Opinion
No. 1 CA-CV 13-0199
06-03-2014
ROBERT E. ALPERT; JAMES VENTURES, L.P.; and DANRO CORPORATION, Plaintiffs/Appellants, v. BIVENS & NORE, P.A., a (dissolved) Arizona professional association, Defendant/Appellee.
Keller Rohrback, P.L.C., Phoenix By Mark D. Samson Co-Counsel for Plaintiffs/Appellants Johnston-Tobey, P.C., Dallas, Texas By Robert L. Tobey, Coyt Randal Johnston Co-Counsel for Plaintiffs/Appellants Humphrey & Petersen, Tucson By Marshall Humphrey, III; Andrew J. Petersen Counsel for Defendant/Appellee
NOTICE: NOT FOR PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE
LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.
Appeal from the Superior Court in Maricopa County
No. CV2009-026936
The Honorable Katherine M. Cooper, Judge
AFFIRMED
COUNSEL
Keller Rohrback, P.L.C., Phoenix
By Mark D. Samson
Co-Counsel for Plaintiffs/Appellants
Johnston-Tobey, P.C., Dallas, Texas
By Robert L. Tobey, Coyt Randal Johnston
Co-Counsel for Plaintiffs/Appellants
Humphrey & Petersen, Tucson
By Marshall Humphrey, III; Andrew J. Petersen
Counsel for Defendant/Appellee
MEMORANDUM DECISION
Judge Peter B. Swann delivered the decision of the Court, in which Presiding Judge Andrew W. Gould and Judge Kenton D. Jones joined. SWANN, Judge:
¶1 This appeal arises from a legal malpractice action filed by Robert E. Alpert; James Ventures, L.P. ("JV"); and Danro Corporation ("Danro") (collectively, "Appellants") against the law firm of Bivens & Nore, P.A. ("B&N"). The trial court ruled that none of Appellants had a cognizable cause of action for legal malpractice and granted summary judgment in favor of B&N. Appellants contend, inter alia, that the court erred by finding that Danro lacked the predicate damages to bring a malpractice claim, by granting summary judgment on Appellants' alternative claim that B&N damaged Appellants by failing to inform them that pursuing the underlying case would be futile, and by denying Appellants' motion for leave to file a second amended complaint. For the following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 The facts of the case underlying Appellants' legal malpractice claim are recounted in detail in James Ventures, L.P. v. TIMCO Aviation Services, Inc., No. 06-60420-CIV, 2008 WL 895714, at *1-2 (S.D. Fla. Apr. 2, 2008), and James Ventures, L.P. ex rel. Alpert v. TIMCO Aviation Services, Inc., 315 F. App'x 885, 887-88 (11th Cir. 2009). For purposes of this appeal, the pertinent facts are as follows.
¶3 Alpert served on the board of directors of TIMCO Aviation Services, Inc. ("TIMCO") when it encountered financial distress in late 2000. TIMCO organized the sale of one of its business units to Kellstrom Industries, Inc. ("Kellstrom") to avert imminent demise. TIMCO needed the deal to close by December 1, 2000, but Kellstrom's lenders required additional working capital before it would issue Kellstrom a loan to complete the acquisition. Kellstrom therefore contracted to sell its headquarters building to a third party and lease it back. When the sale of the Kellstrom building was delayed, TIMCO arranged for JV and a number of other investors to post letters of credit ("LOC") for Kellstrom. Alpert and Danro (a corporation) were at that time general partners of JV (a limited partnership) and Alpert was Danro's president.
¶4 Kellstrom agreed that any draw on the LOCs would be considered a term loan with a maturity date of December 1, 2001, and granted the LOC investors the right to purchase the Kellstrom building for an agreed upon price less a full credit for any amounts drawn. Kellstrom thereafter bought TIMCO's business unit, but the sale of the Kellstrom building never closed and Kellstrom's lenders made demand on the LOCs on or about October 18, 2001. JV eventually acquired from the other LOC investors all the rights to collect against Kellstrom and assigned those rights and "any and all rights ancillary thereto" to Danro in November 2003. The 2003 assignment included the right to purchase the Kellstrom building, which Danro did that same month and then sold at a loss in December 2004.
