevenger “gave [Otto]

the terms” after she and Clevenger negotiated them.

       Otto prepared a mutual letter of intent reducing those terms to a formal

writing. In an April 20 email, he circulated the draft along with a waiver-of-conflict

form. Otto asked the parties to inform him of any changes. The first draft included

a provision that Doyle would “covenant not to compete in the business of Doyle &

DeVoe LLC for a period of ten (10) years in the Iowa Counties of Jasper,

Poweshiek, Marion, Marshall,” and some parts of Polk County. This provision

appeared under the “Consideration” heading.

       After receiving the draft, Doyle called Clevenger, and they agreed to limit

the regional restriction to Jasper County. The parties communicated this and other

changes to Otto. On April 21, Otto circulated an updated draft with the new

language setting out “a covenant not to compete in the business of Doyle & DeVoe

LLC for a period of ten (10) years in Jasper County.”

       The next day, Doyle spoke to Otto, expressing her dissatisfaction with the

length of the noncompete clause. She testified, “[H]e says, most likely if this went
                                          4

to court ever it would not hold up maybe two to three years.” She explained the

parties agreed to ten years because Clevenger and DeVoe insisted on that term

as a condition of the sale.

       Otto testified he told both parties “ten years was on the outside of what is

normal and what a court might allow.”             He thought, depending on the

circumstances, “a court might reform a ten-year covenant” because “most

covenants are two to three years” and “[d]epending on the circumstances, three to

five may be appropriate” but a decade “was on the outside of what I’ve seen or

what I’ve perceived as reasonable.”

       Despite these discussions, the parties made no further edits to the

noncompete clause. On April 23, Otto sent the parties a revised letter of intent.

Doyle read the draft and suggested no further changes. The parties all signed the

letter, which included the following language:

       This letter of intent does not constitute or create, and shall not be
       deemed to constitute or create, any legally binding or enforceable
       obligation on the part of either party to this letter of intent, no such
       obligation shall be created, except by the execution and delivery of
       the purchase agreement containing such terms and conditions of the
       proposed transaction as shall be agreed upon by the parties, and
       then only in accordance with the terms and conditions of such
       purchase agreement.

       Following the signing, Otto drafted a “Final Purchase Agreement”

incorporating the letter’s terms in almost identical language. He circulated the draft

on April 30, and the parties signed on May 1. The agreement contained this

clause: “Geri hereby gives her covenant not to compete in the business of Doyle

& DeVoe LLC for a period of ten (10) years in Jasper County.” Doyle admitted she

did not read the final draft of the purchase agreement before signing it.
                                          5

      Otto, aware of the potential conflict of interests in representing both parties

to the purchase agreement, obtained a waiver of conflict, signed by all the parties

on April 27, 2015. The waiver stated:

      The undersigned parties have each requested representation by
      Otto Law Office, PLLC in a matter involving the sale of business
      interest transaction between [Doyle] and [Clevenger and DeVoe].
      The parties have negotiated their own transaction and [Otto] is
      preparing the purchase agreement and related documents as per the
      parties’ mutual agreement of terms.                The parties hereby
      acknowledge that [Otto’s] involvement on behalf of all parties
      presents a conflict of interest. Notwithstanding the conflict of interest,
      the undersigned hereby state that they are fully informed about this
      conflict of interest, waive said conflict of interest, and consent to
      [Otto’s] representation of all parties involved in this transaction. The
      undersigned further acknowledge that this waiver is being made
      voluntarily, of the parties’ own freewill, and without threat or coercion.

      After selling her interest, Doyle worked for Clevenger and DeVoe as an

independent contractor for about eighteen months. Then Doyle joined an agency

in Polk County and began selling real estate, some of which was located in

Newton. Hearing that, DeVoe and Clevenger hired Otto to remind Doyle that part

of the consideration for the purchase agreement was that she not compete with

their business in Jasper County. Otto sent Doyle letters on December 5, 2016;

December 30, 2016; and February 17, 2017. Each letter insisted she abide by her

covenant not to compete.

      Rather than abiding, Doyle petitioned for declaratory judgment. She asked

the district court to find the noncompete clause was unenforceable (Count I) and

to reform the noncompete clause to a two-year maximum (Count II). Doyle sought

damages against Otto for negligence (Count III), breach of a contract for legal

services (Count IV), and breach of fiduciary duties (Count V.) And she sought

damages against Otto, as well as DeVoe and Clevenger for fraudulent and
                                         6

negligent misrepresentation and fraudulent concealment (Count VI), and

conspiracy and concert of action (Count VII).       Finally Doyle sought punitive

damages (Count VIII) against all the defendants.

      Otto sought summary judgment. Following a hearing, the court found the

noncompete clause was enforceable but not for ten years. The court then granted

summary judgment on all counts, finding Doyle could not prove her damages.

