Knutson v. Foster ( 2018 )

Filed 8/8/18
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CERTIFIED FOR PARTIAL PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
DAGNY KNUTSON,
Plaintiff and Appellant, G054247
v. (Super. Ct. No. 30-2014-00745266)
RICHARD J. FOSTER, OPINION
Defendant and Appellant.
Appeals from a postjudgment order of the Superior Court of Orange
County, Theodore R. Howard, Judge. Reversed and remanded with directions.
Corsiglia McMahon & Allard, Mark J. Boskovich and B. Robert Allard for
Plaintiff and Appellant.
Tracy L. Anielski for Defendant and Appellant.
* * *
*
Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion
is certified for publication with the exception of parts II.B., II.C., III., IV., V., VI., and
VII.
INTRODUCTION
After a three-week trial, the jury found in favor of Dagny Knutson on her
fraudulent concealment and intentional breach of fiduciary duty claims against her former
attorney, Richard J. Foster, and awarded her economic and noneconomic damages. The
trial court granted Foster’s motion for a new trial on the grounds that Knutson did not
prove Foster’s conduct was the cause of Knutson’s damages and that Knutson had failed
to offer substantial evidence of her emotional distress damages.
We reverse and reinstate the jury’s verdict because the motion for a new
trial was granted on erroneous legal theories. We partially publish this opinion for two
reasons. First, we hold that claims of fraudulent concealment and intentional breach of
fiduciary duty by a client against his or her attorney are subject to the substantial factor
causation standard, not the “but for” or “trial within a trial” causation standard employed
in cases of legal malpractice based on negligence. The fact that an attorney-client
relationship existed between the plaintiff and the defendant does not change the method
by which the plaintiff must establish causation in cases of intentional torts.
Second, we hold that in a case such as this, where the plaintiff’s emotional
distress consisted of anxiety, shame, a sense of betrayal, and a continuing impact on
personal relationships, the testimony of the plaintiff alone is sufficient to support
emotional distress damages. Knutson’s testimony that the contract negotiated by Foster,
and which he encouraged her to enter, led to stress and extra pressure that made
swimming an emotionally painful activity, that she felt shamed and betrayed when she
learned about Foster’s duplicitousness, and that her personal relationships have been
impacted due to her lack of trust in others, was sufficient to establish her damages in the
absence of any expert testimony.
2
STATEMENT OF FACTS
A.
KNUTSON, A RISING SWIMMING STAR, ENTERS AN ORAL AGREEMENT WITH
USA SWIMMING’S HEAD COACH.
As a high school student in North Dakota, Knutson was an internationally
ranked swimmer. She was named high school swimmer of the year by Swimming World
Magazine in her junior and senior years of high school. As a high school junior, she
broke the American record in the 400-meter individual medley. She was ranked 16th in
the world in the 200-meter freestyle, and 22nd in the world in both the 400-meter
freestyle and the 200-meter individual medley.
In her senior year of high school (2009-2010), Knutson received
scholarship offers from many universities with top swimming programs. All offered
five-year packages without any type of performance markers. She committed to Auburn
University because one of its coaches, Paul Yetter, was considered an expert in the
individual medley, Knutson’s specialty event.
In March 2010, Mark Schubert, USA Swimming’s head coach, told
Knutson that Yetter was leaving Auburn University. Schubert advised Knutson to swim
professionally rather than at Auburn or another university. He orally promised her
support to train at a “Center for Excellence” formed by USA Swimming in Fullerton,
California, including room, board, tuition, and a stipend until she earned her degree.
Knutson, her parents, and her coaches were present when Schubert made this offer; all of
them agreed Schubert’s offer did not include any performance markers, was not subject
to Schubert’s evaluation, and was to last through 2016, after the Rio de Janeiro Olympic
Games. The agreement was entirely oral; no written agreement was made between
Knutson and USA Swimming or Schubert at that time. Knutson ultimately accepted
Schubert’s offer and moved to Fullerton.
3
At Schubert’s suggestion, Knutson retained Evan Morgenstein, through his
company Premier Management Group LLC (PMG), to be her sports agent. She turned
professional, accepted prize money, and signed an endorsement agreement with Mutual
of Omaha. Morgenstein’s standard athlete representation agreement was signed by
Knutson’s mother, but never by Knutson herself.
B.
KNUTSON RETAINS ATTORNEY FOSTER WHEN USA SWIMMING
REFUSES TO HONOR THE ORAL AGREEMENT.
A few months after Knutson moved to Fullerton, Schubert’s employment
was terminated by USA Swimming. Schubert told Knutson not to worry, and assured her
that USA Swimming would keep the promises he had made to her. However, Knutson
became concerned because she was not receiving any money from USA Swimming.
At Morgenstein’s suggestion, Knutson retained attorney Richard Foster to
represent her in an attempt to get USA Swimming to honor the oral agreement made by
Schubert. Foster was well-connected within the swimming world. At the time he
represented Knutson, Foster was on the water polo technical committee for the
Fédération Internationale de Natation (FINA), the international governing body for
swimming, diving, water polo, and synchronized swimming. Foster had been president
of the governing body for United States Aquatic Sports (USAS) from 2006 through 2010.
(USAS is the umbrella agency that interacts with FINA on behalf of aquatic sports
organizations in the United States, including USA Swimming.) Foster was the
past-president of USA Water Polo, and had been the chairperson of the organizing
committee for the 2004 U.S. Olympic swim trials. Foster was the vice-president and an
executive council member for the Swimming Union of the Americas (ASUA), a
continental aquatics association, from 2003 to 2007.
4
At the time he represented Knutson, Foster considered himself to be a
high-level person within the aquatics industry and had on-going relationships with and
access to many leaders at USA Swimming. Foster did not disclose to Knutson these
close personal ties, or that he had long-time relationships with FINA, USA Swimming,
and other swimming organizations.
Foster had represented Schubert in 2006 in reviewing Schubert’s contract
as USA Swimming’s head coach. When USA Swimming fired Schubert in 2010, Foster
refused to represent him in a wrongful termination lawsuit against USA Swimming
because he did not want to have a negative relationship with USA Swimming in the
future. Foster told Schubert at that time that he would have a conflict of interest in suing
USA Swimming. Knutson testified that Foster never told her that he represented
Schubert in 2006, or that he declined to represent Schubert against USA Swimming
because he felt there was a conflict of interest due to his relationships with people within
USA Swimming. For his part, Foster testified he told both Knutson and Morgenstein that
if Knutson could not settle the dispute with USA Swimming, Foster would help her find
another attorney to bring a lawsuit on her behalf.
Had Knutson known that Foster had previously represented Schubert, or
had she known of Foster’s personal and professional relationships with USA Swimming,
she would not have agreed to let him represent her “[b]ecause he has both sides’ interest
at heart, not just mine.”
C.
FOSTER NEGOTIATES A SETTLEMENT WITH USA SWIMMING ON BEHALF OF KNUTSON.
On behalf of Knutson, Foster sent an e-mail to Chuck Wielgus, USA
Swimming’s Executive Director, on November 10, 2010, asking Wielgus to confirm that
USA Swimming would abide by Schubert’s oral agreement to pay for Knutson’s tuition,
room and board. Wielgus sent Foster an e-mail on the same day, stating, “Let’s not let
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this escalate.” Foster responded, “I don’t want this to escalate either.” Foster never told
Knutson that he had made this statement.
