Zimmerman v. Brown

1

NOT DESIGNATED FOR PUBLICATION

No. 113,899


IN THE COURT OF APPEALS OF THE STATE OF KANSAS

DANIEL J. ZIMMERMAN and SARA K. ZIMMERMAN,
Appellants,

v.

RICHARD W. BROWN; MARLENE E. BROWN; and
BROWN, ISERN & CARPENTER,
Appellees.


MEMORANDUM OPINION

Appeal from Barton District Court; JOHN E. SANDERS SR., judge. Opinion filed July 29, 2016.
Reversed and remanded.

Michael J. Wyatt, of Mann, Wyatt & Rice, LLC, of Hutchinson, for appellants.

Gerald L. Green, of Gilliland & Hayes, LLC, of Hutchinson, for appellees.

Before BUSER, P.J., HILL, J., and WALKER, S.J.

Per Curiam: The law of the case doctrine compels us to remand this case to the
district court once again for trial. When a second appeal is brought in the same case, the
first decision of the appellate court is the settled law of the case on all questions involved
in that first appeal. This court will not reconsider such questions. Because our prior ruling
reversing the first grant of summary judgment actually ruled on the damage issue, it
prevented the district court from granting summary judgment a second time. We reverse
the grant of summary judgment once again.
2

This is a legal malpractice action brought by Daniel and Sara Zimmerman against
attorney Richard Brown and his law firm, Brown, Isern & Carpenter. The allegations
revolve around the sale of the Zimmermans' Amway business, now called Quixtar, to
Richard Brown and his wife, Marlene Brown.

In the first appeal, a panel of this court found that the district court had improperly
granted summary judgment in favor of the law firm based on the doctrines of in pari
delicto and illegality. See Zimmerman v. Brown, 49 Kan. App. 2d 143, 150-158, 306 P.3d
306 (2013), rev. denied 298 Kan. 1209 (2013). We will refer to this ruling as Zimmerman
I. The panel also found that the Zimmermans had come forward with sufficient evidence
to establish the essential elements of a legal malpractice cause of action and, thus, were
entitled to proceed with their claim. 49 Kan. App. 2d at 158-161. The panel remanded the
matter to the district court.

On remand, the law firm moved for summary judgment on grounds that the
Zimmermans' failed to present sufficient evidence of the appropriate measure of damages
based on the value of Quixtar and, thus, the lost profit evidence presented by their expert
was speculative. The district court granted summary judgment in favor of the law firm
and dismissed the case with prejudice.

Because the law of the case doctrine disposes of the claims at this stage, we
reverse the judgment of the district court on that ground without reaching the merits of
any other claims on appeal.

The underlying facts of the parties' dispute are set forth in Zimmerman I. We need
not repeat them here. What is more important is the procedural history surrounding that
appeal and the district court's grant of summary judgment.


3

We review the results of Zimmerman I.

In Zimmerman I, the panel found that the district court's decision to grant summary
judgment to the law firm based on the doctrines of in pari delicto and illegality was
premature and improper. Specifically, the panel held that the doctrine of in pari delicto
did not prohibit the Zimmermans from recovering damages against the law firm for legal
malpractice given that a genuine issue of material fact existed about the parties' relative
appreciation of their wrongful acts. Zimmerman I, 49 Kan. App. 2d at 154-155.

Additionally, a genuine issue of material fact existed on whether damages
sustained by the Zimmermans from the law firm's breach of fiduciary duty were a natural
and probable consequence of the Zimmermans' decision to sell Quixtar to the Browns;
thus, precluding summary judgment based on an illegality defense. Zimmerman I, 49
Kan. App. 2d at 156-158.

The law firm also asked the Zimmerman I panel to address the question left
unanswered by the district court—the propriety of summary judgment on the merits of
the Zimmermans' underlying claim of legal malpractice. In so doing, the panel rejected
the law firm's argument that the Zimmermans had failed to present sufficient evidence to
establish the essential elements of a legal malpractice cause of action. 49 Kan. App. 2d at
158-161; see Canaan v. Bartee, 276 Kan. 116, 120, 72 P.3d 911, cert. denied 540 U.S.
1090 (2003).

