Gary Kuzmin v. Jimmy Jones, Dorothy Fary Jones, and David A. Schiller ( 2015 )

Affirmed; Opinion Filed January 8, 2015.
S
Court of Appeals
In The
Fifth District of Texas at Dallas
No. 05-13-01394-CV
GARY KUZMIN, Appellant
V.
DAVID A. SCHILLER, Appellee
On Appeal from the 429th Judicial District Court
Collin County, Texas
Trial Court Cause No. 429-01580-2012
MEMORANDUM OPINION
Before Justices Fillmore and Stoddart 1
Opinion by Justice Stoddart
This is an appeal from a summary judgment rendered in a legal malpractice case. The
client, Gary Kuzmin, sued attorney David A. Schiller alleging Schiller was negligent by entering
into a business transaction with Kuzmin and another of Schiller’s clients, Jimmy Jones. Kuzmin
also alleged Schiller was negligent by not insisting Kuzmin obtain independent counsel and by
not advising Kuzmin of the statute of limitations on Kuzmin’s claim against Jones for breaching
an agreement to buy Kuzmin’s investment in the business. Schiller filed a traditional and no-
evidence motion for summary judgment. The trial court sustained Schiller’s objections to some
of Kuzmin’s summary judgment evidence and later struck the affidavit and report of his expert
on damages. The trial court then granted Schiller’s motion for summary judgment. Kuzmin
1
Justice Kerry P. FitzGerald was a member of the original panel and participated in the submission of this
case; due to his retirement, he did not participate in the issuance of this opinion. See Tex. R. App. P. 41.1(b).
appeals and argues in two issues that the trial court erred by granting summary judgment and by
striking the damage expert.
The background of the case and the evidence adduced at trial are well known to the
parties; thus, we do not recite them here in detail. Because all dispositive issues are settled in
law, we issue this memorandum opinion. TEX. R. APP. P. 47.2(a), 47.4. We conclude Kuzmin
failed to challenge the trial court’s ruling excluding his expert’s opinions on proximate cause and
without those opinions, Kuzmin presented no evidence of proximate cause in response to the no-
evidence motion for summary judgment. We affirm the trial court’s judgment.
BACKGROUND
The summary judgment evidence indicates Schiller represented Kuzmin in several
matters over a period of years. Schiller approached Kuzmin in 2005 to discuss a business
proposal with Schiller’s other clients, Jimmy Jones and Dorothy Fay Jones. The Joneses owned
a gospel music television network, but were having financial difficulties. Dorothy owned a
company called 1 A Chord, Inc. (A Chord), which in turn owned the assets of the Gospel Music
Television Network (the Network). All the assets of the Network were pledged to secure a $5
million promissory note from A Chord to the prior owner of the Network, Seaton Broadcasting,
LLC.
In December 2005, Schiller formed a company called Gospel Television Management,
Inc. (GTMI), with the Joneses and Schiller as directors. In January 2006, Kuzmin, his wife, and
the Joneses signed a Conflict of Interest Waiver prepared by Schiller. The waiver recited that
Schiller would continue to represent them in other matters, but would only represent corporate
entities in the GTMI transactions. The waiver disclosed that Schiller had a ten percent stock
ownership in GTMI as payment for attorney’s fees. In addition, the waiver disclosed that if a
dispute arose between the parties, Schiller would not be able to represent any party to the waiver.
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On February 21, 2006, two letters of intent were signed, one between A Chord and
GTMI, and the other between the Kuzmins and the Joneses. Under these agreements, the
Kuzmins would own 57% of the stock of GTMI, the Joneses would own 33%, and Schiller the
remaining 10%. GTMI would attempt to acquire the assets of the Network by purchasing the
Seaton promissory note or would enter into management contracts with A Chord to manage the
Network assets. The Kuzmins agreed to acquire stock in GTMI for the sum of $2 million. They
paid a total of $531,000 as an initial payment on the stock purchase and payment of certain
operational expenses of the Network. The Kuzmins also executed a promissory note to the
Joneses for approximately $1.6 million.
