[Cite as McCarty v. Pedraza, 2014-Ohio-3262.]
IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT CLARK COUNTY
DAVID C. McCARTY, et al. : : Appellate Case No. 2013-CA-42 Plaintiffs-Appellees : : Trial Court Case No. 11-CV-10 v. : : MIGUEL A. PEDRAZA, Esq. : (Civil Appeal from Clark : (County Municipal Court) Defendant-Appellant : : ...........
OPINION
Rendered on the 25th day of July, 2014.
...........
DANIEL C. HARKINS, Atty. Reg. #0029750, 333 North Limestone Street, Suite 203, Post Office Box 1125, Springfield, Ohio 45501-1125 Attorney for Plaintiffs-Appellees
MIGUEL A. PEDRAZA, Atty. Reg. #0030236, 1805 Marinette Drive, Springfield, Ohio 45503 Defendant-Appellant, pro se
.............
HALL, J.
{¶ 1} Miguel Pedraza appeals from a legal-malpractice judgment against him in favor
of his former clients David and Cynthia McCarty, essentially for failing to timely file an answer 2
and counterclaim to the litigation against them. The trial court correctly entered summary
judgment on the liability issue of negligence and, after an evidentiary hearing, correctly awarded
damages for attorney fees expended to mitigate damages and for the damages resulting from the
lost counterclaim. But the court applied an incorrect causation standard to the McCartys’ claim
for damages in the amount of the default judgment entered against them as a result of the
attorney’s negligence. In the absence of evidence to demonstrate that the McCartys would have
prevailed in the underlying action, or would have incurred a judgment in the underlying action in
an amount less than the default judgment, the evidence is insufficient to show that Pedraza’s
conduct caused the McCartys to incur the amount of the entire default judgment as damages. We
therefore reverse that part of the judgment that awards those damages and remand the case for
rehearing under the correct causation standard.
I. FACTS
{¶ 2} In April 2006, the McCartys, owners of ABA Insurance Agency of Springfield,
Inc., sold their insurance agency’s entire book of business to Gary R. Gorby & Associates, L.L.C.
Included in the sale agreement (the “Asset Purchase Agreement”) is a non-compete agreement
that prohibits the McCartys from competing against Gorby. Almost two years after the sale,
Gorby filed an action against the McCartys for breach of the non-compete agreement. In February
2008, the McCartys retained Pedraza to represent them in the Gorby action.
{¶ 3} The McCartys had homes in both Ohio and Florida (and appear to have opened
another insurance agency in Florida), and they tried to avoid service of process. At the latest, they
were served in the Gorby action on August 27, 2008. The deadline date to file an answer came
and went without Pedraza ever filing anything in court. Finally, almost a year-and-a-half later, in 3
January 2010, the trial court, on Gorby’s motion, entered default judgment against the McCartys
for $151,259.79 in damages and attorney’s fees. The court later granted the McCartys Civ.R.
60(B) relief based on excusable neglect for Pedraza’s conduct, but in Gorby’s appeal, we
reversed, leaving the default judgment against the McCartys intact. See Gary R. Gorby & Assoc.,
L.L.C. v. McCarty, 2d Dist. Clark No. 2010 CA 71, 2011-Ohio-1983.
{¶ 4} The McCartys then filed a malpractice action against Pedraza, claiming legal
malpractice, breach of contract, and unjust enrichment. On the McCartys’ motion, the trial court
entered partial summary judgment on liability issues and ordered a hearing on damages. After the
hearing, the court entered judgment against Pedraza for $275,825.29 plus interest and costs. The
court awarded the McCartys $1,320 for attorney fees paid to Pedraza for work that he did not
complete; $68,645.50 for their attempt to mitigate the default judgment and their pursuit of the
malpractice action against Pedraza; $54,600 for their lost counterclaim against Gorby; and
$151,259.79 for the default judgment entered against them in the Gorby action.
{¶ 5} Pedraza appealed.