In another e-mail dated November 11, Wielgus responded that Schubert did
not have the authority to make any such promises to Knutson, that Schubert had never
made anyone else at USA Swimming aware of any such promises, and that USA
Swimming’s budget for the years in question had not been approved. Wielgus claimed
there was no evidence of a written or oral agreement with Knutson and didn’t even know
if there was anything in the budget to pay her.
Foster suggested that Richard Young, USA Swimming’s general counsel,
speak directly with Schubert, who confirmed that there was, in fact, an agreement with
Knutson and that she was to be paid through grants or out of a discretionary fund that
Schubert controlled as the national team head coach. Schubert told Young that the
agreement was to run through the 2012 Olympics in London, and that Schubert would
consider extending the agreement based on Knutson’s performance there. At this point
the parties were far apart, with Young insisting on a deal only through 2012 and Foster
demanding a deal through 2016.
Although Foster believed that the “bargaining chip for the whole
negotiation period [was] that we could go to the press,” he also believed that taking the
story to the press would cause USA Swimming to want to pursue litigation. Foster never
suggested to Knutson the possibility of involving or threatening to involve the press as a
bargaining tool.
Foster testified he did not think Knutson was “in a position to go through a
couple of years of litigation” and did not believe she would succeed in litigating against
USA Swimming because the oral contract would be barred by the statute of frauds.
However, Foster knew that Knutson detrimentally relied on the promises Schubert made
by, among other things, giving up her chance to go to Auburn, becoming a professional
swimmer, and moving to Fullerton.
6
In an e-mail dated November 16, 2010 to Foster, Wielgus stated:
“STRICTLY CONFIDENTIAL—PLEASE JUST KEEP BETWEEN YOU AND ME [¶]
These situations are extremely disconcerting . . . and we will do our best to work through
them. [¶] Confidentially, I have posed the following questions to Bruce Stratton, Jim
Wood and Rich Young. [¶] 1. What is our position when we meet with Kate Ziegler next
[1]
Monday morning? (Given that whatever we do with Kate will certainly be precedent-
setting with Dagny.) [¶] 2. When Mark made promises that he had no authority to make,
is USA Swimming still responsible for fulfilling those promises? [¶] 3. Can any of this
be used in the settlement discussions with Mark’s attorney? Specifically, can we back
out from any agreed-to settlement amount the actual expenses that USA Swimming
would incur i[f] we fulfilled Mark’s promises to Kate and Dagny (and potentially
others)? [¶] 4. Mark’s actions would seem to evidence a recruiting violation (Section
304.1.13 of the Code of Conduct) . . . should we take action on this? Will this be
construed as retaliatory by his attorney? [¶] All this business with Mark is just so
depressing.” While Foster forwarded Wielgus’s e-mail to Morgenstein with the notation
“[k]eep this confidential so that I can stay in confidence with Chuck,” he never made
Knutson aware of Wielgus’s communication.
Foster responded to Wielgus’s November 16 e-mail: “As you know, I
represent a lot of athletes, including a fairly large group of swimmers. It is rare that an
issue arises between my clients and USA Swimming. If an issue comes up, I will discuss
it with you in hopes of resolving the issue. I won’t however get involved with litigation
against USA Swimming. I have too many friends in your organization, including you.”
Foster had never informed Knutson in writing that he would not continue his
representation of Knutson if there was a lawsuit against USA Swimming. Knutson
herself testified that Foster never informed her about this at all.
1
Ziegler was another promising young swimmer to whom Schubert had also
made oral promises of support by USA Swimming.
7
On November 17, Wielgus sent Foster an e-mail stating that “USA
Swimming should fulfill the promises that Mark made to . . . Dagny, regardless of
whether or not he had the authority to make such promises.” Wielgus asked Foster to
provide him with “a written summary of exactly what . . . Dagny’s mom believe[s] was
promised to them by Mark, along with their very best estimate and expectation as to the
full extent of the financial commitment that USA Swimming would have to . . . them,” so
Wielgus could present the information to USA Swimming’s board of directors. In late
November, the USA Swimming board of directors approved a motion that the
organization would “make good” on Schubert’s promises to Knutson regarding living
expenses and tuition, with the details to be worked out and approved by Wielgus.
Wielgus advised Foster that Young would be confirming with Schubert the terms of the
agreement claimed by Knutson. Wielgus also noted that any final agreement would have
timetables and performance markers or metrics.
In an e-mail to Young on January 25, 2011, Foster stated that Schubert had
told Knutson, her parents, her previous coach, and others that USA Swimming “would
pay her room, board, tuition and books through the Olympics in 2016. . . . Dagny is a bit
furious because she says it would be absurd to leave a 5[-]year scholarship [at Auburn or
another university] to come to California for a two[-]year scholarship.” Later that same
day, Foster sent Young another e-mail stating: “Dagny and her mother are adamant. The
deal was through the 2016 Olympics. They want a response asap and are willing to file
suit if the deal is not honored. (Again, I would not handle that suit).”
On February 4, 2011, Young e-mailed Foster: “Mark [Schubert] could not
have been more clear that he did not give Dagny an unconditional commitment through
the 2016 Olympic Games. Rather, USA Swimming’s funding to her would be based on
her continued high level of performance. Mark was equally clear that the evaluation of
Dagny’s performance and continued support was to be made by him as Head Coach and
National Team Director. However, if Dagny would prefer to have USA Swimming’s
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post-2012 support tied down with identified performance criteria (e.g., continuous annual
FINA top 25 world ranking in an Olympic event), USA Swimming would be open to
tying down that criteria now.”
On March 15, 2011, Foster e-mailed Knutson to inform her that USA
Swimming was willing to settle the matter on the following terms: (1) assist Knutson
financially by getting her out of her lease in California and paying for one flight to
Florida; (2) pay her tuition from January 2011 through December 2012; (3) pay her
$1,000 per month in athlete support through June 2011; and (4) pay her tuition and
support after 2012 through 2016 if she was in the top 25 in the world in an Olympic event
based on FINA’s September ranking.
Knutson responded on March 16 explaining, inter alia, that the performance
marker “isn’t good because it adds pressure for me to do something for USA Swimming
when all they’ve done is negatively affected my career.” Foster forwarded this
attorney-client privileged document to Young at USA Swimming.
On March 19, Foster sent an e-mail to Knutson and Morgenstein, stating
that a performance marker “is not unreasonable” but should be modified to apply if
Knutson were “top 25 in the world or top 3 in the U.S.” (Italics added.) The e-mail also
stated: “At this point, I don’t think a lawsuit is advisable. While we may get more
money for Dagny, the attorneys’ fees would eat up the difference in our proposal and the
[2]
current counter-proposal. Also, filing suit against USA Swimming could have a
negative impact on Dagny’s ability to acquire future endorsement contracts.” Knutson
believed Foster’s representation that this was the best deal she could expect to receive,
and believed she had no choice but to accept the offer if she wanted to keep swimming.
Foster did not consult with any expert before making this recommendation
regarding performance markers to Knutson. Rather, he relied on Morgenstein, despite
2
At no time had Foster explained to Knutson that she might be able to find an
attorney to sue USA Swimming on a contingency fee basis.