In his affidavit, Kuzmin testified that Schiller never advised him to seek another attorney
to advise him about the GTMI transactions and never pointed out any risks or pitfalls regarding
the proposed transaction. Kuzmin stated, “Had an independent lawyer advised me of any pitfalls
with regards to the GTMI transaction, I would have given such advice strong consideration.”
Kuzmin took over day-to-day operations of the Network for a time, but by June 2006, he
had serious concerns about the Network relating to matters that had not been disclosed to him by
Jones. Kuzmin contacted Schiller to arrange a meeting with Jones to discuss whether Jones
would be willing to buy the Kuzmins’ interest in GTMI. The Joneses agreed to buy the
Kuzmins’ interest for $531,000 in satisfaction of all obligations and promissory notes between
the Kuzmins and the Joneses. Schiller prepared a buyout agreement and a later modification
reflecting these terms and both Kuzmin, individually and on behalf of his wife, and Jones,
individually and on behalf of his wife, signed the documents. However, the Joneses never paid
the Kuzmins under this buyout agreement.
Over the next several years, Kuzmin contacted Schiller several times about getting Jones
to make payment under the buyout agreement. At one point, Schiller told Kuzmin he was
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working with Jones to obtain financing to pay Kuzmin. Later, Schiller asked Kuzmin not to take
action against Jones and to give Schiller time to work with Jones to come up with the money.
Schiller also told Kuzmin he could not represent Kuzmin in a lawsuit against Jones and gave
Kuzmin the name of a lawyer to talk to about suing Jones.
Kuzmin hoped that GTMI would be sold and he would be paid from the sales proceeds.
Kuzmin had several discussions with Schiller about sales prospects and Schiller said there were
three or four interested buyers. In 2009, Schiller told Kuzmin that Jones had agreed to enter into
a repayment agreement, but Jones never signed the agreement. In 2010, Schiller told Kuzmin he
was still working to get Jones to sign the repayment agreement. However, in April 2010,
Schiller assisted Kuzmin in drafting a demand letter from Kuzmin to the Joneses for payment of
the 2006 buyout agreement. In August 2011, Kuzmin contacted Schiller again. Schiller informed
Kuzmin that Jones was talking to his bank about financing and Schiller was assisting Jones in the
process. Kuzmin testified that Schiller never advised him of the statute of limitations on his
claim against the Joneses on the 2006 buyout agreement.
Kuzmin filed this lawsuit against the Joneses and Schiller on April 25, 2012. Kuzmin
later amended the suit to dismiss the Joneses and pursued only his claims against Schiller. In
response to Schiller’s traditional and no-evidence motion for summary judgment, Kuzmin filed
his affidavit, the affidavit of Ronald Reneker, an attorney expert on malpractice, and the affidavit
of Steven Hastings, an expert on valuation of businesses. Schiller objected to portions of these
affidavits and the trial court signed a written order granting several of the objections. The trial
court initially denied the motion for summary judgment. Schiller then filed a motion to strike
both expert witnesses and the trial court struck the valuation expert, Hastings. The same day, the
trial court signed an amended order granting Schiller’s motion for summary judgment. Kuzmin
appeals the summary judgment on his legal malpractice claim against Schiller.
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DISCUSSION
Kuzmin’s first issue argues the trial court erred by granting Schiller’s motion for
summary judgment. We review the trial court’s summary judgment de novo. Provident Life &
Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). We apply the well-established
standards for reviewing summary judgments. See TEX. R. CIV. P. 166a(c), (i); Timpte Indus.,
Inc. v. Gish, 286 S.W.3d 306, 310–11 (Tex. 2009) (no-evidence summary judgment standards of
review); Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex. 1985) (traditional
summary judgment standards of review).