II. ANALYSIS
{¶ 6} Pedraza assigns error to the entry of partial summary judgment and to part of the
damage award. “To establish a cause of action for legal malpractice based on negligent
representation, a plaintiff must show (1) that the attorney owed a duty or obligation to the
plaintiff, (2) that there was a breach of that duty or obligation and that the attorney failed to
conform to the standard required by law, and (3) that there is a causal connection between the
conduct complained of and the resulting damage or loss.” Vahila v. Hall, 77 Ohio St.3d 421, 674
N.E.2d 1164 (1997), syllabus. Pedraza contends that the court should not have entered summary 4
judgment on duty and breach. He also contends that the McCartys failed to prove that his
duty-breaching conduct caused them to suffer the $151,259.79 loss. Lastly, Pedraza contends that
the McCartys’ breach-of-contract and unjust-enrichment claims should have been dismissed as
duplicative of the malpractice claim.
A. The Duty and Breach
{¶ 7} The first assignment of error alleges that the trial court erred by entering partial
summary judgment on the liability issues of duty and breach. Under Civ.R. 56(C), summary
judgment is proper if it is shown “(1) that there is no genuine issue as to any material fact; (2)
that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can
come to but one conclusion, and that conclusion is adverse to the party against whom the motion
for summary judgment is made, who is entitled to have the evidence construed most strongly in
his favor.” Harless v. Willis Day Warehousing Co., Inc., 54 Ohio St.2d 64, 66, 375 N.E.2d 46
(1978).
{¶ 8} “‘The duty of an attorney to his client is to “* * * exercise the knowledge, skill,
and ability ordinarily possessed and exercised by members of the legal profession similarly
situated, and to be ordinarily and reasonably diligent, careful, and prudent in discharging the
duties he has assumed.”’” Yates v. Brown, 185 Ohio App.3d 742, 2010-Ohio-35, 925 N.E.2d 669,
¶ 17 (9th Dist.), quoting Palmer v. Westmeyer, 48 Ohio App.3d 296, 298, 549 N.E.2d 1202 (6th
Dist.1988), quoting 67 Ohio Jurisprudence 3d, Malpractice, Section 9, at 16 (1986). Rule of
Professional Conduct 1.3 states that “[a] lawyer shall act with reasonable diligence and
promptness in representing a client.” A comment to this rule explains that “[d]elay and neglect
are inconsistent with a lawyer’s duty of diligence, undermine public confidence, and may 5
prejudice a client’s cause. Reasonable diligence and promptness are expected of a lawyer in
handling all client matters and will be evaluated in light of all relevant circumstances. * * *”
Comment 3, Prof.Cond.R. 1.3. Given these conduct standards, it follows that “‘attorneys are
expected to keep themselves advised of the progress of their cases.’” Yoder v. Thorpe, 10th Dist.
Franklin No. 07AP-225, 2007-Ohio-5866, ¶ 13, quoting Metcalf v. Ohio State Univ. Hosp., 2
Ohio App.3d 166, 168, 441 N.E.2d 299 (10th Dist.1981); Glick v. Glick, 133 Ohio App.3d 821,
832, 729 N.E.2d 1244 (8th Dist.1999) (quoting the same).
{¶ 9} Pedraza says in his affidavit that he did not file an answer because the McCartys
never notified him “as agreed that they had been served with the complaint, nor did they provide
[him] with a copy of same.” Pedraza Affidavit, ¶ 5. After he agreed to represent the McCartys,
says Pedraza, “and for considerable time thereafter,” they avoided service of the summons and
complaint in the underlying action. Id. at ¶ 3. He and David McCarty discussed this fact several
times, says Pedraza, and Pedraza “stressed to McCarty that when he and/or his wife were served
with the complaint at their Florida home or elsewhere McCarty should notify [Pedraza]
immediately, inform him of the date service was effected and provide him with a copy of the
complaint.” Id. Pedraza says that he was not aware that they had been served with the complaint
“until after the default judgment was filed in early 2010.” Id. at ¶ 6. David McCarty, though, says
in his affidavit that he “advised Pedraza, and Pedraza was aware, that I had been served with a
copy of the Complaint in the Gorby Suit.” McCarty Affidavit, ¶ 5.