¶5 Alpert retained the law firm of Meyer, Hendricks & Bivens ("MH&B") in October 2005 to represent JV in filing suit against TIMCO. JV alleged that during the negotiations of the LOCs, TIMCO's chief executive officer and chairman had orally promised to indemnify JV and the other LOC investors against any loss suffered in the event Kellstrom defaulted on its obligations. MH&B accordingly filed a complaint against TIMCO on October 24, 2005, in the United States District Court for the District of Arizona, naming JV as the plaintiff. JV's counsel at MH&B, among them Don Bivens, moved to B&N in January 2006 but continued to represent JV in the TIMCO litigation. During B&N's representation, the parties agreed to transfer the case to the United States District Court for the Southern District of Florida under 28 U.S.C. § 1404(a). B&N thereafter dissolved in June 2006 but JV's counsel continued the representation at the law firm of Snell & Wilmer ("S&W").
¶6 The Florida district court ultimately granted summary judgment in favor of TIMCO in April 2008. The court found that Danro, not JV, was the real party in interest because the right to enforce the alleged indemnity agreement against TIMCO was "ancillary" to and thereby included in the rights that JV had assigned to Danro in 2003, almost two years before filing suit. The court denied JV's request to substitute Danro as plaintiff under Fed. R. Civ. P. 17(a), finding that Danro no longer owned the right to enforce the alleged indemnity agreement because Danro had assigned all of its "rights, remedies, claims, causes of action and interest arising out of or relating to the letters of credit and the TIMCO Indemnity Agreement" to JV in December 2007. Danro made the 2007 assignment "in an attempt to cure the real party in interest problem," on the advice of a law firm other than B&N. The court in turn found that JV could not rely on the 2007 assignment to establish standing because JV had already filed suit when Danro executed it.
¶7 In addition to the real-party-in-interest ground, the Florida district court granted summary judgment based upon a finding that Arizona's statute of limitations for breach of an oral contract of indebtedness (A.R.S. § 12-543) applied to and barred JV's claim. Without determining whether the three-year statute of limitations began accruing in October 2001 when Kellstrom's lenders made demand on the LOCs or on December 1, 2001, when the term loan to Kellstrom matured, the Florida district court reasoned that in either case JV's claim was filed after the statute had run. The United States Court of Appeals for the Eleventh Circuit affirmed summary judgment on the statute-of-limitations ground in February 2009, finding no need to reach the real-party-in-interest ground.
¶8 Appellants filed a complaint in the Maricopa County Superior Court for professional negligence against MH&B, B&N, S&W and Bivens in September 2009. B&N in due course became the only remaining defendant. Appellants alleged that B&N had acted negligently in handling JV's lawsuit against TIMCO by failing to secure a four-year limitations period under Florida or Texas law, by failing to realize that Danro was the real party in interest and failing to add or substitute it as plaintiff, and by continuing to litigate the case at Appellants' expense without properly advising them of the risks presented by TIMCO's statute-of-limitations and real-party-in-interest defenses. Appellants supported their arguments with an expert affidavit opining that B&N's "professional failures . . . were the principal cause of the dismissal of the Timco lawsuit and resulting damage."
¶9 B&N moved for summary judgment on Appellant's complaint. B&N argued that Appellants could not prove that B&N had caused them to lose the underlying case because the statute of limitations had run before the complaint was filed, and there was no way for B&N to cure the problem even if it had secured a four-year statute of limitations. B&N further argued that "[i]t would be pure speculation that the Florida District Court's reasoning would be any different if B&N discovered the [real-party-in-interest] problem during the B&N time frame nor should the reasoning [for denying JV's request to substitute Danro as plaintiff] be different in [the malpractice case]." Lastly, B&N argued that Alpert as a shareholder could not recover damages belonging to either JV or Danro, and that Danro did not have the predicate damages to bring a malpractice claim because it had assigned the underlying cause of action to JV in 2007 and Arizona law prevented Danro from assigning the malpractice cause of action.
¶10 Appellants responded, arguing that because the underlying claim could have accrued on December 1, 2001, the complaint filed on October 24, 2005, would not have been barred under a four-year statute of limitations. Appellants also presented several scenarios under which B&N supposedly could have added Danro as a plaintiff under either Fed. R. Civ. P. 15 or 17. Appellants further argued that Danro's 2007 assignment was itself proximately caused by B&N's negligence and that regardless of that assignment they had all suffered damages together. Appellants argued in the alternative that if the underlying case was fatally flawed from the beginning, then B&N had damaged Appellants by causing them to incur fees for continuing to litigate a case that was futile.