The Zimmerman I panel found that there were genuine issues of fact about
whether Richard breached his fiduciary duty owed to the Zimmermans. 49 Kan. App. 2d
at 158-161.

Then, the panel addressed the issue of damages by finding that there was a causal
connection between the law firm's breach of duty and the Zimmermans' alleged damages.
4

In rejecting the law firm's assertion that "there [was] insufficient evidence from which a
jury could find that the plaintiffs' alleged damages were caused in any way by Richard's
negligence in preparing and/or participating in the Independent Business Sale Agreement
dated January 18, 2007," the panel specifically found evidence from the Zimmermans'
expert created a submissible case on damages:

"But the defendants misconstrue the plaintiffs' assertions regarding the cause of the
damages they allegedly sustained. Specifically, the plaintiffs assert that they would not
have gone through with the sale of their business to the Browns if Richard had adequately
satisfied his legal duty to inform them of the conflict of interest presented by the sale of
their business to the attorney representing them in the transaction and his legal duty to
advise them to seek the advice of independent counsel before entering into that
agreement. To support this assertion, the plaintiffs offered as evidence the opinion of
Moore, who stated that Richard's breach of his duties caused the plaintiffs to sustain
damages in the form of lost compensation and business development opportunities. The
plaintiffs also offered as evidence the expert opinion of Gary Baker, Ph.D., an economist.
Relying on the historical earnings of the plaintiffs' Quixtar business and projecting those
earnings out over a period of 30 years, Dr. Baker calculated the damages sustained by
the plaintiffs range from a low of $751,665 to a high of $1,503,330. Based on these
submissions, we find sufficient evidence from which a jury could find that the plaintiffs
suffered damages and that these damages were caused by the defendants' breach of legal
duty." (Emphasis added.) Zimmerman I, 49 Kan. App. 2d at 161.

The Zimmerman I panel ultimately reversed and remanded the case to allow the
Zimmermans to move forward with their legal malpractice claim. 49 Kan. App. 2d at
161.

The district court grants the law firm summary judgment a second time.

In September 2014, the law firm filed a second motion for summary judgment
because the Zimmermans had failed to proffer evidence to support an essential element of
their legal malpractice claim—damages. Specifically, the law firm argued that summary
5

judgment was proper because the Zimmermans failed to present sufficient evidence of the
correct measure of damages based on the value of the business and that the evidence
Baker presented based on lost gross annual income figures was speculative. In the
alternative, the law firm argued the district court should limit the question of damages by
not taking into consideration any benefit future generations may have received.

The Zimmermans responded by arguing the law of the case doctrine. In their view,
the district court should not consider the law firm's motion because the finding in
Zimmerman I that Baker's expert opinion evidence and damage calculations were
sufficient evidence of harm and was the settled law of the case. Also, the evidence of
gross income from Quixtar, or "'mailbox money,'" was indeed evidence of lost net
income.

The law firm replied by asserting that its issues on the appropriate measure of
damages and the speculative nature of the Zimmermans' method of calculating the
alleged damages were not before the Zimmerman I panel because those issues had not
been raised.

The district court subsequently granted summary judgment to the law firm and
dismissed the Zimmermans' case with prejudice. The district court, relying on the law
firm's argument, stated that the panel somehow did not address damages:

"It is important to carefully analyze [Zimmerman I], both in terms of what was
decided by that Court and what was not. The issues raised before COA and its decision
dealt with proximate causation, i.e. was there sufficient evidence and controverted
material facts to at least survive summary judgment and proceed on with the lawsuit?
COA found that plaintiffs had presented sufficient evidence to establish the essential
elements of a legal malpractice claim and were entitled to proceed beyond summary
judgment stage. COA also found that there was sufficient evidence, if believed, from
which a jury could find plaintiffs suffered damages that were caused by the defendants'
6

breach of a legal duty. It is important to note that COA did not find that damages were
indeed sustained or that there was an actual breach of a legal duty. And, as noted above,
the certainty or quality of damages was not before COA. The parties had apparently
agreed that damages would not be an issue to be presented to COA; and, as noted, it was
not submitted to the trial court." (Emphasis added.)

The district court, without citing any authority, found that "the proper measure of
damages, as is the case with most lost business ventures, would be the present value of
the Quixtar business at the time of the claimed tortious conduct." Given this conclusion,
the district court found Baker's expert opinion about damages presented an "unacceptable
speculation of projected gross revenue flow."