{¶ 10} The latest date on which the McCartys were served is August 27, 2008.1 Shortly
1 In our Gorby decision, we said that “[a]fter multiple unsuccessful attempts, service of the complaint was perfected on the McCartys on August 27, 2008.” McCarty, 2011-Ohio-1983, at ¶ 16. However, the record reveals arguably successful earlier service. 6
before this date, David McCarty and Pedraza exchanged emails. On July 16, 2008, McCarty sent
Pedraza an email saying, “I am at home here in Springfield and my daughter just called me from
Florida. She received the court packets for my wife and I in the regular mail at my office. I will
be here in Springfield for probably two more weeks. * * * How do you want me to handle this? *
* *.” The following month, on August 20, McCarty sent Pedraza another email. This one said:
“Two weeks ago (or longer) I received via regular mail the packets for my wife and I. I kept them
and did not return them. Yesterday, I received notice that I had certified mail from the court, for
the same thing. My office (daughter) did not sign for them and returned them and I was not aware
of this until I came in today. Can you clarify any of this[?]” The same day that Pedraza received
the August email, he sent this reply: “At this point we want for you to get served. If your office
will go ahead and sign upon any subsequent delivery and if you will let me know the date that
happens we can proceed.”
{¶ 11} After the email exchanges and before default judgment was entered, there were
two more communications between Pedraza and David McCarty. In March 2009, McCarty sent
Pedraza an email telling him about some of Gorby’s activities and asking Pedraza to “check this
out and let me know what is going on.” And in September 2009, McCarty faxed Pedraza a letter
and two documents, one of which was a copy of a form in which McCarty surrendered his Ohio
insurance-sales license. Pedraza billed the McCartys twice in 2009 for work he did in their case.
In August, according to one bill, Pedraza “[r]eview[ed] written narrative and attached
documentation received from client regarding Gorby suit.” And in September, according to
another bill, Pedraza “[r]eview[ed] fax received from client regarding his surrender of agency
license.” 7
{¶ 12} Pedraza acknowledged at his deposition that sending a complaint and summons
by ordinary mail may be sufficient to obtain service. McCarty told Pedraza twice–in both the July
and August emails–that he had received packets from the court in the mail. These emails indicate
strongly that the McCartys may have been served. As an attorney, Pedraza knew that default
judgment is a potential consequence to a party who fails to file a timely answer. Pedraza did
nothing to investigate to see if service had, in fact, been obtained. Furthermore, by the time
McCarty faxed Pedraza in September 2009, it had been well over a year since Pedraza asked the
McCartys to notify him as soon as they had been served. The McCartys had advanced payment
for Pedraza’s attorney fees yet Pedraza egregiously neglected the McCartys’ affairs by letting
over a year go by without at least checking the Gorby case’s docket. Compare Yeschick v.
Mineta, 675 F.3d 622, 630 (6th Cir.2012) (saying that counsel knew that filing would be made in
the case if he failed to respond to discovery requests and knew the discovery cut-off date, yet
failed to check the docket for almost six months, during which time the cut-off date came and
went).
{¶ 13} From the time that the McCartys were undoubtedly served, let alone the earlier
time when they were likely served, sixteen months passed without Pedraza ever checking the
docket or otherwise inquiring about service. Pedraza’s failure to keep himself advised of the
case’s progress for such an extended length of time constitutes a lack of diligence, a lack of
prudence, and an “untenable” neglect of the McCartys’ affairs, compare Disciplinary Counsel v.
Travis, 101 Ohio St.3d 322, 2004-Ohio-785, 804 N.E.2d 969, ¶ 11 (“An attorney’s neglect of
even one client’s affairs is untenable.”). Construing the evidence most strongly in Pedraza’s
favor, it appears that reasonable minds can conclude only that Pedraza had a duty to the 8
McCartys and that he breached it.
{¶ 14} The first assignment of error is overruled.
B. The Causal Connection
{¶ 15} The trial court awarded the McCartys $151,259.79 as damages for the default
judgment entered against them in the Gorby case. Pedraza alleges in the second assignment of
error that the court erred by awarding this amount. He contends that the McCartys failed to
present sufficient evidence of a causal connection between his duty-breaching conduct and this
loss.
1. The applicable causation standard
{¶ 16} We must first determine the legal malpractice causation standard that applies
here. The McCartys contend that the proper standard is the “some evidence” standard established
in Vahila, 77 Ohio St.3d 421, 674 N.E.2d 1164. Pedraza, conversely, contends that the proper
standard is the case-within-a-case doctrine as applied in Environmental Network Corp. v.
