REED J. TAYLOR, Plaintiff-Appellant,
RICHARD A. RILEY and HAWLEY TROXELL ENNIS & HAWLEY, LLP, an Idaho limited liability partnership, Defendants-Respondents, and SHARON CUMMINGS, Personal Representative of the Estate of Robert M. Turnbow, and EBERLE BERLIN KADING TURNBOW & MCKLVEEN, CHTD., an Idaho Corporation.
Opinion No. 100
from the District Court of the Fourth Judicial District of
the State of Idaho, in and for Ada County. Hon. Richard D.
Greenwood, District Judge.
judgment of the district court is affirmed.
Roderick C. Bond, Roderick Bond Law Office PLLC, Bellevue,
Washington, argued for appellant.
Jeffrey A. Thomson, Elam & Burke PA, Boise, argued for
an appeal from a judgment dismissing claims against an
attorney and a law firm that he later joined based upon an
opinion letter issued by the attorney in his capacity as
corporate counsel regarding the legality of a stock
redemption agreement. The Appellant challenges the grant of
summary judgment to the Respondents and the amount of
attorney fees awarded to them. We affirm the judgment
dismissing the claims and the awards of attorney fees, and we
award attorney fees on appeal.
case arises out of an opinion letter issued in August 1995 to
Reed J. Taylor by Messrs. Robert A. Riley and Robert M.
Turnbow, as counsel for AIA Services Corporation ("AIA
Services"). Mr. Taylor held sixty-three percent of the
corporation's common stock and served as the Chairman of
the Board of Directors and the corporation's Chief
Executive Officer. In July 1995, Mr. Taylor and AIA Services
entered into a stock redemption agreement, in which the
corporation agreed to redeem Mr. Taylor's stock for $7.5
million and other consideration. Messrs. Riley and Turnbow
represented the corporation in negotiating that agreement,
and Mr. Taylor was represented by his own counsel. The stock
redemption agreement required an opinion letter from the
corporation's legal counsel, and Messrs. Riley and
Turnbow participated in drafting and issuing that letter.
letter was dated August 15, 1995, and signed "Eberle
Berlin Kading Turbow & McKlveen, Chtd."
("Eberle Berlin"), which was the law firm of which
Mr. Turnbow was a partner and Mr. Riley was an employee. In
the letter, they stated that AIA Services and its
subsidiaries "have full corporate power and authority to
enter into, execute and deliver" the stock redemption
agreement and related documents; that the stock redemption
agreement and related documents "constitute the valid
and binding obligation of Company and its Subsidiaries
enforceable against them in accordance with their respective
terms"; and that neither the stock redemption agreement
nor the consummation of the transaction, "to the best of
our knowledge, violate any law." The opinion letter was
addressed to Mr. Taylor, and it concluded with the statement,
"This opinion is furnished by us solely for your benefit
for use in connection with the Transaction Documents and the
transactions contemplated thereby; and it may not be
furnished or quoted to, or relied upon, by any other
stock redemption transaction closed in August 1995. Pursuant
to agreement, AIA Services gave Mr. Taylor a promissory note
in the sum of $1.5 million payable within ninety days and a
promissory note in the sum of $6 million payable in ten
years, with monthly interest-only payments until the note was
paid in full. The corporation failed to make the required
payments, and Mr. Taylor and the corporation executed a
restructured stock redemption agreement dated July 1, 1996.
When the corporation failed to make the payments due under
that agreement, Mr. Taylor filed a lawsuit on January 29,
2007, against the corporation, its subsidiaries, Mr.
Taylor's brother, other officers and directors of AIA
Services, and their spouses (Taylor v. AIA Services
Corp.). Before the lawsuit was resolved, Mr. Taylor
filed two more lawsuits against the attorneys who were
representing or had represented defendants in the Taylor
v. AIA Services Corp. lawsuit.