A. Standard of Review
Because they are dispositive, we begin with the no-evidence grounds for summary
judgment. A no-evidence motion for summary judgment under rule 166a(i) must challenge
specific elements of the opponent’s claim or defense on which the opponent will have the burden
of proof at trial. TEX. R. CIV. P. 166a(i). The opponent must then present summary judgment
evidence raising a genuine issue of material fact to support the challenged elements. Id. In
reviewing a no-evidence summary judgment motion, we “review the evidence presented by the
motion and response in the light most favorable to the party against whom the summary
judgment was rendered, crediting evidence favorable to that party if reasonable jurors could, and
disregarding contrary evidence unless reasonable jurors could not.” Timpte Indus., 286 S.W.3d at
310 (citing Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006)); City of Keller v.
Wilson, 168 S.W.3d 802, 827 (Tex. 2005); Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193,
208 (Tex. 2002)). A genuine issue of material fact exists if the non-movant produces more than
a scintilla of evidence supporting the existence of the challenged element. Fort Worth
Osteopathic Hosp., Inc. v. Reese, 148 S.W.3d 94, 99 (Tex. 2004).
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B. Applicable Law
In the no-evidence motion for summary judgment, Schiller challenged each of the
elements of a legal malpractice cause of action: duty; breach; proximate cause; and damages.
See Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. Nat’l Dev. & Research Corp., 299 S.W.3d
106, 112 (Tex. 2009); Peeler v. Hughes & Luce, 909 S.W.2d 494, 496 (Tex. 1995). Proximate
cause has two elements: cause in fact and foreseeability. Akin, Gump, 299 S.W.3d at 122. Cause
in fact must be established by proof that (1) the negligent act or omission was a substantial factor
in bringing about the harm at issue, and (2) absent the negligent act or omission (“but for” the act
or omission), the harm would not have occurred. Id. “Causation must be proved, and conjecture,
guess, or speculation will not suffice as that proof.” Id. Breach of the standard of care and
causation are separate inquiries and “an abundance of evidence as to one cannot substitute for a
deficiency of evidence as to the other.” Alexander v. Turtur & Associates, Inc., 146 S.W.3d 113,
119 (Tex. 2004). Proof of causation typically requires expert opinion because the causal link
between an attorney’s negligence and the client’s harm often is beyond the jury’s common
understanding. See id.; Kelley & Witherspoon, LLP v. Hooper, 401 S.W.3d 841, 847 (Tex.
App.—Dallas 2013, no pet.).
When an attorney’s negligence involves the failure to prosecute a claim, the plaintiff
must present evidence the claim would have resulted in a judgment if properly prosecuted and, in
addition, that some amount would have been collected from the judgment debtor at or after the
time of the judgment. See Akin, Gump, 299 S.W.3d at 112; Cosgrove v. Grimes, 774 S.W.2d
662, 666 (Tex. 1989). This is often referred to as the “suit-within-a-suit” or “case-within-a-case”
requirement of a legal malpractice claim. See Kelley & Witherspoon, 401 S.W.3d at 847. The
amount of damages that would have been collectible in the prior suit is the greater of the amount
of damages that would have been either paid or collected from the defendant’s net assets. Akin,
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Gump, 299 S.W.3d at 109. Collectability is determined as of or after the time the prior judgment
would have been signed in the prior case. Id. Generally, the amount that would have been
collectible on an underlying judgment:
will be the greater of either (1) the fair market value of the underlying defendant’s
net assets that would have been subject to legal process for satisfaction of the
judgment as of the date the first judgment was signed or at some point thereafter,
or (2) the amount that would have been paid on the judgment by the defendant or
another, such as a guarantor or insurer.
Id. at 114.
C. Analysis
Kuzmin relied on Reneker’s affidavit to raise a fact issue on proximate cause. Reneker
opined that Schiller was negligent by entering into a transaction with a client and not insisting
Kuzmin obtain independent counsel; by representing both Kuzmin and Jones when a
disinterested lawyer would not have approved the joint representation; and by not advising
Kuzmin that in order for GTMI to have value, GTMI had to either acquire or foreclose the
Seaton note or enter into a management contract with A Chord, not assisting Kuzmin to do either
of those things, and not advising Kuzmin to obtain an independent lawyer to do them. Reneker
opined that these acts of negligence were the proximate cause of (1) Kuzmin’s decision to invest
$531,000 in GTMI when independent counsel would have strongly advised against the
investment and Kuzmin more likely than not would have followed that advice; and (2)
“Kuzmin’s loss of the value that his GTMI stock would have had if GTMI had obtained control”
of the Network.