Goodman Weiss Miller, L.L.P., 119 Ohio St.3d 209, 2008-Ohio-3833, 893 N.E.2d 173.
{¶ 17} The some-evidence standard applies in cases in which a plaintiff’s damage or
loss has been suffered “regardless of the fact that [the plaintiff] may be unable to prove that [he]
would have been successful in the underlying matter(s) in question.” Vahila at 427. In such a
case, the plaintiff need provide only “some evidence of the merits of the underlying claim.” Id. at
428. In Vahila, the plaintiffs sued their attorneys after the attorneys represented them in several
civil and criminal matters. The plaintiffs claimed that the attorneys’ failure to properly disclose
matters related to, and the consequences of, various plea bargains and settlement arrangements
resulted in losses of $100,000 and lost profits of at least $200,000. The Vahila Court held, 9
“[b]ased on the theory that plaintiffs proposed, * * * that ‘given the facts of [the] case, [the
plaintiffs] have arguably sustained damage or loss regardless of the fact that they may be unable
to prove that they would have been successful in the underlying matter(s).’” Environmental
Network at ¶ 14, quoting Id. at 427.
{¶ 18} In Environmental Network, “the Supreme Court focused on the need to link the
attorney’s action (or inaction) to the adverse result.” Gijbertus D.M. van Sommeren v. Gibson,
2013-Ohio-2602, 991 N.E.2d 1199, ¶ 30 (6th Dist.). The Environmental Network Court said that
the case-within-a-case doctrine applies if the theory of the malpractice case places the merits of
the underlying litigation directly in issue. Environmental Network at ¶ 17-18. In this type of case,
said the Court, “it is insufficient for the plaintiff to present simply ‘some evidence’ of the merits
of the underlying claim.” Id. at ¶ 19; see also Gijbertus at ¶ 32 (“After Environmental Network,
the demonstration of causality in legal malpractice cases requires more than just ‘some evidence’
to proximately relate the specific act or omission that is held up as the attorney’s breach of duty
to the client’s damages.”). “[T]he plaintiff must establish that he would have been successful in
the underlying matter.” Id. The plaintiffs in Environmental Network sued their attorney after the
attorney settled the underlying action instead of trying it, claiming that they would have had a
better outcome if the matter had gone to trial. Unlike the Vahila plaintiffs, said the Court, the
plaintiffs in Environmental Network “could recover only if they could prove that they would have
succeeded in the underlying case and that the judgment would have been better than the terms of
the settlement.” Id. at ¶ 18. The Court concluded that “the theory of this malpractice case places
the merits of the underlying litigation directly at issue because it stands to reason that in order to
prove causation and damages, appellees must establish that appellant’s actions resulted in settling 10
the case for less than appellees would have received had the matter gone to trial.” Id.
{¶ 19} The McCartys contend that Environmental Network governs only in settlement
cases. But we have declined to limit it this way and have applied the case’s rationale when a
plaintiff claimed a different more favorable outcome. In Pierson v. Rion, 2d Dist. Montgomery
No. 23498, 2010-Ohio-1793, the plaintiff claimed that his attorney’s failure to request a jury trial
and to appear at the plaintiff’s assault trial caused him (the plaintiff) “to incur damages in the
form of costs associated with hiring new attorneys in the assault matter.” Pierson at ¶ 38. “Put
another way,” we said, “had [his attorney] fulfilled what [the plaintiff] classifies as [the
attorney]’s ‘duties’ by performing these acts, [the plaintiff] would not have incurred the
additional attorney fees which comprise his damages in the malpractice action.” Id. “Unavoidably
linked to this argument,” we noted, “is the notion that [the plaintiff] would have achieved a more
favorable outcome in the assault case and avoided the appeal had [his attorney] personally
appeared or demanded a jury trial on [the plaintiff]’s behalf.” Id. Despite the factual differences,
we concluded, Environmental Network was on point and its rationale applied. Id. at ¶ 37.
{¶ 20} Here, the McCartys claim that Pedraza’s duty-breaching conduct resulted in the
default-judgment loss of $151,259.79. Their claim inextricably links Pedraza’s conduct directly
to this loss: the outcome of the Gorby action, with respect to the McCartys’ liability to Gorby,
would have been more favorable if Pedraza had not breached his duty. Compare Pierson at ¶ 39
(finding that the plaintiff’s causation argument was “inextricably linked to the outcome of his
assault case”). The case-within-a-case doctrine therefore applies here.
