Ryan v. Belin McCormick, P.C. ( 2018 )

IN THE COURT OF APPEALS OF IOWA
No. 16-1345
Filed January 10, 2018
MICHAEL C. RYAN AND RYAN DATA
EXCHANGE, LTD., d/b/a RYDEX, LTD.,
Plaintiffs-Appellees,
vs.
BELIN MCCORMICK, P.C.,
Defendant-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Glenn E. Pille
(summary judgment) and Donna L. Paulsen (trial), Judges.
A law firm appeals a declaratory judgment concerning the extent of its
attorney-client relationship with plaintiffs. DECISION VACATED.
Mark McCormick and Matthew C. McDermott of Belin McCormick, P.C.,
Des Moines, for appellant.
Kenneth R. Munro of Munro Law Office, P.C., Des Moines, for appellees.
Heard by Vogel, P.J., and Tabor and Bower, JJ.
2
BOWER, Judge.
Belin McCormick, P.C.,1 a law firm, appeals a declaratory judgment
concerning the extent of its attorney-client relationship with Michael Ryan and
Ryan Data Exchange, Ltd., doing business as Rydex, Ltd.2 We find the district
court improperly determined Rydex and Seneca Distribution, L.C. were involved
in a joint venture. We find there is no longer a justiciable controversy concerning
the nature, scope, and extent of the attorney-client relationship between Belin
and Rydex. We vacate the decision of the district court.
I. Background Facts & Proceedings
Christopher Risewick and his company, Seneca Distribution, L.C. were
long-time clients of Belin.3 Beginning in 1999, Seneca began investing in Rydex,
which held patents concerning a wireless fluid delivery control system. Belin
performed legal work pertaining to the relationship between Seneca and Rydex.
The relationship between Seneca and Rydex later led to litigation between them
and with other parties. This case involves just one piece in the larger picture of
litigation involving Seneca and Rydex.
On May 8, 2015, Rydex filed a declaratory judgment action against Belin,
asking for a determination of whether they had an attorney-client relationship,
and requesting Belin turn over all documents regarding its legal representation of
Rydex. The petition states:
WHEREFORE, the Plaintiffs request that the Court enters an
Order declaring that Belin McCormick PC had an attorney client
1
We will refer to Belin McCormick, P.C., as Belin.
2
For purposes of brevity, we will generally refer to Ryan and Ryan Data Exchange, Ltd.
together as Rydex.
3
We will refer to Risewick and Seneca Distribution, L.C., together as Seneca.
3
relationship with Michael Ryan and Rydex and that Michael Ryan
and Rydex are immediately entitled to a full copy of their file,
including but not limited to, any and all documents, emails,
pleadings, correspondence, discovery, billings, electronically stored
data, and any other item of any kind relating to the inventions and
U.S. patents that were the subject of the attorney client relationship.
Belin admitted it had an attorney-client relationship with Rydex where
Rydex’s interests aligned with those of Seneca, but stated the relationship did not
encompass the scope Rydex claimed. Belin claimed it did not perform any legal
services for Rydex after May 2002. Nonetheless, Belin gave Rydex copies of its
work associated with the relationship between Seneca and Rydex from January
2000 through January 2006.
Rydex filed a motion for partial summary judgment and Belin also filed a
motion for summary judgment. The district court denied the motions, stating,
“The scope, extent, and nature of the attorney–client relationship must be
determined by the fact-finder and will dictate whether Belin must produce
additional documents to Plaintiffs.”
A trial was held on April 27 and 28, 2016. In a post-trial brief, Rydex
stated:
Rydex seeks information beyond this time frame from Belin,
and Belin states that Rydex is not entitled to this information as it is
outside of the time Belin represented Rydex, and is protected by
attorney-client privilege. The determination of whether or not
Rydex is entitled to this information requires a finding by this Court
that Belin was in violation of disciplinary rules or rules of
professional conduct. As noted by the Court at the beginning of
this proceeding, that is beyond the scope of this Declaratory
Judgment Hearing, and the Court cannot and will not render such
an opinion. It is something that needs to be decided on a case-by-
case basis in other pending litigation.
4
The district court entered a ruling finding there was a joint venture
between Seneca and Rydex and Belin acted as counsel for this joint venture.
The court found Belin had an attorney-client relationship with Rydex from June
2001 to June 23, 2006. The court found the scope of the relationship included
several specific areas.4
Belin filed a motion pursuant to Iowa Rule of Civil Procedure 1.904(2),
stating it had already given Ryan all of the documents for the period from
January 2000 through January 2006, and based on Rydex’s posttrial brief, it was
no longer claiming documents outside that time period in this case. Belin
claimed the case no longer constituted a justiciable controversy, as Ryan had
already received all of the relief to which it was entitled. The district court
modified its ruling to provide the last date Belin provided legal services to Rydex
was January 23, 2006, and denied the rule 1.904(2) motion in all other respects.
