Opinion
No. 1-993 / 00-0808
Filed October 16, 2002
Appeal from the Iowa District Court for Linn County, L. Vern Robinson, Judge.
Hansen Lind Meyer, Inc. appeals after a jury verdict for defendants in this legal malpractice action. AFFIRMED.
Max E. Kirk and Jen Bries of Ball, Kirk Holm, P.C., Waterloo, for appellant.
David J. Dutton, James R. Hellman and Carolyn A. Rafferty of Dutton, Braun, Staack Hellman, P.L.C., Waterloo, for appellee.
Heard by Sackett, C.J., and Huitink and Hecht, JJ.
This case arises out of a $1.033 million settlement Hansen Lind Meyer, Inc. (H.L.M.) paid six of its former shareholder employees. The employees sued H.L.M. and four of its directors challenging the legality of the voting procedures used to elect the defendant directors and subsequent resolutions resulting in termination of their employment. The challenge to the legality of the directors' election and relevant resolutions was based on H.L.M.'s failure to amend its articles of incorporation to permit cumulative shareholder voting. In addition to equitable relief, the employees also claimed damages for breach of contract, breach of fiduciary duty, and wrongful termination.
Under Iowa Code § 490.728(2) (1993), shareholders do not have the right to cumulate their votes for directors unless the articles of incorporation so provide.
As part of the settlement ending their lawsuit, the employees entered into comprehensive agreements providing for redemption of their stock and releasing H.L.M.:
from any claims, demands, causes of action or liability whatsoever, known or unknown, which [the employee] now has or heretofore had against any of the releases, including all claims, demands and causes of action of every nature or sort, whether based on statute or at common law, at law or in equity, or sounding in contract or in tort (including any claims for attorneys' fees). . . .
The release also provided:
[Employee] agrees not to assert any claim with the Iowa Civil Rights Commission, the Equal Employment Opportunities Commission or any other state, local or federal government agency against any released party and, with respect to his employment, the terms and conditions of employment and the termination of his employment with the Company, agrees not to file any charges of discrimination against the Company or any released party nor to sue the Company or any released party (nor to participate as a member of any class in litigation against the Company or any released party) under Chapter 216 (formerly chapter 601a), Iowa code, (the Iowa Civil Rights Act of 1965), Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment act, the Vocational Rehabilitation Act of 1973, the Americans with Disabilities Act or any other local, state or federal law which might otherwise be available to him.
H.L.M. subsequently sued its lawyer Gary Streit and the law firm of Shuttleworth Ingersoll for legal malpractice. H.L.M. alleged that Streit's failure to advise them of needed amendments to H.L.M.'s articles of incorporation was the proximate cause of the damages H.L.M. sustained in settling the claims of its former employees. H.L.M.'s self-described theory of liability advanced at trial was:
H.L.M. fired the dissident group for one reason, and one reason only,to terminate their voting rights. . . . If cumulative voting had been properly authorized, the dissents would not have a basis to challenge the election of a new board. . . .
Streit admitted that he improperly advised H.L.M. concerning required amendments to its articles of incorporation but denied his negligence was the proximate cause of any damages claimed. Streit defended on the theory that H.L.M. terminated its former employees for reasons unrelated to shareholder voting issues and settled the underlying lawsuit to avoid employment-related claims.
Streit called three lawyers, Edgar Hansell, Robert Allbee, and Mark McCormick, to testify as expert witnesses. Each without objection testified, based on their analysis of the evidence, that H.L.M.'s failure to amend its articles of incorporation to permit cumulative voting was not a proximate cause of any of the damages claimed. Allbee also testified, without objection, that none of the settlement proceeds were paid as the result of Gary Streit's or Shuttleworth Ingersoll's claimed negligence.
In a narrative answer explaining his proximate cause opinion McCormick noted H.L.M.'s declining financial condition and proposed business plan for addressing H.L.M.'s financial problems. He testified:
the corporation made some of the additional hard decisions that had to be made including termination of six employees . . . And uh — be willing to go through the difficult process of not only terminating those six people but cutting their losses by negotiating settlement with those six people so the corporation could get on with its business in the direction the new leadership wanted to take. So I see the events that happened in September and October of 1994 as the salvation of this corporation in the sense that the problems had come to a head which would have had to be resolved at some point because the issues were festering, particularly in the Iowa City office.
At that point in McCormick's testimony, H.L.M.'s lawyer interposed this objection:
I am going to move to strike the last portion as it's a narrative but it's also speculation as to what would have been done. There is no factual basis for such an opinion under 403.
H.L.M.'s objection was overruled.
As noted earlier, Streit and his law firm conceded they were negligent but denied causing any of the damages H.L.M. claimed. Accordingly, the only issues submitted to the jury were proximate cause, H.L.M.'s comparative fault, and damages. In a special verdict, the jury found neither Streit or his law firm were at fault. Judgment was entered in accordance with the special verdict resulting in this appeal.