2. Application of the case-within-a-case doctrine
{¶ 21} A legal-malpractice plaintiff must prove a causal connection between the 11
defendant-attorney’s duty-breaching conduct and the plaintiff’s claimed loss or damage. The
“‘but for’ test of causation * * * is the standard test for establishing cause in fact [, which] * * *
is distinct from proximate, or legal, cause.” (Citations omitted.) Ackison v. Anchor Packing Co.,
120 Ohio St.3d 228, 2008-Ohio-5243, 897 N.E.2d 1118, ¶ 48. “[A] defendant’s conduct is a
cause of the event (or harm) if the event (or harm) would not have occurred but for that conduct;
conversely, the defendant’s conduct is not the cause of the event (or harm) if the event (or harm)
would have occurred regardless of the conduct.” Anderson v. St. Francis St. George Hosp., Inc.,
77 Ohio St.3d 82, 84-85, 671 N.E.2d 225 (1996), citing Keeton, Dobbs, Keeton & Owen, Prosser
and Keeton on the Law of Torts, 266 (5th Ed.1984).
{¶ 22} Here, with regard to the element of damages in question, the McCartys must
prove that but for Pedraza’s duty-breaching conduct they would not have suffered their claimed
loss. But what is their loss? The McCartys contend that their loss is the entry of default judgment
against them. But the loss that they claim, and that the trial court awarded them, is not necessarily
the $151,259.79 that the default judgment obligates them to pay Gorby. The causation issue here
is whether but for Pedraza’s duty-breaching conduct the McCartys would be liable to Gorby for
$151,259.79. Accordingly, our inquiry is whether, after viewing the evidence in the light most
favorable to the McCartys, any reasonable trier of fact can find that but for Pedraza’s
duty-breaching conduct the McCartys would not be liable to Gorby for any amount. See State v.
Jenks, 61 Ohio St.3d 259, 273, 574 N.E.2d 492 (1991).
{¶ 23} Little testimony on this issue can be found in the record before us. At his
deposition, Pedraza was asked what theories or defenses he was going to assert for the McCartys
in the case filed by Gorby. Pedraza replied, “Well, essentially that Mr. McCarty had not breached 12
the noncompete provisions of the asset purchase agreement for, there was litigation between Gary
Gorby, and I believe it was maybe a couple of nieces of Mr. McCarty’s who were alleged to have
indirectly on Mr. McCarty’s behalf conducted business which was alleged to be in breach of that
agreement. Mr. McCarty was not brought into that suit, and that was the basis of the defense, that
there was not a breach of the agreement.” (Depo. Tr. 32). Pedraza was also asked about the
purchase agreement’s arbitration provision, which provides that “[a]ll disputes arising under this
Agreement, which are not settled within thirty (30) calendar days after they arise, shall be settled
by arbitration * * *,” Asset Purchase Agreement, ¶ 19. Pedraza was asked whether he was going
to assert the arbitration provision as a defense. Pedraza answered, “I’m not sure whether it’s
labelled as a defense per se. It would have been brought to the attention to the court, yes.” (Depo.
Tr. 32). At the damages hearing, the McCartys’ attorney asked David McCarty whether the
$151,259.79 default judgment was still pending against him, and McCarty said that it was. The
attorney pertinently asked the McCartys’ expert only about whether the default judgment would
have been rendered: “[W]ith respect to this matter is it your professional opinion that had Mr.
Pedraza filed an answer and sought arbitration in the Gorby matter that the default judgement that
was rendered $[151],259.79 would not have been rendered by this Court?” (Damages Tr. 29),
which question the expert answered affirmatively.
{¶ 24} All that the above evidence establishes is that but for Pedraza’s duty-breaching
conduct default judgment would not have been entered. The evidence does not establish that but
for Pedraza’s conduct the McCartys would not be liable to Gorby for $151,259.79.
