Booth v. Davis , 690 F. App'x 571 ( 2017 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT May 25, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
SCOTT BOOTH; KATIE MICHELLE
BOOTH; COLTEN SCOTT BOOTH;
BRIAN CORY BOOTH,
Plaintiffs - Appellants,
v.
No. 16-3153
GRANT DAVIS, (D.C. No. 5:10-CV-04010-KHV)
(D. Kan.)
Defendant - Appellee.
___________________________________
DOROTHY SCHMITZ; JILL SCHMITZ-
NOBLE; BILL SCHMITZ; LADONNA
OLIPHANT; NEELEY SCHMITZ;
DAVID SCHMITZ,
Plaintiffs - Appellants,
v.
No. 16-3167
GRANT DAVIS, (D.C. No. 5:10-CV-04011-KHV)
(D. Kan.)
Defendant - Appellee.
___________________________________
KIMBERLY CARREL,
Plaintiff - Appellant,
v.
No. 16-3156
GRANT DAVIS, (D.C. No. 5:10-CV-04124-KHV)
(D. Kan.)
Defendant - Appellee.
___________________________________
PRUDENCE KIRKEGAARD,
Plaintiff - Appellant,
v. No. 16-3168
(D.C. No. 5:10-CV-04125-KHV)
GRANT DAVIS, (D. Kan.)
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before KELLY, LUCERO, and MURPHY, Circuit Judges.
_________________________________
In 2002 and 2003, defendant attorney Grant Davis represented several hundred
individuals in lawsuits against two pharmaceutical companies. Some of those
individuals now claim Davis committed legal malpractice by failing to disclose to
them material information pertaining to a settlement agreement with the drug
companies.1 The district court dismissed their legal malpractice claims on the ground
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
1
This case involves four consolidated appeals by four sets of plaintiffs:
members of the Booth family, members of the Schmitz family, Kimberly Carrel, and
Prudence Kirkegaard. However, the facts giving rise to plaintiffs’ legal malpractice
claims, as well as the legal arguments asserted on appeal, are virtually identical. And
with the exception of Carrel, the plaintiffs in these cases are the surviving family
members of the individuals represented by Davis in the litigation against the
2
that they were time-barred under Kansas’ two-year statute of limitations. Exercising
jurisdiction under 28 U.S.C. § 1291, we affirm.2
I
The malpractice claims in this case arise out of the same underlying facts as
the malpractice claims addressed in our prior decision, Wille v. Davis, 650 F. App’x
627 (10th Cir. 2016) (unpublished). In 2002 and 2003, Davis and his law firm
represented numerous individuals in lawsuits against pharmacist Robert Courtney, a
pharmacy, and two pharmaceutical companies—Eli Lilly & Company and Bristol-
Myers Squibb Company—for the alleged dilution of chemotherapy drugs. In late
2002, the drug companies proposed a global settlement agreement intended to resolve
all cases pending against them and to set aside money for future cases. The
companies expressly reserved the right to opt out of the agreement if “fewer than all
of the Covered Individuals accept[ed]” the proposed settlement. In addition, the
settlement was contingent upon Georgia Hayes, who had filed the lead case against
the drug companies, “complying with all the terms and conditions of” a separate
agreement, under which the companies would pay her $2.9 million in exchange for
the dismissal of her claims.
pharmaceutical companies. For clarity, we will generally refer to plaintiffs
collectively.
2
This case is in federal court by way of diversity jurisdiction under 28 U.S.C.
§ 1332. At the time the complaints were filed, Davis was a resident of Kansas,
plaintiffs were residents of Missouri and Ohio, and the amount in controversy
exceeded $75,000.
3
Davis informed plaintiffs of the proposal and provided them with a
“Disclosure of Global Settlement.” That disclosure stated that Davis’ law firm
represented most of the individuals who had filed lawsuits against the drug
companies, that Eli Lilly and Bristol-Myers Squibb had made a joint settlement offer
to resolve all of those lawsuits, and that the companies had each offered Hayes a
separate settlement of $1.45 million. By signing the disclosure, plaintiffs represented
that they had reviewed the terms of the settlement agreement and understood that
their right to receive funds would be determined by a Special Master. They also
signed a “Release and Settlement Agreement” acknowledging “that they underst[ood]
the process by which settlement amounts [would] be determined.”
On May 20, 2003, the Special Masters determined plaintiffs’ settlement
awards. Connie Booth and Kimberly Carrel signed a Settlement Sheet
acknowledging receipt of their awards on June 24, 2003; Prudence Kirkegaard and
Dorothy Schmitz, on July 10, 2003. All awards were substantially lower than what
Hayes had received from the drug companies.