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the fact that as a sports agent, Morgenstein stood to benefit from a performance marker
because it would give incentive to Knutson to perform well and he would make money
on endorsement deals. Foster made no inquiries to learn what percentage of collegiate
swimmers had ever met the specified performance marker even once, much less over a
continuous five-year period, before advising Knutson to accept it. Foster hired no
investigator or expert while representing Knutson, did not interview a single witness
other than Knutson herself, including Knutson’s coaches and mother, who were present
when Schubert made the promises. Foster never even met Knutson until her deposition
was taken in the present case.
Foster’s April 2, 2011 e-mail to USA Swimming stated, “We will agree to a
performance standard, even though no such standard was discussed. However, we would
like to make it top 25 in the world or top three in the U.S.”
During the negotiations for the settlement agreement, Foster informed USA
Swimming, without Knutson’s authority, that Knutson was out of money. Once, Foster
e-mailed Young: “Can we get this resolved ASAP? At the last meet, Dagny was going
to sleep at the airport because she is out of money.” On another occasion, Foster
forwarded to Wielgus an e-mail from Morgenstein that “Dagny has to pay $2500 for her
classes or they [will] drop her. How can we get this contract and payments??? [¶] It[’]s
causing her und[ue] stress!” And again, Foster e-mailed Young: “FYI, I’m getting more
and more pressure to file suit. Dagny is absolutely broke.” Foster testified he received
permission from either Knutson or Morgenstein to tell USA Swimming about Knutson’s
financial problems, but agreed that he never had Knutson’s written authority to divulge
attorney-client communications.
Foster sent the settlement agreement to Knutson and asked her to read it
and let him know if she had any questions. He never met with her or had a telephone
conference to discuss the agreement to ensure that she understood what she was
committing to. Indeed, after Foster sent the final agreement to Knutson, she responded,
10
“Some of it was hard for me to understand because of the wording.” Knutson also raised
specific questions regarding upfront payments from USA Swimming. Foster’s response
to Knutson reads: “We wanted to get a little more up front, but this is a good deal. Sign
the agreement, fax the signature page to me and mail the original.”
D.
KNUTSON AND USA SWIMMING REACH A DEAL.
The agreement between Knutson and USA Swimming was signed on
April 20, 2011. The terms of the deal were as follows: Tuition was provided from
January through December 2012. Between 2013 and 2016, all payments were contingent
upon Knutson being in the top 25 in the world or the top three in the United States in an
Olympic event based on FINA’s September rankings. The settlement agreement also
released Schubert, although Knutson received no additional consideration for doing so.
Foster never told Knutson she was releasing Schubert, or even that she had a right to sue
Schubert individually. The agreement also contained a confidentiality clause, precluding
Knutson from discussing her story outside her family and professional advisors. Foster
never explained the confidentiality clause to Knutson.
E.
WERE THE PERFORMANCE MARKERS ACHIEVABLE,
AND DID KNUTSON HAVE TO AGREE TO THEM?
At trial, Nancy Hogshead-Makar, an Olympic gold medalist, testified as an
expert witness for Knutson. Hogshead-Makar testified that the performance markers
included in the settlement agreement could not have been met by the most elite swimmers
in the world. “It’s onerous. It’s burdensome. It’s very rare that even the most elite
athlete would be able to make that standard.” She further testified that the markers were
neither realistic nor comparable to a college scholarship. Based upon her experience and
11
knowledge of other top-level swimmers, she testified that only one percent of all
swimmers would be able to meet the standard required by the performance markers.
Hogshead-Makar had never had any performance markers while swimming.
By contrast, based on her knowledge of NCAA rules, Hogshead-Makar
testified a college scholarship accommodates the “ups and downs that happen[] with
students, particularly student athletes.” Universities usually have counselors on staff paid
for by the school, “a medical team that is there for the athletes,” and a “safety net” for
students to assure that their academic and swimming careers would stay on track despite
life’s interruptions. Hogshead-Makar spoke with the Auburn University swimming
coach, who informed her that the services available there included emotional counseling,
medical care, academic accommodations for eating disorders or other issues, and a team
and peer support group “that is really unparalleled.”
Foster never explained to Knutson that, even if she refused to enter the
settlement agreement, she was already entitled to $2,500 per month if she maintained a
top 16 world ranking under the Athlete Partnership Agreements, a funding program
through USA Swimming. (Although the Athlete Partnership Agreements are discussed in
the appellate record, we have no specific details about them.) In addition, grants were
available to swimmers ranked in the top 32 in the world for tuition assistance.
F.
KNUTSON TAKES TIME OFF FROM SWIMMING AND EVENTUALLY RETIRES FROM THE SPORT.
After signing the deal with USA Swimming, Knutson transferred from
Fullerton to Florida to swim under another Olympic coach. But swimming was not the
same for her. “Every day I went to practice, meaning, I guess in my mind when I got to
Florida—it was kind of like a rain cloud always following me. It was always on my mind
that, I mean, that was something that I had to do. [¶] It didn’t . . . give me freedom to just
12
chase the original dreams I wanted. It was like I was swimming on egg shells or walking
on egg shells. I’m swimming not to lose.”
In early 2012, Knutson stopped swimming to enter treatment programs for
an eating disorder. (Knutson suffered from the eating disorder before signing the
settlement agreement; she did not tell Foster or USA Swimming about it.) USA
Swimming stopped paying Knutson in June 2012.
Knutson finished treatment in August 2012 and moved back to North
Dakota, where she resumed training with her former coaches. She swam in several meets
around the country.
In late 2013, she attempted to regain NCAA eligibility. To do so, the
NCAA required that she provide them with a copy of her agency agreement with
Morgenstein. After Knutson e-mailed Morgenstein three times without any real
response, Foster became involved. Morgenstein asked Foster to request a release from
Knutson. Foster told Knutson that Morgenstein could not find the agreement and had
asked for a “statement not holding him liable for [Knutson] turning pro” in exchange for
confirmation of the agency agreement. Knutson trusted Foster, and thought she had to
provide the release in order to get the information needed to regain NCAA eligibility.
Knutson received no consideration for the release of Morgenstein. After he received the
release, Morgenstein found the agency agreement and provided a copy to Knutson.
In October 2013, Knutson asked Morgenstein for “records of dates of my
payments to you from my mutual contract.” Morgenstein forwarded Knutson’s request to
Foster who wrote to Morgenstein: “I don’t see any problem. She has already waived any
claims against you which would be extremely weak in any event.”
Knutson did not regain her NCAA eligibility, and in February 2015, she
decided she would no longer swim competitively.
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G.
KNUTSON LEARNS ABOUT FOSTER’S CONFLICTS OF INTEREST.
In 2014, Knutson learned of Foster’s conflicts while representing her. She
felt “very betrayed” and believed he had manipulated and taken advantage of her because
she was naïve.
In April 2014, Knutson, through her new counsel, requested that Foster
produce his entire file, including but not limited to e-mails. When compared to
documents later produced in response to formal discovery requests, it became apparent
that Foster had not initially produced many documents, including his November 16, 2010
e-mail to Wielgus stating that he would not “get involved with litigation against USA
Swimming.”
H.
PROCEDURAL HISTORY
In September 2014, Knutson sued Foster for fraudulent concealment and
breach of fiduciary duty. During trial, the court granted nonsuit as to plaintiff’s
noneconomic damages flowing from breach of fiduciary duty.