April 2008, defendants in Taylor v. AIA Services
Corp. filed motions for a partial summary judgment
alleging that the stock redemption agreement was
unenforceable because it was an illegal contract. The hearing
on those motions was held on April 23, 2008. In August 2008,
Mr. Taylor filed a lawsuit against Michael E. McNichols and
his firm, Clements, Brown and McNichols, P.A. (Taylor v.
McNichols), who initially represented Mr. Taylor's
brother, AIA Services, and its subsidiary. In April 2007, Mr.
McNichols had withdrawn from representing AIA Services and
its subsidiary, and Gary Babbitt and John Ashby, of the law
firm Hawley Troxell Ennis & Hawley, LLP ("Hawley
Troxell"), appeared as counsel for those defendants. In
August 2008, Mr. Taylor also filed a lawsuit against Messrs.
Babbitt and Ashby, Hawley Troxell, and two other attorneys
from that firm, Patrick Collins and Richard Riley,
(Taylor v. Babbitt). On March 1, 1999, Mr. Riley had
left Eberle Berlin and had joined Hawley Troxell.
Taylor asserted claims against the attorneys for (1) aiding
and abetting or assisting others in the commission of
tortious acts in Taylor v. AIA Services Corp.; (2)
conversion and misappropriation of the corporate assets of
AIA Services and its subsidiary; (3) violations of
Idaho's Consumer Protection Act, and (4) professional
negligence and/or breach of fiduciary duties for their
conduct in representing AIA Services, including their failure
to defend the accuracy of the opinion letter. The defendants
in these two cases filed motions to dismiss, and the court
entered orders granting those motions. The district judge
presiding over these two cases was also the district judge
presiding over Taylor v. AIA Services Corp., and he
took judicial notice of that case in toto when
deciding the motions. Mr. Taylor filed notices of appeal, but
no judgments had yet been entered in the cases. They were
remanded for the entry of judgments, which were then provided
to this Court on March 24, 2010. The two cases were
consolidated for the appeal, and this Court upheld the
judgments in favor of the defendants. Taylor v.
McNichols, 149 Idaho 826, 243 P.3d 642 (2010).
June 17, 2009, the court in Taylor v. AIA Services
Corp. held that the stock redemption agreement was void
because a statute in effect in 1995 prohibited a corporation
from redeeming its own shares unless either (a) the
corporation had sufficient unreserved and unrestricted earned
surplus to do so or (b) it had sufficient unreserved and
unrestricted capital surplus to do so and the use of capital
surplus for the redemption was authorized either by the
articles of incorporation or by the vote of the holders of a
majority of all its shares. The court found, based upon the
evidence presented in connection with the motions for summary
judgment, that AIA Services had negative earned surplus in
1995 and that the use of capital surplus had not been
authorized by a vote of the shareholders. Mr. Taylor did not
contend that the use of capital surplus was authorized by the
articles of incorporation.
September 4, 2009, the court in Taylor v. AIA Services
Corp. entered a partial judgment dismissing as to all
defendants Mr. Taylor's claims alleging breach of
contract, misrepresentation, fraud, conversion, constructive
trust, specific performance, and breach of the implied
covenants of good faith and fair dealing. That partial
judgment was certified as final pursuant to Rule 54(b) of the
Idaho Rules of Civil Procedure. This Court affirmed the
partial judgment on appeal. Taylor v. AIA Servs.
Corp., 151 Idaho 552, 261 P.3d 829 (2011).
October 1, 2009, Mr. Taylor filed this lawsuit against Mr.
Riley, Hawley Troxell, Mr. Turnbow, and Eberle Berlin. In Mr.
Taylor's complaint, he sought to recover damages caused
by his reliance on the opinion letter issued by Messrs. Riley
and Turnbow based upon the theories of negligent
misrepresentation, malpractice, consumer protection act
violations, breach of fiduciary duties, and fraud or
constructive fraud. Mr. Turnbow passed away while the lawsuit
was pending, and the personal representative of his estate
was substituted as a party in his place. Mr. Taylor and the
personal representative ultimately reached a settlement, and
Mr. Taylor's claims against the estate were dismissed
Riley and Hawley Troxell filed motions for summary judgment
seeking dismissal with prejudice of all claims alleged
against them in the complaint, and Mr. Taylor filed a motion
for partial summary judgment seeking an order that they were
liable on all of his claims. After briefing and argument, the
district court entered orders denying Mr. Taylor's
motion, granting Mr. Riley's motion with respect to the
claims of negligent misrepresentation and violation of the
Consumer Protection Act, and granting Hawley Troxell's
motion dismissing all claims against it.