In April 2004, another family who had participated in the global settlement—
the Tilzers—filed a legal malpractice suit against Davis in Kansas state court. See
Tilzer v. Davis, Bethune & Jones, L.L.C., 204 P.3d 617, 621 (Kan. 2009). On
appeal, the Kansas Supreme Court held that the global settlement constituted an
“aggregate settlement” under Missouri Rule of Professional Conduct 4-1.8(g),
requiring Davis to disclose to his clients “the existence and nature of all of the claims
and of the participation of each person in the settlement” in order to obtain informed
4
consent. Tilzer, 204 P.3d at 627-28. It further concluded that the settlement ran
“afoul of the ABA guidelines” because damage awards were not negotiated on behalf
of individual plaintiffs and the structure of the settlement made it impossible for
Davis to make the required disclosures. Id. at 629. The Kansas Supreme Court
decision was filed on April 3, 2009. However, the proceedings were subject to a
protective order, which prevented the Tilzers’ attorney from contacting Davis’ other
clients, including plaintiffs, until December 2009. The Booth and Schmitz families
learned of the Tilzer opinion in December 2009; Carrel and Kirkegaard, in June
2010.
On February 3, 2010, nearly seven years after the global settlement with the
drug companies, the Booths and the Schmitz’s filed lawsuits against Davis, alleging
legal malpractice based on his failure to disclose material information pertaining to
the settlement agreement, including the existence of actual and potential conflicts of
interest. Carrel and Kirkegaard filed similar actions on September 29, 2010. The
district court granted summary judgment in favor of Davis in all four cases,
concluding that plaintiffs’ claims were time-barred under Kansas’ two-year statute of
limitations. Plaintiffs timely appealed.
II
We review a grant of summary judgment de novo, applying the same standard
as the district court. Duvall v. Georgia-Pacific Consumer Prods., L.P., 607 F.3d
1255, 1259 (10th Cir. 2010). Summary judgment is appropriate if “there is no
5
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a).
The parties agree that plaintiffs’ legal malpractice claims are governed by Kan.
Stat. § 60-513(a)(4), which prescribes a two-year limitations period for tort actions.
Under Kansas law, a claim accrues when “the act giving rise to the cause of action
first causes substantial injury, or, if the fact of injury is not reasonably ascertainable
until some time after the initial act,” when “the fact of injury becomes reasonably
ascertainable to the injured party.” § 60-513(b). This latter rule “postpones the
running of the limitations period until the time the plaintiff is able to determine that
her injury may be caused by some act of the defendant.” Benne v. Int’l Bus. Mach.
Corp., 87 F.3d 419, 427 (10th Cir. 1996); see also Dearborn Animal Clinic, P.A. v.
Wilson, 806 P.2d 997, 1006 (Kan. 1991) (stating that limitations period did not begin
to run until it was “reasonably ascertainable that the injury was caused by the
attorney’s malpractice”). “Reasonably ascertainable does not mean actual
knowledge.” Davidson v. Denning, 914 P.2d 936, 948 (Kan. 1996) (quotations
omitted). The standard “carries with it an obligation to investigate available factual
sources,” Bi-State Dev. Co. v. Shafter, Kline & Warren, Inc., 990 P.2d 159, 162
(Kan. Ct. App. 1999), and is met if “the plaintiff knew or could reasonably have been
expected to know of the alleged negligence,” Knight v. Myers, 748 P.2d 896, 901
(Kan. Ct. App. 1988).
Plaintiffs argue that they could not have discovered their legal malpractice
claims prior to the issuance of the Tilzer decision on April 3, 2009, and thus their
6
lawsuits are timely because they were filed within two years of that date. They
appear to argue that their claims could not have accrued until they had an
understanding of their legal rights and Davis’ professional obligations as their
attorney. But as we have previously stated, “no plaintiff ever knows prior to her suit
whether the defendant is negligent” because that is a question “to be resolved by a
jury.” Benne, 87 F.3d at 427. Instead, a claim accrues when the plaintiff “discovers,
or reasonably should have discovered, the material facts essential to his cause of
action.” Pancake House, Inc. v. Redmond ex rel. Redmond, 716 P.2d 575, 579 (Kan.
1986) (emphasis added).