The jury found in favor of Knutson on both causes of action, and awarded
economic damages of $217,810, past noneconomic damages of $250,000, and future
noneconomic damages of $150,000. The jury awarded no punitive damages, despite its
finding that Knutson proved by clear and convincing evidence that Foster engaged in
wrongful conduct towards Knutson with malice, oppression or fraud. Judgment was
entered in favor of Knutson.
3
Foster filed a motion for a new trial. The trial court granted the motion on
the grounds that Knutson failed to adduce evidence of causation and that the jury’s award
3
Foster also filed a motion for judgment notwithstanding the verdict. In light of
its ruling on the motion for a new trial, the court denied the JNOV motion as moot. On
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of damages was excessive. However, the court denied Foster’s motion on two other
grounds, namely that the trial court erred by refusing to instruct the jury on agency, and
that Knutson’s counsel’s closing argument was improper and constituted an irregularity
in the proceedings. Both Knutson and Foster filed notices of appeal.
DISCUSSION
I.
THE TRIAL COURT ERRED BY GRANTING FOSTER’S MOTION FOR A NEW TRIAL ON THE
GROUND OF INSUFFICIENCY OF THE EVIDENCE OF CAUSATION.
A.
Legal Principles and Standard of Review
“The authority of a trial court in this state to grant a new trial is established
and circumscribed by statute. [Citation.] [Code of Civil Procedure] section 657 sets out
seven grounds for such a motion: (1) ‘Irregularity in the proceedings’; (2) ‘Misconduct
of the jury’; (3) ‘Accident or surprise’; (4) ‘Newly discovered evidence’; (5) ‘Excessive
or inadequate damages’; (6) ‘Insufficiency of the evidence’; and (7) ‘Error in law.’”
(Oakland Raiders v. National Football League (2007) 41 Cal.4th 624, 633 (Oakland
Raiders).) “A new trial shall not be granted upon the ground of insufficiency of the
evidence to justify the verdict or other decision . . . unless after weighing the evidence the
court is convinced from the entire record, including reasonable inferences therefrom, that
the court or jury clearly should have reached a different verdict or decision.” (Code Civ.
Proc., § 657.)
“On appeal from an order granting a new trial the order shall be affirmed if
it should have been granted upon any ground stated in the motion, whether or not
specified in the order or specification of reasons.” (Code Civ. Proc., § 657.) “There are
two exceptions: Orders may not be affirmed on the ground of insufficiency of the
appeal, Foster does not address the ruling on the JNOV motion.
15
evidence or on the ground of excessive or inadequate damages unless that ground is
specified in the order.” (Oakland Raiders, supra, 41 Cal.4th at p. 634; see Code Civ.
Proc., § 657 [an order granting a motion for a new trial “shall not be affirmed upon the
ground of the insufficiency of the evidence . . . unless such ground is stated in the order
granting the motion”].) Code of Civil Procedure section 657 further provides “it shall be
conclusively presumed that said order as to such ground was made only for the reasons
specified in said order or said specification of reasons, and such order shall be reversed as
to such ground only if there is no substantial basis in the record for any of such reasons.”
Knutson’s lawsuit alleged Foster committed fraud and breached his
fiduciary duty while representing Knutson in her negotiations with USA Swimming. In
his motion for a new trial, Foster contended that Knutson was required to prove she
would have obtained a better result in the absence of Foster’s fraud and breaches of
fiduciary duty. The trial court granted Foster’s motion for a new trial on the ground, inter
alia, that “substantial factor causation [was] still an element of proof and . . . Plaintiff
need[ed] to prove that if the misrepresentations had not been made, or that full disclosure
of these relationships had been made and Plaintiff had employed another attorney . . . that
she would have received a better result.”
B.
The Trial Court Erred by Finding Insufficiency of the Evidence Regarding
the Causation Element for Both the Fraudulent Concealment and
Intentional Breach of Fiduciary Duty Claims.
Knutson contends the trial court erroneously granted the motion for a new
trial. She claims that the “‘better result’” method is an element unique to claims for
attorney malpractice, but is inapplicable to fraudulent concealment and intentional breach
of fiduciary duty claims asserted against an attorney. Foster argues the trial court did not
apply a “‘better result’” method but rather the substantial factor test for causation that is
16
applicable to Knutson’s claims: “The Superior Court did not hold that a party must
demonstrate that a ‘better result’ must be shown as a matter of law. Rather [it] held that,
under the facts of this case, the jury could not have properly found that Foster’s purported
fraud was a substantial factor in causing [Knutson]’s claimed damages without such a
showing.” For reasons we will explain, we conclude the trial court erred by applying an
incorrect legal standard for causation in granting a new trial.
1.
Legal Standards of Causation Concerning Attorney Malpractice
We begin our analysis by reviewing the standard of causation applicable to
legal malpractice claims, as legal malpractice is often conflated with claims of fraud and
breach of fiduciary duty asserted against attorneys.
In California, an attorney is subject to liability for malpractice “when his or
her negligent investigation, advice, or conduct of the client’s affairs results in loss of a
meritorious claim.” (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1092.) In a case
of legal malpractice based on negligence, a plaintiff must show that “but for the alleged
malpractice, it is more likely than not that the plaintiff would have obtained a more
favorable result.” (Viner v. Sweet (2003) 30 Cal.4th 1232, 1244, italics omitted.) In
Viner v. Sweet, the California Supreme Court cautioned that “[t]he requirement that the
plaintiff prove causation should not be confused with the method or means of doing so.
Phrases such as ‘trial within a trial,’ ‘case within a case,’ . . . and ‘better deal’ scenario
describe methods of proving causation, not the causation requirement itself or the test for
determining whether causation has been established.” (Id. at p. 1240, fn. 4.)
The purpose of the causation requirement is to safeguard against
speculative and conjectural claims and to ensure that damages awarded for the attorney’s
malpractice actually have been caused by the malpractice. (Viner v. Sweet, supra, 30
Cal.4th at p. 1241.) Because legal malpractice involves negligent conduct on the part of
an attorney (see Neel v. Magana, Olney, Levy, Cathcart & Gelfland (1971) 6 Cal.3d 176,
17
180), causation for legal malpractice is analyzed differently than causation for the
intentional torts of fraudulent concealment and intentional breach of fiduciary duty, of
which Foster was accused.
2.
Sufficient Evidence Was Presented at Trial to Establish Substantial Factor Causation
on the Claim for Fraudulent Concealment.
Fraud is an intentional tort distinct from malpractice. Fraud includes “[t]he
suppression of a fact, by one who is bound to disclose it.” (Civ. Code, § 1710, subd. (3).)
‘“[T]he elements of an action for fraud and deceit based on concealment are: (1) the
defendant must have concealed or suppressed a material fact, (2) the defendant must have
been under a duty to disclose the fact to the plaintiff, (3) the defendant must have
intentionally concealed or suppressed the fact with the intent to defraud the plaintiff,
(4) the plaintiff must have been unaware of the fact and would not have acted as he did if
he had known of the concealed or suppressed fact, and (5) as a result of the concealment
or suppression of the fact, the plaintiff must have sustained damage.’ [Citation.]” (Hahn
v. Mirda (2007) 147 Cal.App.4th 740, 748.)