September 7, 2011, this Court issued its opinion in
Taylor v. AIA Services Corp. upholding the judgment
that the stock redemption agreement was illegal and therefore
void. In that case, Mr. Taylor argued that if the stock
redemption agreement was illegal, it should still be enforced
because he was fraudulently induced to enter into the
agreement by the opinion letter. He also argued that the
opinion letter included false assertions of fact. In
rejecting those arguments, this Court in Taylor v. AIA
Services Corp. stated as follows:
Third, Reed Taylor argues that even if the Stock Redemption
Agreement is illegal, it should be enforced because he was
fraudulently induced to enter into the agreement by an
opinion letter (the Opinion Letter), which offered the
opinion that the Stock Redemption Agreement was legal. The
Opinion Letter was written by a law firm, acting as general
counsel for AIA Services in connection with the agreement,
and was addressed to Reed Taylor. Reed Taylor argues that the
district court erred in: (1) refusing to enforce the Stock
Redemption Agreement based upon fraud; (2) finding that the
Opinion Letter did not provide factual representations or
mixed representations of fact and opinion; and (3) making
these decisions on fraud without ever permitting Reed Taylor
to depose or conduct discovery with the attorneys who
rendered the opinions and factual representations to him.
Reed Taylor makes no argument and provides no explanation
on these claims; he merely states that the district court
made these errors. Furthermore, Reed Taylor cites nothing in
the record except for the district court's Opinion and
Order granting partial summary judgment and its Opinion and
Order on the motion for reconsideration.
Taylor v. AIA Servs. Corp., 151 Idaho at 566, 261
P.3d at 843 (emphasis added).
quoting the district court's conclusion that the opinion
letter was not a statement of fact, but merely a statement of
opinion that cannot form the basis of a fraud claim, we held:
We affirm the district court in dismissing Reed Taylor's
fraud argument. On appeal, Reed Taylor merely states the
general proposition that an opinion can form the basis for
fraud when there is intent to mislead, but he does not
actually argue that anyone intended to mislead him in this
case and points to nothing in the record suggesting that
anyone had such intent. As to Reed Taylor's claim
that the district court erred in finding an absence of fraud
without giving him the opportunity to depose or conduct
discovery with the lawyers who authored the Opinion Letter,
Reed Taylor again makes no argument in this section of his
brief concerning this issue.
Id. (emphasis added).
upon our opinion in Taylor v. AIA Services Corp., on
December 15, 2011, Mr. Riley moved for a partial summary
judgment dismissing the claims against him for fraud and
constructive fraud. The motion was briefed by Mr. Riley and
Mr. Taylor, and it was argued on January 30, 2012. Based upon
the briefing and oral argument, the district court entered a
decision holding that the fraud and constructive fraud claims
were barred by res judicata because Messrs. Riley and Turnbow
were in privity with AIA Services, based upon the fact that
they issued the opinion letter in the course of representing
the corporation and, alternatively, that the fraud and
constructive fraud claims were barred by the doctrine of
collateral estoppel. On April 30, 2012, the court entered an
order dismissing the fraud and constructive fraud claims.
Riley again moved for summary judgment on several grounds,
including that the claim for malpractice was barred by res
judicata based upon the judgment entered in Taylor v.
Babbitt. The district court denied the motion, and Mr.
Riley sought a permissive appeal to this Court on that issue,
which this Court granted. On appeal, this Court held that Mr.
