No. 89-114
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
DALE KINNIBURGH, KEITH KISER,
ROBERT J. WAGAR, and B.B. & K., INC.,
Plaintiffs and Appellants,
DONALD A. GARRITY, and GARRITY,
KEEGAN & BROWN, a law firm and
partnership,
Defendants and Respondents.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis & Clark,
The Honorable Thomas B. Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Richard P. DeJana, Kalispell, Montana
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C) r2 For Respondent:
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LJkJ Cresap S. McCracken; Church, Harris, Johnson &
-.I2.; Williams; Great Falls, Montana
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Submitted on Briefs: July 13, 1990
Decided: September 6, 1990
*
Justice R. C. McDonough delivered the Opinion of the Court.
The plaintiffs appeal the judgment of the Montana First
Judicial ~istrictCourt, Lewis and Clark County, sitting without
a jury, entering judgment in favor of the defendants on the
plaintiffs' claim of legal malpractice. The claim arises from
their earlier suit against Burlington Northern (BN) that involved
a series of timber contracts between the plaintiffs and BN in which
the defendants here represented the plaintiffs. The District
Court entered judgment in favor of the defendants on the grounds
that plaintiffs1 underlying suit did not state a claim against BN
and therefore the admitted negligence of Garrity did not
proximately cause any damage to the plaintiffs. We affirm.
The plaintiffs attempt to frame several issues as the basis
of appeal. We consolidate these issues into the following:
(1) Did the District Court err in holding that the
plaintiffs1 original complaint against BN failed to state a claim
for relief?
Determination of this issue will enable us to dispose of the
principal issue on appeal:
(2) Did the District Court err in holding that the admitted
negligence of Garrity and the alleged misrepresentations of Garrity
concerning the plaintiffs1 chances of success were not the
proximate cause of any damage claimed by the plaintiffs?
The plaintiffs are independent businessmen who routinely
entered into contracts with BN to harvest timber on BN lands, build
roads to accommodate such harvest, and haul logs to lumber mills.
2
Contracts were for individual logging jobs or related operations.
The contracts were let to bid or negotiated depending upon what BN
thought was best for its interests on a particular job.
In 1979, the plaintiffs were part of a group of independent
logging contractors who, in apparent dissatisfaction with BN,
formed an informal organization and attempted to pressure BN into
changing some of its contracting procedures. The group met with
BN to discuss these issues, however, nothing much happened.
The plaintiffs contend that in retaliation for this
organization effort they were not offered further contracts by BN.
They hired the defendant Garrity to sue BN in federal court
primarily on theories of breach of the implied covenant of good
faith and fair dealing in the employment relationship, deprivation
of civil rights under 42 U.S.C. 1983, and interference with
contract.
Garrity took the case on a contingent fee basis and filed suit
on behalf of the plaintiffs on January 25, 1982. At the outset
he thought that the civil rights claim had the best chance of
success. After this Court's decision in Gates v. Life of Montana
(1982), 638 P.2d 1063, giving at-will employees expanded employment
protections, Garrity thought this theory might be expanded to cover
the plaintiffs' situation, and this became his principal legal
theory.
Garrity told Kiser and the other plaintiffs that they had a
good chance of success in their suit against BN, but that the "bad
faith" aspects of the suit were dependent upon a favorable ruling
from the trial judge. The findings indicate that if plaintiff
Kiser had not been assured of a reasonable chance of success by
Garrity, he would not have authorized the filing of the lawsuit and
he would have gone back to work as he felt that a fruitless lawsuit
endangered his employability with other timber operators. The
United States ~istrictCourt for the District of Montana, Great
Falls Division, ultimately disposed of the case in its entirety by
entering judgment in favor of BN on all claims on January 4, 1984.
An attempted appeal of this judgment was never decided on its
merits. Garrity mistakenly counted the 30 day appeal period as
ending on February 4, 1984, a Saturday, when the time deadline was
actually February 3, 1984, a Friday. As a result, Garrity filed the
required Notice of Appeal one day late.