Causation for fraud is properly determined using the substantial factor test.
(Strebel v. Brenlar Investments, Inc. (2006) 135 Cal.App.4th 740, 752.) “It is the element
of fraudulent intent, or intent to deceive, that distinguishes it from actionable negligent
misrepresentation and from nonactionable innocent misrepresentation.” (Ibid.)
“Causation requires proof that the defendant’s conduct was a ‘“substantial factor”’ in
bringing about the harm to the plaintiff.” (Williams v. Wraxall (1995) 33 Cal.App.4th
120, 132.)
Here, the trial court recognized the different standards of causation between
legal malpractice claims and fraud claims, but nevertheless erroneously applied the
malpractice standard of causation to the fraudulent concealment claim. Although the
18
court referred to the substantial factor for causation, it used and applied the but for test.
The order granting the motion for a new trial reads, in relevant part: “As to [Knutson]’s
fraud theory, substantial factor causation is still an element of proof and it only seems
reasonable to this Court that [Knutson] needs to prove that if the misrepresentations had
not been made, or that full disclosure of these relationships had been made and [Knutson]
had employed another attorney to deal with USA Swimming, that she would have
received a better result.”
When the correct standard of causation is applied, it is clear that sufficient
evidence supports the jury’s verdict on the fraud claim, and the trial court erred by
granting the motion for a new trial on this ground. Foster concealed from Knutson:
— he had a relationship with USA Swimming and its personnel;
— his relationship with USA Swimming created a conflict of interest
vis-à-vis his representation of Knutson;
— he would not litigate against USA Swimming, and he had shared that
information with USA Swimming during his negotiations on behalf of Knutson;
— he had refused to represent Schubert in litigation against USA
Swimming because he believed that would create a conflict of interest;
— he had told USA Swimming’s executive director that he did not want the
dispute between Knutson and USA Swimming “to escalate”;
— making her story public or taking it to the press would be a bargaining
chip for Knutson;
— Knutson might have an independent claim against Schubert;
— he did not believe she could prevail in litigation against USA Swimming
due to the statute of frauds;
— USA Swimming had provided him with confidential information he had
not shared with Knutson at USA Swimming’s request;
19
— he had told USA Swimming during the negotiations that Knutson was
out of money;
— the settlement agreement contained a release of Schubert and a
confidentiality provision;
— his representation that Knutson could reach the performance markers in
the settlement agreement was not based on any independent research;
— he had forwarded attorney-client privileged communications to USA
Swimming during the negotiations for the settlement agreement;
— he had withheld e-mails containing evidence of his conflicts of interest
when Knutson requested her file from his office; and
— Knutson might have been eligible for financial support through the
Athlete Partnership Agreements or other sources without entering the settlement
agreement.
A substantial factor in Knutson’s decision to enter into the settlement
agreement was Foster’s fraudulent concealment of the foregoing facts. The settlement
agreement contained unattainable performance markers that led to the loss of financial
support from USA Swimming and to feelings of despair, loss, and unhappiness. She
suffered both economic and noneconomic damages as a consequence. Knutson’s
economic damages were her lost tuition and support benefits. Knutson’s noneconomic
damages were the emotional distress and pain and suffering she experienced due to the
performance markers in the deal with USA Swimming.
The jury found Foster liable for fraud and awarded Knutson economic
damages of $217,810 and noneconomic damages of $400,000. There was enough
evidence to find that Foster’s fraud was a substantial factor in causing Knutson’s
damages.
20
3.
Sufficient Evidence Was Presented at Trial to Establish Substantial Factor Causation
on the Claim for Breach of Fiduciary Duty.
“The breach of fiduciary duty can be based upon either negligence or fraud
depending on the circumstances. [Citations.] It has been referred to as a species of tort
distinct from causes of action for professional negligence [citation] and from fraud
[citation].” (Ash v. North American Title Co. (2014) 223 Cal.App.4th 1258, 1276.) “The
elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary
relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v.
Goldman (2011) 51 Cal.4th 811, 820.)
The trial court applied the legal malpractice standard of causation to
Knutson’s intentional breach of fiduciary duty cause of action. The court cited The
Rutter Group’s treatise on professional responsibility to equate causation for legal
malpractice with causation for all breaches of fiduciary duty: “‘The rules concerning
causation, damages, and defenses that apply to lawyer negligence actions . . . also govern
actions for breach of fiduciary duty.’” (See Vapnek et al., Cal. Practice Guide:
Professional Responsibility (The Rutter Group 2017) ¶ 6:425.5, pp. 6-171 to 6-172, citing
Rest.3d Law Governing Lawyers, § 49, com. e, pp. 349-352.) This statement of the law
is correct, however, only as to claims of breach of fiduciary duty arising from negligent
conduct.
Substantial factor causation is the correct causation standard for an
intentional breach of fiduciary duty. (Stanley v. Richmond, supra, 35 Cal.App.4th at
p. 1095.) As the court stated in that case: “It is plaintiff’s burden to establish ‘“a
reasonable basis for the conclusion that it was more likely than not the conduct of the
defendant was a substantial factor in the result.”’” (Ibid.) The authors of the
Restatement Third of the Law Governing Lawyers recognized that causation for
intentional breach of fiduciary duty might be treated differently from negligent breach:
21
“Under generally applicable fiduciary law, a claim of intentional breach might render
applicable different defenses and causation and damages rules than would otherwise
control.” (Rest.3d Law Governing Lawyers, § 49, com. e, pp. 350, italics added.)
Here, Knutson’s claim for breach of fiduciary duty is based on intentional
conduct and, thus, is subject to the substantial factor standard of causation. Knutson’s
counsel argued at trial that Foster breached the following four fiduciary duties: “Loyalty,
conflicts, not keeping the client informed, and failing to protect confidential
information.” The jury needed only to find that one of the claims for the breach of
fiduciary duty was a substantial factor in causing harm to Knutson, and it did so.
Applying the correct test of causation, we conclude there was sufficient
evidence to support Knutson’s breach of fiduciary duty cause of action. The evidence
established Foster breached his duty of loyalty by engaging in the following intentional
acts:
— failing to provide written disclosures to Knutson of his relationships
with USA Swimming;
—failing to ensure Knutson understood the terms of the settlement with
USA Swimming;
—failing to employ all negotiation strategies beneficial to Knutson (such as
threatening to go public with the dispute);
— failing to disclose all communications he received from USA Swimming
personnel;
— failing to obtain any consideration for Knutson while encouraging her to
sign a release of claims against Morgenstein; and
— telling Morgenstein that Knutson’s claims against him would be weak.
The evidence established Foster breached his duty to avoid conflicts of
interest by failing to advise Knutson in writing of his relationships with USA Swimming
and Schubert. He breached his duty to keep Knutson informed by failing to share with
22
her “confidential” information provided by USA Swimming. He breached his duty to
protect confidential information by forwarding to USA Swimming privileged
attorney-client communications, and by disclosing Knutson’s financial condition without
her knowledge or consent. And Foster breached his duty to provide Knutson a complete
copy of her client file when requested. These breaches of Foster’s fiduciary duty caused
Knutson harm initially by failing to provide her with all the information she needed to
make an informed decision about entering into the settlement agreement with USA
Swimming and failing to ensure that Knutson’s best interests were being protected by
Foster during the negotiations. Knutson was also harmed when she later learned of the
Foster’s breaches and suffered emotional distress.