Belin now appeals the district court’s decision.
II. Standard of Review
“The court's review of a declaratory judgment action depends upon how
the action was tried to the district court.” Van Sloun v. Agans Bros., 778 N.W.2d
174, 178 (Iowa 2010). “To determine the proper standard of review, we consider
the ‘pleadings, relief sought, and nature of the case [to] determine whether a
4
These areas were: (1) Rydex’s assets, (including [its patents]), (2) the business
relationship between Seneca Corporation, Chris Risewick and the Plaintiffs Michael
Ryan and Rydex, Ltd. . . . (3) the business or financial operations of Rydex and Michael
Ryan related to the above patents or wireless fluid delivery control systems, (4)
enforcing, licensing, protecting the patents and any legal actions or infringement actions
related to the above patents, (5) manufacturing, developing, marketing related to the
patents or any wireless fluid delivery control system, and (6) inventions of patents
related to the above patents or development of further products related to wireless fluid
delivery control systems.
5
declaratory judgment action is legal or equitable.’” Id. (quoting Passehl Estate v.
Passehl, 712 N.W.2d 408, 414 (Iowa 2006)). The parties agree this case was
tried at law. Therefore, our review is for the correction of errors at law. See Iowa
R. App. P. 6.907. “Under this standard of review, the trial court’s findings carry
the force of a special verdict and are binding if supported by substantial
evidence.” Van Sloun, 778 N.W.2d at 179. We are not bound by the trial court’s
legal conclusions. Id.
III. Joint Venture
Belin claims the district court erred by finding Seneca and Rydex were
involved in a joint venture, and Belin provided legal services for this joint venture.
We find there are two problems with the district court’s ruling on this issue.
First, in a declaratory judgment action, “the issues decided by the district court
should be limited to those directly or impliedly raised by the pleadings or litigated
with the consent of the parties.” Stew-Mc Dev., Inc. v. Fischer, 770 N.W.2d 839,
848 (Iowa 2009). “Declaratory judgment actions are subject to the same rules of
pleading and proof as other actions.” Smith v. Bitter, 319 N.W.2d 196, 201 (Iowa
1982).
Rydex filed a petition requesting a declaratory judgment concerning
whether Belin had an attorney-client relationship with Rydex and requesting
copies of all documents “that were the subject of the attorney-client relationship.”
In the ruling on the motions for summary judgment, the district court stated:
Determining the legal effect or enforceability of the demand note or
forbearance agreement, or the settlement including the costs of
Seneca’s legal representation, is not before this Court. Nor must or
should this Court weigh in on questions before other courts or
regarding pending or hypothetical litigation between other parties.
6
The present suit is between Rydex and Belin McCormick regarding
the scope, nature, extent of their attorney–client relationship.
Furthermore, after the trial, the district court noted there was other
pending litigation between Rydex and Seneca, and related litigation pending with
other parties. The court stated, “The focus of this Court is the very narrow issue
presented in this case, that is the extent, scope, and nature of any attorney-client
relationship.” Despite this statement, the court found, “The arrangement
between Seneca on the one hand and Ryan and Rydex on the other was a joint
venture.”
We find the district court erred by characterizing the relationship between
Seneca and Rydex as a joint venture. This part of the court’s ruling goes beyond
the very narrow issue presented in the petition for declaratory judgment for a
determination of the relationship between Belin and Rydex. We conclude no
determination should have been made in this case about the relationship
between Seneca and Rydex because this issue is beyond the scope of the
issues presented in the petition for a declaratory judgment. See Stew-Mc Dev.,
770 N.W.2d at 848.
The second problem with the ruling there was a joint venture between
Seneca and Rydex is the ruling could affect the legal rights of Seneca, although it
was not a party to the proceeding. A joint venture is a relationship, similar to a
partnership.5 Peoples Tr. & Sav. Bank v. Sec. Sav. Bank, 815 N.W.2d 744, 756
5
A joint venture has been defined “as an association of two or more persons to carry
out a single business enterprise for profit; also as a common undertaking in which two or
more combine their property, money, efforts, skill or knowledge.” Brewer v. Cent.
Constr. Co., 43 N.W.2d 131, 136 (Iowa 1950)). Additionally, it “is characterized by a
7
(Iowa 2012). “In a joint venture, as in a partnership, fiduciary relations are
created between the parties entered into the enterprise.” Goss v. Lanin, 152
N.W. 43, 45 (Iowa 1915); see also Greenberg v. Alter Co., 124 N.W.2d 438, 440
(Iowa 1963) (“There is no question but joint venturers like partners owe the duty
of finest loyalty and such loyalty continues throughout the life of the venture and
its dissolution.”).
In some instances, a declaratory judgment can be binding on a third party.