The plaintiffs filed a malpractice suit against Garrity
alleging negligence and misrepresentation on February 14, 1985.
The action was tried without a jury and judgment was entered in
favor of the defendants. A motion to amend the findings of fact
and conclusions of law was filed and the court issued an order
granting a portion of the amendments. The District Court concluded
that there were no claims under the Civil Rights Act or under the
theory of contractual interference, and that the claims of breach
of the implied covenant of good faith and fair dealing were barred
under Nordlund v. School District No. 14 (1987), 227 Mont. 402, 738
P.2d 1299. The plaintiffs now appeal the judgment in favor of the
defendants raising the aforementioned issues.
On appeal the plaintiffs do not contest the invalidity of the
civil rights claims in their case against BN. However, they do
argue that the District Court erred in its interpretation of
Nordlund as precluding recovery on their claims for breach of the
implied covenant of good faith and fair dealing. They also argue
that our recent decision clarifying causes of action for breach of
the implied covenant, Story v. City of Bozeman (1990), - Mont .
, 791 P.2d 767, 47 St.Rep. 850, would afford them a cause of
action under this theory if we would allow the parties to argue the
present facts under the criteria adopted in Story.
Nordlund is clearly dispositive of the underlying claim
against BN for breach of the implied covenant. In Nordlund the
plaintiff schoolteacher alleged that the defendant school district
breached the implied covenant of good faith and fair dealing by
arbitrarily and capriciously not renewing his employment contract.
After being given a series of two year contracts, the school board
voted to give superintendent Nordlund a one year employment
contract. Under the law applicable at the time, Itthe nature and
extent of an implied covenant of good faith and fair dealing is
measured in a particular contract by the justifiable expectations
of the parties. Nicholson v. United Pacific Insurance (1985), 219
Mont. 32, 41, 710P.2d1342, 1348. WeheldinNordlundthatunder
the express, clear, and unambiguous language of the contract, the
plaintiff could have no justifiable expectation of continued
employment. Nordlund, 738 P.2d at 1302, citing Maxwell v. Sisters
of charity of Providence (D.Mor1t.1986)~645 F.Supp. 937, 939.
Here, BN offered the plaintiffs, independent contractors,
contracts for discrete logging jobs or related tasks, by taking
bids or negotiating the contract terms. These contracts were for
individual jobs and cannot be the basis for a continued expectation
that BN would offer such contracts to an independent contractor in
the future. BN1s conduct cannot be characterized as arbitrary,
capricious, or unreasonable under the applicable law where
plaintiffs are independent contractors with no express contract of
employment, and were threatening to sue BN.
Plaintiffs also allege that they would have a cause of action
in tort against BN under the current law defining breach of the
implied covenant as set forth in Story v. City of Bozeman, supra.
Even if Story were applicable to this case, the plaintiffs did not
have a case against BN. Under Story, the following Ifspecial
relationshipI1 criteria must be met for a plaintiff to maintain a
cause of action in tort for breach of the implied covenant:
(1) the contract must be such that the parties are in
inherently unequal bargaining positions; [and] (2) the
motivation for entering the contract must be a non-
profit motivation, i.e., to secure peace of mind,
security, future protection; [and] (3) ordinary contract
damages are not adequate because (a) they do not require
the party in the superior position to account for its
actions, and (b) they do not make the inferior party
wwholell; [and] (4) one party is especially vulnerable
because of the type of harm it may suffer and of
necessity places trust in the other party to perform;
and (5) the other party is aware of this vulnerability.
791 P.2d at 776; citing Wallis v. Superior Court (1984), 160
Cal.App.3d 1109, 207 Cal.Rptr. 123, 129. Substantial evidence of
each and all of these essential elements must be presented to the
court, or the court will direct that there is no special
relationship. Story, 791 P.2d at 776. Here, the plaintiffs are
independent businessmen dealing at arms-length in a commercial
setting and negotiating contracts for profit on a job-by-job basis.