On appeal, the Zimmermans make three arguments about defects in the district
court's damage analysis.

 First, the district court's ruling violates the law of the case doctrine and
there were genuine issues of fact relating to damages that allowed the case
to proceed to trial.
 Second, the district court erroneously concluded that the only measure of
damages in this case was Quixtar's value at the time of the alleged tortious
conduct.
 Third, even if the Zimmermans' evidence of damages was speculative, the
discovery compelled after the law firm filed their second motion for
summary judgment turned up undisputed concrete evidence of damages.

Because we hold the first contention is dispositive, we reverse the district court on
that ground. We need not reach the merits of the remaining arguments.


7

A brief review of the law is helpful here.

When the underlying facts and procedural history relevant to the law of the case
are undisputed, an appellate court's consideration of the doctrine presents a legal question
subject to unlimited review. State v. Parry, 51 Kan. App. 2d 928, 930, 358 P.3d 101
(2015), petition for review granted July 21, 2016.

It is well settled in Kansas that matters decided in an earlier appeal are the law of
the case governing future proceedings in the same case. Thoroughbred Assocs. v. Kansas
City Royalty Co., 297 Kan. 1193, 1212, 308 P.3d 1238 (2013); Lechleitner v. Cummings,
160 Kan. 453, 456, 163 P.2d 423 (1945). Once an appellate court decides an issue, it
should not be relitigated or reconsidered unless it is clearly erroneous or would cause
manifest injustice. State v. Collier, 263 Kan. 629, Syl. ¶ 3, 952 P.2d 1326 (1998).

The doctrine is not an inexorable command. Rather, the purpose of the doctrine is
to avoid indefinite relitigation of the same issue, to obtain consistent results in the same
litigation, to afford one opportunity for argument and decision of the matter at issue, and
to assure the obedience of lower courts to the decisions of appellate courts. Collier, 263
Kan. 629, Syl. ¶ 2. The doctrine operates in tandem with the mandate rule, requiring a
district court to implement both the letter and spirit of the mandate, taking into account
the appellate court's opinion and the circumstances it embraces. Collier, 263 Kan. 629,
Syl. ¶ 4.

The law firm, of course, denies the argument that Zimmerman I is the settled law
of the case on the question of whether there was sufficient evidence of damages to
preclude summary judgment. Instead, to us, the law firm repeats almost verbatim the
argument it made to the district court not to consider the Zimmerman I panel's ruling on
damages because it was dicta:

8

"On appeal, Defendants briefed in pari delicto, illegality, and proximate
cause. . . . In addressing proximate cause, [Zimmerman I] held there was sufficient
evidence from which, if believed, a jury could find Plaintiffs' alleged damages were
proximately caused by Defendants' alleged malpractice. [Zimmerman I] did not consider
or address the appropriate measure of damages, Plaintiffs' method of calculating them,
nor whether Plaintiffs' damages were too speculative. [Citation omitted.] Those issues
were not raised before the district court and consequently were not raised in Plaintiffs'
first appeal. The findings of [Zimmerman I] cited to by Plaintiffs, addressed proximate
cause, and nothing more, concluding only that there was in the record at that point
sufficient evidence on the issue of damages. To the extent the Court found Plaintiffs'
damages were possible, it was at most dicta, and significantly, the Court's comments
were based upon Defendants' stipulation to Plaintiffs' damages for the purposes of
summary judgment on liability." (Emphasis added.)

But that is simply not true. In fact, the law firm did make the same argument in
Zimmerman I that they made to the district court here. In seeking summary judgment, it
argued the Zimmermans had failed to present evidence of the correct measure of damages
based on the value of Quixtar and that "[t]here is no law to support an argument that the
damages for a loss of a business are equal to an alleged future gross income stream." The
law firm argued that Baker's report and opinion on damages based on lost future gross
annual income failed to take into consideration factors relevant to the valuation of a
business and, thus, was improper speculation. More importantly, as mentioned, the law
firm told the district court it could decide the question of the appropriateness of damages
because those issues had not been raised in Zimmerman I.