Reneker also opined that Schiller was negligent by assisting Kuzmin in attempting to
collect from Jones and not advising Kuzmin of the statute of limitations on a claim against Jones
on the 2006 buyout agreement. Reneker opined that these acts of negligence were the proximate
cause of Kuzmin’s delay in independently seeking to collect on the 2006 buyout agreement and
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the running of the statute of limitations on that claim. Reneker did not express an opinion that
had suit been filed against the Joneses within limitations, it would have resulted in a judgment
favorable to Kuzmin and Kuzmin would have been able to collect that judgment from the
Joneses’ unencumbered and non-exempt assets at the time or after the judgment would have been
signed.
In his appellate brief, Kuzmin cites Reneker’s opinions and argues they raised a genuine
issue of material fact on proximate cause. However, the trial court sustained Schiller’s
objections to those opinions and excluded them by written order dated September 11, 2013.
Kuzmin’s appellate brief does not mention this order or assert the trial court erred by sustaining
the objections.
Schiller argues Kuzmin cannot rely on Reneker’s opinions on proximate cause on appeal
because the trial court excluded this evidence by written order and Kuzmin did not assign error
to that ruling in his appellate brief. As a result, Schiller argues there is no summary judgment
evidence on proximate cause in the record and we should affirm on that basis. In Kuzmin’s reply
brief, he argues his issue on appeal broadly attacked the trial court’s granting of summary
judgment for Schiller and the issue should be broadly construed to include a challenge to the
ruling on the objections to summary judgment evidence. For the first time, Kuzmin argues in the
reply brief that the trial court abused its discretion by excluding the evidence because the expert
used the correct definition of proximate cause and his opinion was not conclusory.
We will not consider summary judgment evidence that was excluded by the trial court
unless the appellant timely and successfully challenges the evidentiary ruling. See Vallance v.
Irving C.A.R.E.S., Inc., 14 S.W.3d 833, 838 (Tex. App.—Dallas 2000, no pet.) (“The trial court
sustained appellees’ objections to this evidence. Appellant does not challenge that ruling on
appeal. Therefore, no evidence supports appellant’s argument.”); Brooks v. Sherry Lane National
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Bank, 788 S.W.2d 874, 878 (Tex. App.—Dallas 1990, no writ) (holding party challenging
summary judgment waived any error in trial court’s striking portions of party’s affidavit by not
challenging that ruling on appeal). Where the trial court sustains objections to summary
judgment evidence and appellant does not challenge the evidentiary ruling on appeal, appellant
has waived error regarding that ruling and we may not consider the excluded evidence.
For the sake of argument, we accept that Kuzmin’s first issue on appeal—the trial court
erred by granting summary judgment—was broad enough to permit the argument that the trial
court also abused its discretion by excluding Kuzmin’s summary judgment evidence. See
Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970) (appellant may challenge
grounds asserted in motion for summary judgment by separate points of error or by general point
that allows argument as to all possible grounds on which summary judgment should have been
denied). Issues on appeal should be liberally construed to fairly and equitably adjudicate the
rights of litigants. Tittizer v. Union Gas Corp., 171 S.W.3d 857, 863 (Tex. 2005). We consider
the arguments supporting the issues and not merely the wording of issue. Id.