      Regardless of the nature of the claim, Doyle must be able to establish
      by a preponderance of the evidence that Otto’s action or a failure to
      act resulted in actual injury, loss, or damages. In view of the
      enforceability of the covenant not to compete, Doyle cannot prove an
      actual injury, loss, or damages because the contract’s noncompete
      clause bars her from competing with Defendants.

      Doyle appeals only the grant of relief to Otto.

   II. Scope and Standard of Review

      We review a summary judgment ruling for correction of errors at law.

Albaugh v. The Reserve, 930 N.W.2d 676, 682 (Iowa 2019). We will uphold the

ruling if the moving party has shown there is no genuine issue as to any material

fact and the moving party is entitled to judgment as a matter of law. Id. A “genuine

issue of material fact” exists if “the evidence is such that a reasonable jury could

return a verdict for the nonmoving party.” Fees v. Mut. Fire & Auto. Ins. Co., 490

N.W.2d 55, 57 (Iowa 1992). We consider the evidence in the light most favorable

to the nonmoving party and entertain every legitimate inference that we can

reasonably deduce from the summary-judgment record. UE Local 893/IUP v.

State, 928 N.W.2d 51, 59 (Iowa 2019).
                                         7

    III. Discussion

       Before digging into Doyle’s appellate claims, we must clarify what she is not

challenging.   Although Doyle mentions the enforceability of the noncompete

clause, she does not contest the district court’s conclusion it is enforceable for a

duration of less than ten years.2     Doyle pursues only the grant of summary

judgment on her claims against Otto. Of those, Doyle abandons the breach-of-

legal-contract and conspiracy counts.        The remaining allegations include

negligence, breach of fiduciary duties, and fraudulent misrepresentation, as well

as a request for punitive damages.

       A.      Negligence

       Negligence in legal representation means failing to use the skill, care, and

diligence commonly possessed and exercised by lawyers of ordinary ability and

capacity. See Skadburg v. Gately, 911 N.W.2d 786, 792 (Iowa 2018). The client

must show: “(1) a duty arising from the established existence of an attorney-client

relationship; (2) the attorney breached that duty; (3) the attorney’s breach was the

proximate cause of injury to the client; and (4) the client suffered actual damage,

injury, or loss.” Id. (quoting Barker v. Capotosto, 875 N.W.2d 157, 161 (Iowa

2016)). The injury must be an “actual loss” and not speculative or “the threat of

future harm.” Id. (quoting Vossoughi v. Polaschek, 859 N.W.2d 643, 650 (Iowa

2015)).

2 We do not address the proper duration for the clause because the district court
did not reach a conclusion on that issue. See Meier v. Senecaut, 641 N.W.2d 532,
537 (Iowa 2002) (“It is a fundamental doctrine of appellate review that issues must
ordinarily be both raised and decided by the district court before we will decide
them on appeal.”).
                                         8

      Although the district court granted summary judgment by finding insufficient

evidence of damages, we choose to affirm on the breach-of-duty ground. See Pitts

v. Farm Bureau Life Ins. Co., 818 N.W.2d 91, 97 (Iowa 2012) (explaining appellate

court may affirm summary judgment on any ground urged on appeal that was

raised below).   Even viewing the summary-judgment record in the light most

favorable to Doyle, we find no evidence Otto breached any duty to her. At bottom,

Doyle, DeVoe, and Clevenger communicated their agreement to Otto who

memorialized it in writing.3 When asked for advice on the enforceability of the

covenant not to compete, he told the parties that—based on his professional

experience—it was enforceable but not for a term of ten years. And, if put before

a court, the court would likely reform the contract. He estimated an enforceable

duration between two and five years.

      Otto’s opinion was consistent with existing case law.4            See, e.g.,

Rasmussen Heating and Cooling, Inc. v. Idso, 463 N.W.2d 703, 704–05 (Iowa

1990) (finding a ten-year noncompete clause was unreasonable in length, noting

3 Otto asserts his scope of representation was limited and offers the waiver of
conflict as evidence. Nothing in the waiver of conflict required the parties to
acknowledge a limitation in the duties Otto owed his clients. True, the waiver of
conflict stated “the parties have negotiated their own transaction” and Otto was
“preparing the purchase agreement and related documents as per the parties’
mutual agreement of terms.” But it waived claims based on the conflict of interest
only. It did not absolve Otto of the duty to be an attorney—for both parties. It did
not absolve him of the duty to give accurate advice. Still, as we conclude below,
when Doyle asked Otto for guidance on the enforceability of the noncompete
clause, and he explained his prediction, he was giving competent legal advice.
4 In analyzing whether a noncompete covenant is enforceable, we balance three

factors: (1) the reasonable necessity of the restriction to protect the business;
(2) the reasonableness of the restriction on the former owner’s rights; and (3) any
prejudice to the public. Sutton v. Iowa Trenchless, L.C., 808 N.W.2d 744, 749–50
(Iowa Ct. App. 2011).
                                        9

“[t]ypically, the duration of a disputed covenant ranges from two years to three

years,” and collecting cases holding the same); Phone Connection, Inc. v. Harbst,

494 N.W.2d 445, 449–50 (Iowa Ct. App. 1992) (finding a five-year covenant

unreasonably long and affirming modification to a two-year term); cf. Sutton, 808

N.W.2d at 751 (finding a seven-year noncompete term was not unreasonable

under the circumstances).