II.
THE TRIAL COURT ERRED BY GRANTING FOSTER’S MOTION FOR A NEW TRIAL ON THE
GROUND OF EXCESSIVE DAMAGES.
A.
The Trial Court Erred by Concluding Testimony by a Lay Witness Was Insufficient, in
This Case, to Establish Emotional Distress Damages.
The trial court also granted the motion for a new trial on the ground that the
award of noneconomic damages was excessive because there was no evidence supporting
them: “Turning to the jury’s award of non-economic damages, [Foster] argues that the
award of $400,000 was unsupported by the evidence and the Court agrees. [Foster]’s
argument and some description of evidence in the opposition are that no expert testimony
connected emotional distress and [Foster]’s conduct, that [Knutson] stipulated she was
not seeking damages for the eating disorder . . . , she stipulated that she lost NCAA
eligibility before [Foster]’s involvement so emotional distress could not be attributed to
that, and finally there was minimal evidence of emotional distress at trial—consisting of
[Knutson]’s testimony about feeling betrayed, violated, and manipulated by [Foster]
which included her apparently tearing up during her testimony.” (Italics added.) We
23
consider whether expert testimony is required to support Knutson’s claim for
noneconomic damages.
The law in this state is that the testimony of a single person, including the
plaintiff, may be sufficient to support an award of emotional distress damages. “If
credited by the jury, appellant’s testimony about the extreme pressure she was under and
her state of mind during the last few weeks of Richmond’s representation—including
feelings of abandonment and betrayal by her attorney, anxiety over her possible loss of
her family home, and undue pressure to obtain financing on a timetable established for
the benefit of her attorney and opposing counsel—as well as her loss of lifetime health
benefits, may well be sufficient to support an award of damages for emotional distress
from the alleged breaches of fiduciary duty.” (Stanley v. Richmond, supra, 35
Cal.App.4th at p. 1097; see McLaughlin v. National Union Fire Ins. Co. (1994) 23
Cal.App.4th 1132, 1162-1163 [emotional distress damages in insurance bad faith action
may be established by the plaintiffs’ testimony; it was improper for the jury to award
emotional distress damages to those plaintiffs that neither testified nor produced other
evidence of their damages]; Tan Jay Internat., Ltd. v. Canadian Indemnity Co. (1988)
198 Cal.App.3d 695, 708.)
Numerous cases approve the award of emotional distress damages based on
the testimony of nonexpert witnesses. In Little v. Stuyvesant Life Ins. Co. (1977) 67
Cal.App.3d 451, 465, the appellate court affirmed the jury’s award of emotional distress
damages because there was sufficient evidence to support it. The opinion does not
indicate any expert testimony was offered to establish the plaintiff’s emotional distress.
Rather, the opinion quotes the plaintiff’s own testimony that the loss of her disability
benefits led to her need to borrow money and the sale of her home, which caused her “to
feel that she was ‘just nothing any more, useless.’ She was deeply depressed. She
testified: ‘I just—I didn’t feel like—I didn’t want to sell my house; I didn’t want to leave
and—I had three children down there [in San Bernardino], grandchildren; nice neighbors.
24
[¶] The house I had was very efficient; it was—was something I had always dreamed of,
maybe, a little Spanish house. All my furniture was Spanish. [¶] It was something I fell
in love with the minute I walked in the door. And to leave it to—to—not even knowing
where I was going to go, not knowing what I was going to do—I was just very, very
depressed, felt sick.’” (Id. at p. 460.) The plaintiff further testified that when she learned
she would only realize $1,765 from the sale of her house, she felt “anguish. ‘So I just—I
figured I wouldn’t get anything back at all. I was just completely—I saw red. [¶] I just
decided I didn’t want anything to do with anybody—the insurance company—I didn’t
care, I just wanted to forget everything, go to sleep, forget the whole works. I was
thoroughly disgusted and depressed and really down.’” (Ibid.)
In Iwekaogwu v. City of Los Angeles (1999) 75 Cal.App.4th 803, 821, the
appellate court affirmed a judgment of which $450,000 was attributable to emotional
distress damages due to racial discrimination. The testimony regarding the plaintiff’s
emotional distress was as follows: “With respect to evidence concerning [the plaintiff]’s
emotional distress, [the plaintiff] testified that he has nightmares about his supervisors
‘going after [him] at night,’ that he is under stress, that he has been treated by a doctor
with medication for high blood pressure, that his relationship with his children has
changed, that his wife threatened to leave him because of his ‘stressed-out’ condition
caused by his work situation, that he has trouble sleeping and that he eats less. He
worries about mortgage payments and his future ability to afford private schooling for his
children. Although he was referred for psychological counseling, there was no testimony
that he received treatment from a psychologist or psychiatrist. No medical practitioner
testified concerning his emotional distress. [The plaintiff]’s wife testified that he used to
be a fun-loving person but has changed. She testified that [the plaintiff] now cries a lot
and has withdrawn from activities with his children and with social acquaintances. She
confirmed that she had threatened to leave her husband because he was unhappy and
would not communicate. She testified that they were having difficulty paying bills and
25
that they could not afford to send their children to private school.” (Id. at p. 812, italics
added.)
Testimony of an expert witness is required when the subject matter “is
sufficiently beyond common experience that the opinion of an expert would assist the
trier of fact.” (Evid. Code, § 801, subd. (a).) The emotional distress to which Knutson
testified is not beyond the common experience of the jurors. Knutson testified that the
performance markers in the agreement led to stress and extra pressure that made
swimming an emotionally painful activity.
“Q. How do you describe—after the agreement was entered into with USA
Swimming in April of 2011, can you describe in your own words any stress of extra
pressure you felt in having to meet that standard? [¶] . . . [¶]
“A. Every day I went to practice, meaning, I guess in my mind when I got
to Florida—it was kind of like a rain cloud always following me. It was always on my
mind that, I mean, that was something that I had to do.
“It didn’t—to me, it didn’t give me freedom to just chase the original
dreams I wanted. It was like I was swimming on egg shells or walking on egg shells.
I’m swimming not to lose.”
Knutson also testified that when she learned about Foster’s duplicitousness,
she felt betrayed and developed a lack of trust in others that continued through the time of
trial.
“Q. When you found out about things that Mr. Foster had done when he
represented you, as you indicated you found these things out recently, how did it make
you feel?
“A When I found all this information out, I felt very betrayed.
“Q. Can you elaborate as to what you mean by ‘betrayed’?
“A. Ever since I was eight years old, before I started swimming, all
I wanted to do was go to the Olympics.
26
“I put my whole life into the sport of swimming. And it wasn’t fair to me
what I found out. It wasn’t fair to my family who sacrificed just as much to make sure
I could go to a swim meet, and I just—I don’t know how I’m supposed to trust someone
like that again.
“I just assume people are not good, like I used to—I felt manipulated and
taken advantage of because I was naïve. I didn’t know. I didn’t know.
“I remember last summer, I drove from Phoenix to North Dakota to spend
the summer at home. And the second half of the trip, I was supposed to stay with a
family from South Dakota just to break up the drive, and I just sobbed on the way home;
my swimming career and not—not being able to swim with the same friends and not
being able to accomplish things that I really wanted to.