¶11 Appellants also moved for leave to file a second amended complaint. Appellants' proposed complaint sought to add a new fact: "Alpert, JV and Danro pursued the purchase and subsequent sale of the Kellstrom Building as a joint venture"; and an additional theory of liability: B&N should have moved to amend JV's complaint under Fed. R. Civ. P. 15 in the underlying case.
¶12 The court granted summary judgment in favor of B&N on the ground that none of Appellants had a cause of action for legal malpractice. Specifically, the court found that:
It is undisputed Danro was the entity with standing to pursue the underlying claim against TIMCO. Danro was the real party in interest.
On December 11, 2007, Danro assigned its claim in the underlying action to JV. The assignment conveyed from Danro to JV all "rights, remedies, claims, causes of action and interests arising out of or relating to the issuance of letters of credit and the Timco Indemnity Agreement" "absolutely, unconditionally and irrevocably."
. . . .
In assigning its TIMCO claims to JV, Danro did two things. First, it could (and did) assign to JV its claim for damages against TIMCO. Second, it divorced this claim for damages from any potential claim for malpractice. As a matter of law, Danro could not (and did not) assign its legal malpractice claim. The malpractice claim, however, is predicated on damages that allegedly occurred to Danro as a result of B&N's negligence. As a result, while Danro may have had a potential cause of action for malpractice, it
assigned away the damages claim relating to that cause of action. With no damages, Danro has no cause of action.
. . . .
Since JV was not the real party in interest and Danro's legal malpractice claim could not be assigned to JV, JV has no cause of action.
Finally, Mr. Alpert is the principal of JV and Danro. A shareholder cannot recover damages belonging to the corporation. . . . He was not a party to the underlying case, and B&N did not represent him. He has no cause of action for legal malpractice.
¶13 The court denied Appellants' motion for leave to file a second amended complaint, reasoning that
[n]othing in the proposed Second Amended Complaint affects th[e court's] ruling [on B&N's motion for summary judgment]. The Court granted summary judgment on the grounds that none of the Plaintiffs has a cause of action for legal malpractice against Defendant based on the 2007 assignment of claims from Danro to JV (as to Danro's claim) or the fact that they were/are not a real party in interest in the underlying litigation (as to JV and Alpert). Accordingly, Plaintiff's Motion to Amend is moot.
¶14 Lastly, the court denied Appellants' motion for reconsideration of its summary judgment order and denial of leave to amend. Appellants timely appeal.
STANDARD OF REVIEW
¶15 When reviewing the trial court's grant of summary judgment, we view the facts in the light most favorable to Appellants as the nonmoving parties, Riley, Hoggatt & Suagee, P.C. v. English, 177 Ariz. 10, 12-13, 864 P.2d 1042, 1044-45 (1993), and determine de novo whether there are any genuine issues of material fact and whether the court erred in applying the law, L. Harvey Concrete, Inc. v. Agro Constr. & Supply Co., 189 Ariz. 178, 180, 939 P.2d 811, 813 (App. 1997). "Summary judgment is appropriate only if no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law." Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 482, ¶ 14, 38 P.3d 12, 20 (2002). We in turn review the court's denial of Appellants' motion for leave to amend for a clear abuse of discretion. Hall v. Romero, 141 Ariz. 120, 124, 685 P.2d 757, 761 (App. 1984).
DISCUSSION
I. DANRO LACKED THE PREDICATE DAMAGES TO BRING A MALPRACTICE CLAIM.
¶16 "Negligence alone is not actionable; actual injury or damages must be sustained before a cause of action in negligence is generated." Amfac Distribution Corp. v. Miller, 138 Ariz. 152, 153, 673 P.2d 792, 793 (1983). A legal malpractice plaintiff must establish both the fact of damages attributable to the defendant and the extent of those damages. Phillips v. Clancy, 152 Ariz. 415, 418, 733 P.2d 300, 303 (App. 1986). Where the alleged negligence occurs during the course of litigation, "the injury or damaging effect on the unsuccessful party is not ascertainable until the appellate process is completed or is waived by a failure to appeal." Amfac Distribution Corp., 138 Ariz. at 154, 673 P.2d at 794. And though "Arizona case law generally allows the assignment of unliquidated legal claims," Webb v. Gittlen, 217 Ariz. 363, 364, ¶ 6, 174 P.3d 275, 276 (2008), "[m]alpractice claims are regarded as personal injury claims, and personal injury claims are not assignable in Arizona," Botma v. Huser, 202 Ariz. 14, 17, ¶ 11, 39 P.3d 538, 541 (App. 2002). In Botma, we declined to create an exception to this nonassignability rule when the assignment of a legal malpractice claim was coupled with an assignment of breach of contract and bad faith claims. Id. at 18, ¶ 16, 39 P.3d at 542.