{¶ 25} The McCartys’ arguments suggest that if Pedraza had asserted the arbitration
provision in the Gorby action, the trial court would have dismissed the action, precluding any 13
liability to Gorby. This is not necessarily true. Assuming no breach of duty and that Pedraza
successfully asserted the arbitration provision, the arbitrator could have awarded Gorby some
amount on his claim and thereby imposed liability on the McCartys. To prove their claimed
$151,259.79 loss under the case-within-a-case doctrine, the McCartys had to show that there was
no merit whatsoever to Gorby’s claim such that an arbitrator would not have awarded Gorby
anything. They failed to do so.
{¶ 26} A reasonable mind cannot find from the evidence that but for Pedraza’s
duty-breaching conduct the McCartys would have no liability on Gorby’s claims. The McCartys
thus failed to establish a causal connection between Pedraza’s duty-breaching conduct and the
$151,259.79 loss.
{¶ 27} As to the appropriate remedy, it appears that the trial court incorrectly applied the
some-evidence standard instead of the case-within-a-case doctrine. The court does not explicitly
refer to the some-evidence standard in its partial-summary-judgment entry. But the court “adopts
the reasoning set out in plaintiffs’ memorandum.” Entry (Sept. 11, 2012). And the plaintiffs’
memorandum, along with their reply memorandum (and their argument here), indicates that the
McCartys were operating under the some-evidence standard. That an incorrect standard was
applied likely affected the type and amount of evidence that the McCartys presented at the
damages hearing. They are thus entitled to a rehearing under the correct standard on the causal
connection between Pedraza’s duty-breaching conduct and their liability to Gorby. Proof that the
McCartys would have prevailed in their defense against Gorby, or that they would only be subject
to a judgment of some amount less than the default judgment is necessary.
C. Breach-of-Contract and Unjust Enrichment Claims 14
{¶ 28} Pedraza also alleges in the second assignment of error that the trial court should
have dismissed the McCartys’ breach-of-contract and unjust-enrichment claims. He contends that
these claims are subsumed under the malpractice claim. We agree.
“An action against one’s attorney for damages resulting from the manner
in which the attorney represented the client constitutes an action for malpractice *
* *, regardless of whether predicated upon contract or tort or whether for
indemnification or for direct damages. * * * Malpractice by any other name still
constitutes malpractice. As stated in Richardson v. Doe (1964), 176 Ohio St. 370,
199 N.E.2d 878, malpractice consists of ‘the professional misconduct of members
of the medical profession and attorneys.’ Such professional misconduct may
consist either of negligence or of breach of the contract of employment. It makes
no difference whether the professional misconduct is founded in tort or contract, it
still constitutes malpractice.”
Pierson, 2010-Ohio-1793, at ¶ 14, quoting Muir v. Hadler Real Estate Mgmt. Co., 4 Ohio App.3d
89, 89-90, 446 N.E.2d 820 (10th Dist.1982). The McCartys’ claims for breach of contract and
unjust enrichment are not based on conduct distinct from the conduct supporting their
legal-malpractice claim. In the complaint, all three claims are based on the same duty-breaching
conduct–Pedraza’s failure to represent the McCartys’ interests in the Gorby action. The breach
and unjust-enrichment claims therefore should have been dismissed.
{¶ 29} Nevertheless, because the damages are the same, the failure to dismiss the claims
did not prejudice Pedraza. So this error is not reversible.
{¶ 30} The second assignment of error is sustained in part and overruled in part. 15
{¶ 31} The trial court’s judgment is reversed as to the $151,259.79 damage award; the
rest of the judgment is affirmed. This case is remanded for the sole purpose of holding a hearing
consistent with the standard set forth in this opinion on the causal connection between Pedraza’s
duty-breaching conduct and the amount of damages resulting from the McCartys’ liability to
Gorby.
FAIN, J., concurs.
FROELICH, P.J., dissenting in part and concurring in part:
{¶ 32} While I agree that a jury’s finding that Pedraza was negligent would be supported
by the evidence on this record, I disagree with the majority’s conclusion that, construing the
evidence most strongly in Pedraza’s favor, reasonable minds could only conclude that he did not
exercise the knowledge, skill, and ability ordinarily possessed by lawyers similarly situated.
Therefore, I would reverse the partial summary judgment on liability.
{¶ 33} Otherwise, I concur with the analysis of the damages issues.
..........
Copies mailed to:
Daniel C. Harkins Miguel A. Pedraza Hon. Douglas M. Rastatter