The record in Zimmerman I shows to the contrary. The law firm, in briefing the
proximate cause element of the legal malpractice claim, similarly argued the
Zimmermans had failed to show they had suffered actual damages. Specifically, they
contended:

9

"Since Plaintiffs offered no evidence of the value of their business, nor offered any expert
opinions on it, their claims cannot be proven as a matter of law. Plaintiffs' expert arrived
at the sum of $1,503,330.00 by arbitrarily selecting annual gross income of $30,000.00
and multiplying it over a period of eighty (80) years. Plaintiffs' damage calculation was
based solely on gross income, and did not take into consideration the operating expenses
or the fact they were projecting its receipt far beyond their own lifetimes. Despite their
claim that their expert's opinion established their loss, there is no law that supports a
claim that the damages for a loss of a business are equal to the future gross income
stream. Rather, the damages, if any, would be the value of that business. While value
may be based on an income approach, the law is clear that only net income may be
considered in setting a value. [Citations omitted.] Plaintiffs offered no evidence
whatsoever of their net income or what their real loss, if any, was." (Emphasis added.)

To advance its motion for summary judgment before the district court a second
time in this case, the law firm clearly misstated the record in the former appeal and
depends on the same misstatement in this appeal. To compound matters, the record
indicates that the district court relied upon the law firm's misstatement to distinguish the
Zimmerman I panel's ruling on the question of damages and ultimately granted summary
judgment in its favor.

Clearly, the Zimmerman I panel heard the same argument and obviously rejected
it.

Our Kansas Supreme Court stated the law of the case rule as follows:

"When a second appeal is brought to the appellate courts in the same case, the
first decision is the settled law of the case on all questions involved and decided in the
first appeal and reconsideration will not be given to such questions. This law of the case
rule applies where the evidence in the second trial, or second appeal, is substantially the
same as in the first appeal." Miller v. Zep Mfg. Co., 249 Kan. 34, Syl. ¶ 9, 815 P.2d 506
(1991).

10

Zimmerman I addressed the law firm's argument that it was entitled to summary
judgment because the Zimmermans did not establish the essential elements of a legal
malpractice cause of action. 49 Kan. App. 2d at 158-161. After all, if the Zimmermans, as
the nonmoving party, did not sufficiently establish each of the essential elements of their
legal malpractice claim on which they had the burden of proof, the law firm would have
been entitled to summary judgment. See Dozier v. Dozier, 252 Kan. 1035, 1041, 850 P.2d
789 (1993).

In other words, the Zimmerman I panel had to consider whether the Zimmermans
had showed (1) Richard's duty to exercise ordinary skill and knowledge; (2) Richard's
breach of that duty; (3) a causal connection between the law firm's breach and the
Zimmermans' resulting injury; and (4) actual damages sustained by the Zimmermans. See
Canaan, 276 Kan. at 120. In addressing the fourth element in conjunction with the
causation element, Zimmerman I found that Baker's expert testimony regarding "the
historical earnings of the plaintiffs' Quixtar business and projecting those earnings out
over a period of 30 years" established actual damages. 49 Kan. App. 2d at 161.

The evidence on actual damages before the district court on the second motion for
summary judgment was identical to the evidence before the Zimmerman I panel. See
Miller, 249 Kan. 34, Syl. ¶ 9. And, the same question the law firm raised regarding
damages in the prior appeal is before us again in this appeal. See 249 Kan. 34, Syl. ¶ 9.

Contrary to the law firm's assertion, nothing in Zimmerman I reflects the prior
panel based its conclusion regarding the element of actual damages on a stipulation by
them. We also see no specific circumstance that would excuse the application of the law
of the case doctrine given that Zimmerman I determined the outcome of the first summary
judgment on the same evidence under the correct legal standard. See Collier, 263 Kan.
629, Syl. ¶ 3. Moreover, the law firm does not claim manifest injustice and we find none
here. See 263 Kan. 629, Syl. ¶ 3. Contrary to what the law firm would have us believe, it
11

had the benefit of presenting this argument in questioning the propriety of the
Zimmermans' appeal of the original grant of summary judgment.

Because the ruling of the Zimmerman I panel is the law of the case, we find the
district court erroneously granted summary judgment. We reverse that judgment. We
remand the matter allowing the Zimmermans, once again, to go forward with their claim.

Reversed and remanded.