On appeal H.L.M. raises the following issues:
1) The trial court erred in allowing speculative testimony by the Defendants' experts concerning the motives for terminating the employment of the dissident shareholders of H.L.M.
2) The trial court erred in allowing speculative testimony by the Defendants' experts regarding the merits of a claim for age discrimination or disability discrimination by the dissident shareholders of H.L.M.
3) The trial court erred in allowing speculative testimony concerning the Defendants' experts alternate employment related claims which terminated shareholder employees could have asserted against H.L.M.
4) The trial court erred in allowing speculative testimony by the Defendants' experts concerning H.L.M.'s motives for paying the claims asserted against H.L.M. by the terminated shareholders.The Merits.
In Iowa, we are committed to a liberal view on the admissibility of expert testimony. Leaf v. Goodyear Tire Rubber Co., 590 N.W.2d 525, 531 (Iowa 1999). The decision to admit or exclude opinion evidence rests within the sound discretion of the district court and will not be disturbed on appeal absent manifest abuse of that discretion to the prejudice of the complaining party. In re Estate of Kelly, 558 N.W.2d 719, 721 (Iowa Ct.App. 1996). An abuse of discretion is found when a court exercises its discretion on grounds or for reasons clearly untenable or to an extent clearly unreasonable. State v. Khalsa, 542 N.W.2d 263, 267 (Iowa Ct.App. 1995).
The specific grounds of an objection to admission of evidence must be indicated to the trial court as soon as they become apparent. Iowa R. Evid. 103(a)(1); Milks v. Iowa Oto-Head Neck Specialists, 519 N.W.2d 801, 805-06 (Iowa 1994); Kunau v. Pillers, Pillers Pillers, P.C., 404 N.W.2d 573, 578 (Iowa Ct.App. 1987). The test for determining the sufficiency of an objection is whether counsel's statement clearly alerts the judge to the question raised and enables the opposing counsel to take remedial steps to cure the alleged defect. Carter v. Wiese Corp., 360 N.W.2d 122, 132 (Iowa Ct.App. 1984). Error may not be predicated on an order overruling an inadequate objection. State v. Nimmo, 247 N.W.2d 228, 231 (Iowa 1976) (citing Iowa R. Evid. 5.103).
Iowa Rule of Evidence 5.703, provides in part, "The facts or data in the particular case upon which an expert bases an opinion or interference may be those perceived by or made known to the expert at or before the trial or hearing." Brunner v. Brown, 480 N.W.2d 33, 34 (Iowa 1992). Any asserted deficiencies in the scope or breadth of the facts or data relied upon go to the weight of the testimony, not its admissibility. Hunter v. Board of Trustees, 481 N.W.2d 510, 520 (Iowa 1992).
Here, there was evidence the six employees were terminated because they dissented to the new management of H.L.M. There was also evidence these employees were not as productive as other employees, having more "indirect" time rather than billable hours. Furthermore, H.L.M. cut costs by discharging them because they were long-term employees with higher salaries than other employees. The experts properly testified to all of these issues.
Concerning H.L.M.'s motives for entering into the settlement, we note the releases signed by the six discharged employees specifically provided the employees were releasing their claims regarding age and disability discrimination, as well as other employment-related claims. The attorney for the discharged employees, Kelly Baier, testified that based upon their ages and their positions in the company, he felt the employees could have brought claims of age discrimination, or other employment-related claims, against H.L.M. He also testified the cumulative voting issue did not add to the employees' damages. In addition, Mark Zaiger, an attorney for H.L.M. at the time of the discharged employees' lawsuit, testified he believed the discharged employees had viable age discrimination claims. We determine the experts' testimony concerning H.L.M.'s motives for entering into the settlement was therefore based on facts, and not speculation.
H.L.M. also asserts the district court abused its discretion by permitting McCormick to testify concerning H.L.M's motives for entering into a settlement agreement. We find this issue has not been preserved. McCormick testified at length that H.L.M. negotiated the settlement so it could get on with its business in the direction the new leadership wanted to take. We find H.L.M.'s objection to McCormick's testimony on this issue lacks sufficient specificity to preserve any error in the admission of his testimony. We decline to consider the issue on appeal. See Milks, 519 N.W.2d at 806. We also note that the Chairman of the Board, John Carlson, testified to the same matters without objection. We find no abuse of discretion in the district court's decision to permit expert testimony on the issues of whether the discharged employees had viable employment-related claims, which H.L.M. could have agreed to pay damages to settle.
We have carefully considered all of the issues and find they have no merit or have been addressed by the foregoing.
We affirm the decision of the district court.