“I felt violated that someone did that, and shared that stuff with other
people, and I didn’t know about it. I just wanted to go home to my dad.
“So I got home about 3:00 in the morning, because I just couldn’t get
myself to have to stay with someone else.”
Because expert testimony was not necessary to support Knutson’s
testimony, the trial court erred by granting the motion for a new trial on the issue of
Knutson’s emotional distress damages. We note that there may be certain cases where
testimony of an expert witness would be necessary to support all or part of an emotional
distress damages claim. For example, expert testimony would be required to the extent a
plaintiff’s damages are alleged to have arisen from a psychiatric or psychological
disorder caused or made worse by a defendant’s actions and the subject matter is beyond
common experience. We are not addressing such a case here. In this case, the emotional
distress damages arose from feelings of anxiety, pressure, betrayal, shock, and fear of
others to which Knutson herself could and did testify. Expert testimony was not required.
27
B.
Because There Was Sufficient Evidence of the Causal Connection Between Foster’s
Actions and Knutson’s Damages, the Trial Court Erred by Granting a New Trial on the
Ground Those Damages Were Excessive.
The trial court also granted the motion for a new trial on the ground of
excessive damages because there was no causal connection between Foster’s wrongful
conduct and the damages awarded. “The Court finds that because there was a failure to
provide sufficient evidence to provide the necessary causal connection between [Foster]’s
wrongful conduct and the full amount of the economic damages provided in the
testimony of witness Graves, the award of the economic damages by this jury was
excessive and based on insufficient evidence[,] entitling [Foster] to a New Trial.” For the
same reasons we reverse the order granting the motion for a new trial as to causation, we
also reverse the order as to the damages on this ground.
C.
Because the Trial Court’s Order Did Not Specify that Damages Were Excessive Due to
Not Being Limited to the Time Period After the Fraud Was Discovered, We Need Not
Address the Issue on Appeal.
Knutson argues that the trial court erred by limiting her damages to those
suffered after she discovered the fraud committed by Foster. Knutson contends she is
entitled to damages incurred from the time the fraud was committed. This was not,
however, a ground for granting the new trial specified in the statement of reasons in the
trial court’s order granting the motion for a new trial. The trial court’s oral statements
4
made at the hearing on the motion are not part of the final order.
4
At the hearing, the trial court stated: “The damages occur when she discovers
the fraud.” The trial court also stated: “I’m saying that the damages in this case were
non-economic damages of embarrassment, the feeling of the betrayal, the disappointment
that she felt when she was informed by her new lawyer of these facts that she was
previously unaware of.”
28
III.
WE NEED NOT ADDRESS THE TRIAL COURT’S NONSUIT ORDER REGARDING EMOTIONAL
DISTRESS DAMAGES DUE TO OUR RESOLUTION OF THE APPEAL FROM THE ORDER GRANTING
THE MOTION FOR A NEW TRIAL.
During trial, the court granted nonsuit as to Knutson’s recovery of
emotional distress damages from Foster’s breach of fiduciary duty. On appeal, Knutson
asks this court to review this order only if we were to affirm the new trial court’s order
granting the motion for a new trial. Because we reverse that order, we need not address
this argument further.
IV.
THE TRIAL COURT DID NOT ERR BY DENYING FOSTER’S MOTION FOR NONSUIT ON THE ISSUE
OF CAUSATION.
Following the presentation of Knutson’s case, Foster moved for nonsuit on
the ground Knutson had failed to prove her damages had been caused by Foster. (Code
Civ. Proc., § 581c.) The issues presented by this argument have been fully addressed
ante, in connection with Knutson’s argument that the trial court erred in granting the
motion for a new trial on causation.
V.
THE TRIAL COURT DID NOT ERR BY DENYING FOSTER’S MOTION FOR A NEW TRIAL WITH
REGARD TO JURY INSTRUCTIONS AND THE SPECIAL VERDICT ON THE ISSUE OF AGENCY.
Foster contends that Morgenstein was Knutson’s agent, both for purposes
of the statute of limitations (whether Morgenstein’s knowledge that Foster had a
relationship with Schubert and USA Swimming might be imputed to Knutson) and of
consent to violation of confidentiality (whether Morgenstein was acting as Knutson’s
agent when he asked Foster to provide information regarding Knutson’s financial
condition to USA Swimming during their negotiations).
29
Foster proposed several special jury instructions defining actual and
ostensible agency and explaining imputation of knowledge from an agent to the principal.
The trial court denied Foster’s request for these instructions. Foster also proposed a
special verdict form that included the following question with respect to the statute of
limitations for breach of fiduciary duty: “Before September 15, 2013, did Plaintiff
Dagny Knutson or her agent know of facts, or would a reasonable investigation have
disclosed facts, that would have caused a reasonable person to suspect that she had
suffered harm that was caused by someone’s wrongful conduct?” (Italics added.)
Similarly, with respect to the statute of limitations on the cause of action for fraud, the
proposed special verdict form stated: “Before September 15, 2011, did Plaintiff Dagny
Knutson or her agent know of facts, or would a reasonable investigation have disclosed
facts, that would have caused a reasonable person to suspect that she had suffered harm
that was caused by someone’s wrongful conduct?” (Italics added.) The trial court did
not include in the special verdict forms Foster’s proposed language regarding agency.
A party is entitled to have the jury instructed on its theory of the case
provided that party requests and submits legally correct instructions, and there is
sufficient evidence to support the theory. (Thompson Pacific Construction, Inc. v. City of
Sunnyvale (2007) 155 Cal.App.4th 525, 547.)
It is well-established under California law that “[b]oth principal and agent
are deemed to have notice of whatever either has notice of, and ought, in good faith and
the exercise of ordinary care and diligence, to communicate to the other.” (Civ. Code,
§ 2332.) An agent’s knowledge acquired before or during the agency is imputed to the
principal if it concerns the subject of the agency and is within its scope. (Capron v. State
of California (1966) 247 Cal.App.2d 212, 232.)
Morgenstein admitted he did not have an athlete representation agreement
executed by Knutson. Morgenstein’s athlete representation agreement, which apparently
was signed by Knutson’s mother, provided that Morgenstein would “develop, negotiate,
30
organize and administer all income producing opportunities and activities that may be
available to [Knutson] as a result of [Knutson’s] reputation as a celebrity and athlete.”
Knutson’s consultation with Foster was not an “income producing opportunity.” There is
no evidence that Morgenstein was Knutson’s agent for any other aspect of her life.
To the contrary, the athlete representation agreement expressly recited that it did not
confer a general “Right of Attorney.” The trial court did not err.
VI.
THE TRIAL COURT DID NOT ERR BY DENYING FOSTER’S MOTION FOR NONSUIT ON THE
STATUTE OF LIMITATIONS DEFENSE.
Knutson executed the settlement agreement with USA Swimming in April
2011. This action was filed more than three years later, on September 15, 2014. Foster
contends that Knutson’s case was barred by the applicable statutes of limitations, and that
the trial court should therefore have granted Foster’s motion for nonsuit on this ground.
In reviewing an order denying a motion for nonsuit, we view the evidence
in the light most favorable to the plaintiff. Denial of a nonsuit motion will be reversed
only when “no substantial evidence exists tending to prove each element of the plaintiff’s
case.” (Adams v. City of Fremont (1998) 68 Cal.App.4th 243, 263.)