No special relationship exists.
Moreover, for a plaintiff to maintain a cause of action for
breach of the implied covenant, whether it is based in contract or
based on the special relationship criteria giving rise to a tort,
he must first show breach of the "honesty in factw standard:
The conduct required by the implied covenant of good
faith and fair dealing is honesty in fact and the
observance of reasonable commercial standards of fair
dealing in the trade.
Section 28-1-211, MCA. Story, 791 P.2d at 775. There is no
evidence in the original suit that BN was not honest in fact or
failed to observe reasonable commercial standards as a means of
depriving the plaintiffs of the benefit of their contracts. See
Story, 791 P.2d at 775.
The plaintiffs also contend that the District Court erred in
concluding that the missed appeal caused no actual damage to the
plaintiffs, because the court deemed the contractual interference
claim to be a valid claim. A close examination of the record
demonstrates that this contention is without merit. In finding of
fact no. 108 the court found that Garrity, not the court,
subjectively deemed the contractual interference claim to be valid.
The court later concluded that regardless of Garrity's subjective
belief in the claim's validity the plaintiffs had failed to state
7
anv valid claims for relief against BN, and thus had no claim for
relief against Garrity.
We agree. To establish a professional negligence action the
plaintiffs must prove that Garrity breached a duty and that "but
forw such negligence they would have been successful in the
prosecution of their claims. Lorash v. Epstein (1989), 236 Mont.
21, 24, 767 P.2d 1335, 1337; Carlson v. Morton (1987), 229 Mont.
234, 238, 745 P.2d 1133, 1136. Because the plaintiffs had no legal
claim for relief against BN they experienced no damage as the
result of the admitted negligence of Garrity in missing the appeal
date. Lack of any damages and direct causation is fatal to their
malpractice claim.
Finally, plaintiffs allege that Garrity misrepresented their
chances of success in winning the lawsuit. By stipulation, the
parties agreed that
It is a breach of accepted standards of the Montana legal
profession for an attorney to misrepresent to a client
or potential client the attornevls evaluation of the
chances of success or failure of a proposed lawsuit if
the attorney knows that such misrepresented evaluation
will be the deciding factor in the mind of the client in
deciding to pursue or abandon the proposed litigation.
Transcript, p. 253. While plaintiffs contend that Garrity should
have known that the chances for success were poor and therefore
misrepresented such chances, the stipulation clearly applies only
if the attorney forms one opinion regarding the chances of success
or failure and communicates another one to the client. The
District Court made extensive factual findings describing Garrityls
evaluation of the plaintiffs1 claims. The Court specifically noted
that "~arritybelieved in the case to the point of risking his time
and effort for the chance of a contingent fee." Nowhere did the
District Court find or conclude that Garrity misrepresented
evaluations to the plaintiffs. Plaintiffs failed to meet their
burden of proof on this matter.
Plaintiffs suffered no damage as the result of Garrity's
admitted negligence nor did Garrity misrepresent to plaintiffs his
evaluation of their chances for success. The judgment of the
District Court is
AFFIRMED.
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Justice
We Concur: lf
Justices
Justice William E. Hunt, Sr., did not participate.
Justice John C. Sheehy concurs specially:
I concur in the result here and especially concur that in
order to state a claim against an attorney for malpractice, the
client must show that except for the alleged malpractice, the
result of the suit would have been in favor of the client. This
is the holding in Brosil v. Stockton (1970), 105 Ariz. 574, 468
P.2d 933, 936, and my dissent in R. H. Schwartz v. Hanrahan (1983),
207 Mont. 105, 672 P.2d 1116, 1118.
I would hold that the claims of the plaintiffs were barred
under our decision in Nordlund v. School District No. 14 (1987),
227 Mont. 402, 738 P.2d 1299, as the opinion here states. Since
I dissented in Story v. City of Bozeman (1990), - Mont. , 791
P.2d 767, I see no application of that case to the present case.