      Even after hearing Otto’s advice, both parties opted to enter the contract,

risking litigation over the noncompete clause. When Doyle petitioned to reform the

covenant, the district court did—as Otto predicted—find it enforceable but not for

ten years. Given these events, Doyle cannot generate a jury question on the

breach-of-duty element. As a matter of law, Otto’s advice-giving did not constitute

a failure to use the skill, prudence, and diligence of a reasonable attorney. See

Skadburg, 911 N.W.2d at 792.

      Nevertheless Doyle complains Otto did not sufficiently advise her before

she signed the noncompete covenant. But nothing in the record shows Doyle did

not understand the term when she signed the contract. In fact, the record evidence

is to the contrary. She is a sophisticated real estate agent who has been helping

buyers and sellers negotiate contracts for years. The noncompete covenant was

in the letter of intent through multiple drafts, which she approved, though Doyle

admitted she did not read the final purchase agreement before signing it. She

successfully negotiated the geographic limits down to just Jasper County. She

tried to negotiate a shorter noncompete term, but DeVoe and Clevenger refused

to consider less than ten years. Doyle admitted she “could have walked away from

the deal” but did not. The record evidence would support a conclusion—as a
                                          10

matter of law—that Doyle understood the contract term.5 There is no genuine

issue of material fact that Otto failed to carry out his duty as the attorney

representing the parties in the underlying contract matter.6

       B.     Breach of Fiduciary Duty

       Her claim of breach of a fiduciary duty requires Doyle to show the existence

of a fiduciary relationship and a breach of those duties causing damages. See Vos

v. Farm Bureau Life Ins. Co., 667 N.W.2d 36, 52 (Iowa 2003). Some relationships,

including that between an attorney and client “necessarily give rise to a fiduciary

relationship.” Id. (quoting Kurth v. Van Horn, 380 N.W.2d 693, 695 (Iowa 1986)).

Like Doyle’s negligence count, her fiduciary-duty claim fails on the breach element.

Otto demonstrated as a matter of law that he did not violate his fiduciary duty in

representing her interests in executing the purchase agreement.

       C.     Fraudulent Misrepresentation

       To prove Otto engaged in fraudulent misrepresentation or concealment,

Doyle had to show seven elements: (1) representation, (2) falsity, (3) materiality,

(4) scienter, (5) intent to deceive, (6) reliance, and (7) resulting injury. Lloyd v.

Drake Univ., 686 N.W.2d 225, 233 (Iowa 2004). Our supreme court has described

5 Also on appeal, Doyle claims she understood the noncompete covenant to apply
to business activities of the brokerage firm and the opening of a new brick-and-
mortar brokerage company in Jasper County, not real estate sales activity. The
district court did not decide this question, so we do not address it here. See Meier,
641 N.W.2d at 537.
6 To the extent Doyle faults Otto for a conflict of interest, she waived that claim.

Her assertion Otto did not sufficiently explain the waiver is contrary to the evidence:
she testified she had entered joint representation agreements as a real estate
agent and knew what duties an attorney would have to each client in such an
arrangement. She testified she understood her right to obtain the opinion of
another attorney but did not do so.
                                         11

this tort as “narrowly circumscribed” and imposing liability only if a person, in the

course of his or her profession, “supplies false information for the guidance of

others in their business transactions.” See Van Sickle Constr. Co. v. Wachovia

Com. Mortg., Inc., 783 N.W.2d 684, 690 (Iowa 2010).

       Doyle claims Otto supplied her false information about two matters: the

enforceability of the noncompete clause and that the purchase agreement included

all terms from the mutual letter of intent. These claims find no support in the

summary-judgment record. As discussed above, Otto provided Doyle accurate

advice about the enforceability of the noncompete covenant. And she can point to

nothing in the final transaction documents at variance from the terms she approved

during the negotiations. On this record, Doyle cannot show Otto told her anything

false to induce her to sign the contract. See Lloyd, 686 N.W.2d at 233. Thus Otto

was entitled to summary judgment on this claim.

       D.     Punitive Damages

       On her claim for punitive damages, Doyle must show by a preponderance

of clear, convincing, and satisfactory evidence that Otto acted with willful and

wanton disregard for her rights. See Iowa Code § 668A.1(1)(a) (2015). “[M]erely

objectionable conduct is insufficient to meet the standards of section 668A.1.”

Hockenberg Equip. Co. v. Hockenberg’s Equip. & Supply Co. of Des Moines, Inc.,

510 N.W.2d 153, 156 (Iowa 1993). We see no disputed facts in the record to

support a finding that Otto engaged in willful disregard of Doyle’s rights.

       The district court properly granted summary judgment on this and all other

malpractice claims against Otto.

       AFFIRMED.