The limitations period for a breach of fiduciary duty cause of action is “one
year after the plaintiff discovers, or through the use of reasonable diligence should have
discovered, the facts constituting the wrongful act or omission, or four years from the
date of the wrongful act or omission, whichever occurs first.” (Code Civ. Proc., § 340.6,
subd. (a) [action against attorney for wrongful act or omission]; Stoll v. Superior Court
(1992) 9 Cal.App.4th 1362, 1363-1364 [Code Civ. Proc., § 340.6 applies to breach of
fiduciary duty claim based on attorney malpractice].) The limitations period for
Knutson’s fraud claim is three years; the limitations period does not begin to run until the
31
aggrieved party discovers the facts constituting the fraud. (Code Civ. Proc., § 338,
subd. (d).)
To invoke delayed accrual, a plaintiff must prove facts showing (1) lack of
knowledge; (2) that in the exercise of reasonable diligence, the facts could not have been
discovered at an earlier date; and (3) how and when the plaintiff actually discovered the
fraud or mistake. (3 Witkin, Cal. Procedure (5th ed. 2016) Actions, § 659, and cases
cited therein.) When a plaintiff has notice or information of circumstances sufficient to
put a reasonable person on inquiry, or has the opportunity to obtain knowledge from
sources open to his or her investigation, the statute begins to run.
Foster’s motion for nonsuit on statute of limitations grounds was based
entirely on Morgenstein’s knowledge in 2010 that Foster had previously represented
Schubert. Foster argued that because Morgenstein was Knutson’s agent, his knowledge
must be imputed to Knutson. “The basis for imputing knowledge to the principal is that
the agent has a legal duty to disclose information obtained in the course of the agency and
material to the subject matter of the agency, and the agent will be presumed to have
fulfilled this duty. [Citations.] The scope of the imputation of knowledge is directly
related to the scope of the duty arising from the agency agreement; it has nothing to do
with whether the agent actually has the information in question or has it only
constructively.” (Triple A Management Co. v. Frisone (1999) 69 Cal.App.4th 520,
534-535.) The evidence before the court included the athlete representation agreement,
signed by Knutson’s mother and Morgenstein, which provided that Morgenstein was
Knutson’s agent for purposes of endorsement deals and income-producing opportunities.
Morgenstein did not have authority to represent Knutson in connection with legal
matters, and therefore any knowledge Morgenstein had regarding Foster’s previous
representation of Schubert cannot be imputed to Knutson. In fact, the agreement signed
by Knutson’s mother and Morgenstein specifically limits any claim that Morgenstein had
32
a general power of attorney to act as Knutson’s agent: “PMG does not possess Right of
Attorney.”
VII.
THE TRIAL COURT DID NOT ERR BY DENYING FOSTER’S MOTION FOR A NEW TRIAL BASED ON
IRREGULARITY OF THE PROCEEDINGS CAUSED BY THE ALLEGED MISCONDUCT OF COUNSEL
DURING CLOSING ARGUMENT.
Foster contends the trial court erred by denying his motion for a new trial
based on Knutson’s counsel’s alleged misconduct. Attorney misconduct that rises to the
level of an “irregularity in the proceedings” preventing a party from having a fair trial
may be grounds for a new trial. (Code Civ. Proc., § 657, subd. 1; Bell v. Bayerische
Motoren Werke Aktiengesellschaft (2010) 181 Cal.App.4th 1108, 1122.) Arguing facts
not justified by the record, or suggesting that the jury engage in speculation, may be
misconduct. (Malkasian v. Irwin (1964) 61 Cal.2d 738, 747.) However, a new trial is
only proper “if it is reasonably probable that the party moving for a new trial would have
obtained a more favorable result absent the misconduct.” (Bell v. Bayerische Motoren
Werke Aktiengesellschaft, supra, 181 Cal.App.4th at p. 1122.)
Foster cites two instances of alleged attorney misconduct during closing
argument. First, Knutson’s counsel argued “[t]here is nothing more vile and degrading
than getting down on your knees and throwing up in a toilet, but she did this to make
herself feel better.” Foster contends this argument was highly prejudicial, and violated a
stipulation that Knutson was not contending and would not attempt to admit any evidence
5
that Foster’s actions caused or exacerbated her eating disorder.
5
Before trial, Foster filed a motion in limine to exclude expert testimony from
Sherri Bates, Psy.D., who was retained to testify as to the nature and extent of Knutson’s
eating disorder, and the extent to which Foster’s actions caused or exacerbated that
disorder. Knutson’s trial counsel decided not to pursue that claim for relief, and therefore
advised the court he would not call Dr. Bates as a witness, unless Foster offered evidence
that Knutson had withdrawn the claim or that Knutson had retained an expert to testify
33
In denying the new trial motion on this ground, the trial court correctly
found that Foster waived the issue by failing to timely object to the argument. (Garcia v.
ConMed Corp. (2012) 204 Cal.App.4th 144, 148 [claim of misconduct of counsel waived
unless objection is made].)
Second, Knutson’s counsel argued, with regard to the testimony of one of
Knutson’s experts, Alison Buchanan, that due to the communications between Foster and
USA Swimming regarding Knutson’s financial issues, “You may as well have announced
a fire sale. Wink, wink. Nod, nod, my client’s ripe for settlement. She’s broke. [¶] That
is a breach of the duty of loyalty, which is another breach of a fiduciary duty.” Foster
contends this argument was improper because Buchanan was precluded from testifying
that Foster’s representation of Knutson fell below the standard of care in representing her.
Following an Evidence Code section 402 hearing on Buchanan’s qualifications, the trial
court ruled that she could not opine as to Foster’s exercise of competence in the
negotiations of the deal “other than talking about general terms.” The court also ruled
that she could testify about “disclosure of potential conflicts, confidentiality, and perhaps
in a limited fashion as to the acts that are in the utmost good faith in plaintiff’s interest.”
Foster neither objected to the argument, nor to the underlying testimony to
which Knutson’s counsel was referring. Foster therefore waived this issue. (Garcia v.
ConMed Corp., supra, 204 Cal.App.4th at p. 148.)
In any event, Foster fails to show how he was prejudiced by either instance
of alleged attorney misconduct. Even egregious acts of misconduct do not require
reversal if prejudice has not been shown. (Pope v. Babick (2014) 229 Cal.App.4th 1238,
1250-1251; Garcia v. ConMed Corp., supra, 204 Cal.App.4th at p. 149.) The comments
complained of were isolated and not repeated, and no prejudice has been shown. (People
about it. Foster withdrew the motion in limine.
34
v. Pensinger (1991) 52 Cal.3d 1210, 1250.) We conclude that the trial court did not err in
denying the motion for a new trial based on attorney misconduct.
DISPOSITION
The postjudgment order granting Foster’s motion for a new trial is reversed.
The matter is remanded with directions to reinstate the judgment. Appellant Dagny
Knutson to recover costs on appeal.
Pursuant to Business and Professions Code section 6086.8, subdivision (a)
and California Code of Judicial Ethics canon 3D(2), the clerk of this court is directed to
forward a copy of this opinion to the California State Bar and directly to Richard J. Foster
upon issuance of the remittitur.
FYBEL, J.
WE CONCUR:
MOORE, ACTING P. J.
ARONSON, J.
35