Taylor's malpractice claim against Mr. Riley was barred
by the doctrine of res judicata. Taylor v. Riley,
157 Idaho 323, 335, 336 P.3d 256, 268 (2014) (Taylor v.
remand, the district court entered judgments on July 8, 2015,
dismissing with prejudice all claims against Hawley Troxell
and all claims against Mr. Riley. The court also awarded Mr.
Riley and Hawley Troxell court costs and attorney fees. Mr.
Taylor and Sharon Cummings, the personal representative of
Mr. Turnbow's estate, reached an agreement to settle the
claims against the estate, and on September 18, 2015, the
court entered a judgment dismissing all claims against the
October 23, 2015, Mr. Taylor filed a motion asking the
district court to reconsider various orders and decisions it
had entered during the litigation and the judgments entered
in favor of Riley and Hawley Troxell. Mr. Taylor filed a
notice of appeal on October 29, 2015, and on January 5, 2016,
the court entered an order denying his motion for
the District Court Err in Dismissing Mr. Taylor's Claim
for Negligent Misrepresentation?
first claim for relief in his complaint, Mr. Taylor alleged
that Mr. Riley was liable for alleged false representations
made in the opinion letter based upon the tort of negligent
misrepresentation. Mr. Riley moved for summary judgment
dismissing that claim, which the district court granted based
upon this Court's opinions in Duffin v. Idaho Crop
Improvement Ass'n, 126 Idaho 1002, 895 P.2d 1195
(1995), and Mannos v. Moss, 143 Idaho 927, 155 P.3d
1166 (2007). In Duffin, we held that, "except
in the narrow confines of a professional relationship
involving an accountant, the tort of negligent
misrepresentation is not recognized in Idaho." 126 Idaho
at 1010, 895 P.2d at 1203. In Mannos, we reaffirmed
that holding. 143 Idaho at 935, 155 P.3d at 1174. On appeal,
Mr. Taylor asks us to expand the tort of negligent
misrepresentation to include attorneys. We need not address
the arguments he makes in asking us to do so, because any
claim for negligent misrepresentation would be barred by res
judicata, based upon our opinion in Taylor v. Riley
I. In that appeal, we held that Mr. Taylor's claim,
which he alleged in his complaint as being for
"professional negligence, malpractice, negligence and/or
negligent issuance of an opinion letter" was barred by
the doctrine of res judicata. 157 Idaho at 335, 336 P.3d at
268. A claim for negligent misrepresentation based upon the
content of the opinion letter is the same cause of action
under a different theory, and so it too would be barred by
the doctrine of res judicata. Therefore, we will not address
Did the District Court Err in Dismissing Mr. Taylor's
Claim for Malpractice?
second claim for relief in his complaint, Mr. Taylor alleged
that Mr. Riley committed malpractice in drafting and issuing
the opinion letter. Mr. Taylor contends on appeal that the
district court erred in holding that his malpractice claim
was barred by the doctrine of res judicata.
Riley moved for summary judgment seeking dismissal of the
malpractice claim on the ground that it was barred by the
doctrine of res judicata based upon the judgment in
Taylor v. Babbitt, and the district court
denied that motion. This Court granted Mr. Riley's
request for a permissive appeal to decide that issue. On
appeal, we held that Mr. Taylor's malpractice claim
against Mr. Riley was barred by res judicata, and we remanded
the case to the district court. Taylor v. Riley I,
157 Idaho at 335, 340, 336 P.3d at 268, 273. Based upon the
doctrine of "law of the case, " the district court
did not err in holding that Mr. Taylor's malpractice
claim was barred by res judicata.
The doctrine of "law of the case" is well
established in Idaho and provides that "upon an appeal,
the Supreme Court, in deciding a case presented states in its
opinion a principle or rule of law necessary to the decision,
such pronouncement becomes the law of the case, and must be
adhered to throughout its subsequent progress, both in the
trial court and upon subsequent appeal . . . ."
Swanson v. Swanson, 134 Idaho 512, 515, 5 P.3d 973,
976 (2000). Therefore, we will not revisit our prior holding
that Mr. Taylor's malpractice claim is barred by res
Did the District Court Err in Dismissing Mr. Taylor's