See Opheim v. Am. Interins. Exch., 430 N.W.2d 118, 121 (Iowa 1988) (finding
requisites of issue preclusion had been satisfied and the third-party had a
community of interest and adequate representation by another party). These
concerns do not arise when all of the parties with an interest to protect are made
a party to the declaratory judgment action. See Iowa Mut. Ins. Co. v. McCarthy,
572 N.W.2d 537, 541 (Iowa 1997); see also Iowa R. Civ. P. 1.234(2) (providing a
party is indispensable if “the party’s interest would necessarily be inequitably
affected by a judgment rendered between those before the court”).
While Belin had provided legal representation to Seneca for many years,
in the present case Belin was representing itself. Seneca may very well have an
independent interest in litigating the nature of its relationship with Rydex.
Because it was not a party, however, no witnesses appeared on its behalf at the
trial to address the issue of whether it had agreed to enter into a joint venture
with Rydex.6 We conclude it was improper for the court’s ruling to address
joint proprietary interest in the subject matter, a mutual right to control, a right to share in
the profits and a duty to share the losses.” Id.
6
“[A] joint venture can exist only by the voluntary agreement of the parties to it.” Farm
Bureau Serv. Co. v. Bavender, 217 N.W.2d 560, 563 (Iowa 1974).
8
issues which potentially could affect Seneca’s legal rights. We vacate the district
court’s decision on the issue of whether there was a joint venture because it is
outside the scope of the issues presented in the petition for a declaratory
judgment.
IV. Nature, Scope, and Extent of Attorney-Client Relationship
We turn to the issues raised by the petition for declaratory judgment. The
petition for declaratory judgment requested an order stating Belin and Rydex had
an attorney-client relationship and asked to have Belin give Rydex all of the
documents “that were the subject of the attorney-client relationship.” Belin
admitted there was an attorney-client relationship and gave Rydex all of the
documents in its possession relating to Rydex covering the period from January
2000 to January 2006.
The ruling on the motions for summary judgment explained the narrow
issue presented in the case, “The scope, extent, and nature of the attorney–client
relationship must be determined by the fact-finder and will dictate whether Belin
must produce additional documents to Plaintiffs.” In its posttrial brief, Rydex
stated it was seeking information beyond the time period of January 2000 to
January 2006, but recognized it could not obtain those documents in the current
action. It stated the question of whether it would receive additional documents
would “be decided on a case-by-case basis in other pending litigation.”
The issue of whether there remained a justiciable controversy was not
addressed in the district court’s ruling after the trial. Belin raised the issue in its
rule 1.904(2) motion. Rydex responded there were two issues before the court—
(1) the scope, extent and nature of the attorney-client relationship, and (2) the
9
issue regarding the documents. The district court found there was a justiciable
controversy between the parties.
“A case is moot if it no longer presents a justiciable controversy because
the issues involved are academic or nonexistent.” Homan v. Branstad, 864
N.W.2d 321, 328 (Iowa 2015). “Our test is whether an opinion would be of force
and effect with regard to the underlying controversy.” Id. Even if a case is moot,
it may still be decided if it involves an issue of public importance and the issue is
likely to recur. Id. at 330. If a case is moot and the public importance exception
does not apply, the case should be dismissed. Id. at 332-33.
We find the petition for declaratory judgment sought a ruling as to whether
Belin and Rydex had an attorney-client relationship and requested Belin be
required to give Rydex all of the documents “that were the subject of the
attorney-client relationship.” In denying the motions for summary judgment, the
district court found the scope, extent, and nature of the attorney-client
relationship was relevant to determine whether Belin would be required to
produce additional documents to Rydex. Thus, at the trial, the issue to be
determined was whether Rydex was entitled to documents beyond those it had
already received. In its post-trial brief, however, Rydex stated it was not seeking
any additional documents in this proceeding.
We conclude Rydex’s statement it was not requesting Belin turn over any
additional documents within the scope of this declaratory judgment action made
the issue of the nature, scope, and extent of the attorney-client relationship
between Belin and Rydex moot, as the determination of the nature, scope, and
extent of the relationship was relevant only as to whether Belin would be required
10
to turn over additional documents. Once Rydex stated it was not seeking any
other documents, issues concerning whether the relationship ended in 2002
rather than 2006, or whether certain subjects were included in the relationship or
not, ceased to matter because all of the documents in Belin’s possession relating
to Rydex were turned over. We find there is no longer a justiciable controversy
concerning the nature, scope, and extent of the attorney-client relationship
between Belin and Rydex.
When a case is moot it should be dismissed. Auto Owners, 887 N.W.2d
at 602. We conclude the issue concerning the nature, scope, and extent of the
attorney-client relationship became moot when Rydex filed its posttrial brief,
which was before the district court entered its ruling on June 9, 2016. We vacate
the district court’s ruling on this issue.
DECISION VACATED.