However, Kuzmin never argued in his opening brief that the trial court abused its
discretion by excluding portions of Reneker’s affidavit. See Cantu v. Horany, 195 S.W.3d 867,
871 (Tex. App.—Dallas 2006, no pet.) (we review rulings on objections to summary judgment
evidence for an abuse of discretion). He merely cited the opinions on proximate cause in support
of his argument that he presented sufficient evidence to avoid summary judgment. Kuzmin
argues in his reply brief that he effectively challenged the order excluding Reneker’s opinions by
citing a case defining proximate cause and detailing Reneker’s opinions. We disagree. Kuzmin
did not cite the appropriate standard of review for evidentiary rulings and did not mention the
trial court’s order sustaining the objections to the affidavit. There is simply no discussion or
analysis in Kuzmin’s appellate brief of how the trial court abused its discretion by excluding the
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opinions.
Kuzmin argues we should liberally construe his issue citing Tittizer, 171 S.W.3d at 863.
But this is not a mere mistake in the wording of the issue as in Tittizer. See id. (context of
litigation and text of argument in brief indicated party intended to appeal award of attorney’s
fees to Tittizer, even though point of error erroneously mentioned “the Gislers”). Here there is
no argument or analysis in Kuzmin’s opening brief to support the issue that the trial court erred
by excluding Reneker’s affidavit testimony on proximate cause. See id.; TEX. R. APP. P. 38.1(i).
While we liberally construe issues on appeal, we will not create arguments that could have—but
were not—raised in the brief. See Stovall & Associates, P.C. v. Hibbs Fin. Ctr., Ltd., 409
S.W.3d 790, 802-03 (Tex. App.—Dallas 2013, no pet.) (that appellant “could have but did not
make such an argument in its opening brief does not allow it to do so for the first time in its reply
brief”).
Kuzmin “could have but did not” argue in his opening brief that the trial court abused its
discretion by excluding part of Reneker’s affidavit. Id. He may not raise the argument for the
first time in his reply brief. Id. Issues raised for the first time in a reply brief are ordinarily
waived and may not be considered by an appellate court. Id.; Humphries v. Advanced Print
Media, 339 S.W.3d 206, 207–08 (Tex. App.—Dallas 2011, no pet.) (issue raised for the first
time in a reply brief will not be considered). We conclude the exclusion of Reneker’s opinions
on proximate cause is not properly before us. See Collin Cnty. v. Hixon Family P’ship, Ltd., 365
S.W.3d 860, 877–78 (Tex. App.—Dallas 2012, pet. denied); Dallas Cnty. v. Gonzales, 183
S.W.3d 94, 104 (Tex. App.—Dallas 2006, pet. denied).
In his affidavit, Kuzmin did state he would have given an independent attorney’s advice
“strong consideration.” However, without the excluded portions of Reneker’s affidavit, there is
no evidence an independent attorney would have advised Kuzmin against making the
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investment. Thus, Kuzmin’s statement that he would have given such advice strong
consideration does not raise a genuine issue of material fact as to proximate cause. Conjecture,
guess, or speculation will not suffice as evidence of causation. See Akin, Gump, 299 S.W.3d at
122.
CONCLUSION
We conclude Kuzmin failed to present summary judgment evidence raising a genuine
issue of material fact as to the element of proximate cause. See TEX. R. CIV. P. 166(a)(i). We
overrule Kuzmin’s first issue. Without evidence of proximate cause, we need not decide whether
the trial court abused its discretion by excluding the expert opinion on the value of Kuzmin’s
stock. Thus, Kuzmin’s second issue it is not necessary to disposition of this appeal and we need
not address the issue. See TEX. R. APP. P. 47.1. We affirm the trial court’s judgment.
/ Craig Stoddart/
CRAIG STODDART
JUSTICE
131394F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
GARY KUZMIN, Appellant On Appeal from the 429th Judicial District
Court, Collin County, Texas
No. 05-13-01394-CV V. Trial Court Cause No. 429-01580-2012.
Opinion delivered by Justice Stoddart.
DAVID A. SCHILLER, Appellee Justices FitzGerald and Fillmore
participating.
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.
It is ORDERED that appellee DAVID A. SCHILLER recover his costs of this appeal
from appellant GARY KUZMIN.
Judgment entered this 8th day of January, 2015.
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