This standard was satisfied in 2003 when plaintiffs received their settlement
awards. By that time, they had signed the Disclosure of Global Settlement and the
Release and Settlement Agreement, and thus knew that: (1) they had entered into a
joint settlement agreement covering all cases pending against the drug companies;
(2) Davis and his law firm represented a majority of the individuals who had filed
lawsuits against those companies; (3) they were receiving significantly less than
Hayes, who had filed the lead case; and (4) Davis had not disclosed the settlement
awards of the remaining plaintiffs (nor could he have, given that those awards had
yet to be determined by a Special Master).
Moreover, several of the plaintiffs acknowledge their belief, in 2003, that they
had been treated improperly and/or that Davis had not disclosed all information
material to the settlement agreement. For example, Carrel told an attorney at Davis’
firm that she had been treated unfairly and that the settlement money should have
7
been divided evenly. Similarly, Neeley Schmitz spoke to Davis about the family’s
settlement award because “it just didn’t seem fair,” and the family was not “given
enough information to know if they were being treated equally or fairly.” And Jill
Schmitz-Noble testified that she did not think her attorneys were “coming clean”
with her because they did not provide information about the other participants in the
settlement or the process by which the awards would be determined. This evidence
demonstrates that both the fact of injury and its causal connection to Davis’ conduct
were reasonably ascertainable in 2003.
Plaintiffs seek to bolster their argument with our statement in Wille that “[a]
legal malpractice claim accrues [under Kansas law] when the Plaintiff reasonably
ascertains that her injury is the result of the attorney’s negligence.” 650 F. App’x at
630. But this statement was intended to clarify that the limitations period begins to
run only when a plaintiff knows or reasonably should know that her injury is
attributable to the attorney’s conduct. It was not meant to suggest that the plaintiff
must also come to the legal conclusion that the attorney’s conduct was negligent.
See Benne, 87 F.3d at 427 (rejecting the argument that Kansas law permits a plaintiff
who is “fully aware of the cause of her injury” to delay until “the plaintiff develops
the thought that the defendant may have been negligent”); Davidson, 914 P.2d at 947
(rejecting argument that action did not accrue until plaintiff “connect[ed]”
defendant’s conduct and death, because “[a]ll the information that [he] needed to
make that connection was available as of the date of death”).
8
There is no better support for our determination that plaintiffs’ claims accrued
when they received their settlement awards than the fact that the Tilzers, who were
otherwise similarly situated to plaintiffs with respect to the underlying settlement
agreement, brought suit against Davis for legal malpractice in 2004. Plaintiffs
contend that the Tilzer family was in a unique position because a member of the
family was a lawyer who had been involved in the litigation against the drug
companies. Yet plaintiffs do not specify what facts, as opposed to legal conclusions,
the Tilzers were able to obtain from this family member that would have been
unavailable to other participants in the settlement. Their argument can again be
reduced to the claim that they could not have brought suit in 2003 because they did
not have the legal expertise to know that Davis’ conduct constituted malpractice. But
every lay plaintiff lacks legal expertise—they nevertheless are charged with
investigating their claims within the limitations period. See Benne, 87 F.3d at 427(“The plaintiff must take the initiative within the limitations period to set out to
prove defendant’s negligence.”).3
3
Similarly, plaintiffs argue that the Tilzer decision apprised them of “facts”
necessary to their cause of action: that the global settlement was an aggregate
settlement, that Davis had an obligation to make certain disclosures, and that Davis
had breached his obligation. But, as with the determination that Davis’ conduct
constituted malpractice, these “facts” are actually legal conclusions and are thus
irrelevant to the question of when plaintiffs’ claims accrued.
We are sympathetic to plaintiffs’ argument that they were entitled to trust
Davis as their attorney and proceed on the assumption that he was acting in their best
interests. However, to reach the outcome plaintiffs seek in this case, we would have
to conclude that a special standard for claim accrual applies to legal malpractice
actions. The Kansas Supreme Court has held that the general rules set forth in
§ 60-513(a)(4) and (b) apply to legal malpractice claims. See Dearborn Animal
9
III
For the foregoing reasons, the district court’s orders granting summary
judgment in favor of Davis are AFFIRMED.
Entered for the Court
Carlos F. Lucero
Circuit Judge
Clinic, 806 P.2d at 1001-02. And we are not permitted to disregard state court
interpretations of state law. See King v. Order of United Commercial Travelers of
Am., 333 U.S. 153, 157-58 (1948). Plaintiffs’ theory that the limitations period is
tolled indefinitely unless another attorney is consulted would effectively eliminate
any statute of limitations for legal malpractice claims under Kansas law, a result
plainly inconsistent with state court precedent.
10