¶17 Here, the trial court correctly held that Danro lacked the predicate damages to bring a legal malpractice claim against B&N. Although Alpert was at all relevant times the president of Danro and the general partner of JV along with Danro, the critical fact remains that they were all distinct legal entities. See Deutsche Credit Corp. v. Case Power & Equip. Co., 179 Ariz. 155, 160, 876 P.2d 1190, 1195 (App. 1994) ("The concept of a corporation as a separate entity is a legal fact, not a fiction. The mere fact that corporations have the same officers does not make one liable for the acts of the other." (footnote omitted)); Chase Bank of Ariz. v. Acosta, 179 Ariz. 563, 570, 880 P.2d 1109, 1116 (App. 1994) (finding no reason to disregard "the distinct existence of the [limited] partnership and its partners" for purposes of establishing general partner's liability (citation omitted)). JV's 2003 assignment to Danro and Danro's 2007 assignment to JV underscore the fact that they were separate entities even though Alpert controlled both of them. The Florida district court noted that Danro's tax returns "reflect that Danro claimed a loss from the sale of the Kellstrom Building, further evidencing that at that time, Danro, not JV, was the [separate] entity which had the right to recoup that loss." James Ventures, L.P., 2008 WL 895714, at *3. And in response to JV's argument that it had acted through Danro as its general partner to accomplish certain tasks, including purchasing the Kellstrom building, the Florida district court remarked: "Separate legal entities are intentionally created. JV cannot play a 'shell game' in which it reaps the benefit of a possible recovery of losses which it voluntarily assigned to a separate legal entity, albeit an entity which is also its general partner." Id. at *6 n.5.
¶18 Because JV and Danro were separate entities, Danro could not pursue the underlying cause of action against TIMCO after it made the 2007 assignment to JV. See Flood Control Dist. of Maricopa Cnty. v. Paloma Inv. Ltd. P'ship, 230 Ariz. 29, 47, ¶ 65, 279 P.3d 1191, 1209 (App. 2012) ("Once a party fully and completely assigns its rights in a case, it is not the real party in interest and no longer may be a party to the litigation."). Danro could not assign its malpractice claim to JV, see Botma, 202 Ariz. at 17, ¶ 11, 39 P.3d at 541, but as a result of the 2007 assignment Danro no longer owned any rights to the underlying cause of action when the appellate process was completed in February 2009 and the alleged malpractice damages became ascertainable, see Amfac Distribution Corp., 138 Ariz. at 154, 673 P.2d at 794. Thus, Danro could not prove its malpractice claim because its alleged damages were predicated on a diminution in value of a cause of action that it did not own. The trial court correctly held that "while Danro may have had a potential cause of action for malpractice [if it had not made the 2007 assignment], it assigned away the damages claim relating to that cause of action. With no damages, Danro has no cause of action."
¶19 Appellants contend that there is a genuine dispute of material fact as to whether Danro would have executed the 2007 assignment absent B&N's alleged malpractice. In support of their argument, Appellants rely on Bivens' deposition testimony that he believed he would have substituted Danro as a plaintiff in the underlying case if he had reviewed the 2003 assignment while at B&N. Appellants further rely on an expert's opinion that Bivens was negligent in failing to review the 2003 assignment while at B&N, and the fact that Danro expressly made the 2007 assignment to cure the real-party-in-interest problem allegedly caused by B&N's negligence.
¶20 We disagree with Appellants' contention because B&N did not represent Danro when Danro executed the 2007 assignment on the advice of a law firm other than B&N. Danro may have had a cause of action for malpractice against B&N had it not made the 2007 assignment, but B&N did not cause the harm Danro suffered as a result of that assignment. Put differently, the 2007 assignment was a superseding cause to B&N's alleged negligence as to Danro. See Barmat v. John & Jane Doe Partners A-D, 165 Ariz. 205, 211, 797 P.2d 1223, 1229 (App. 1990) ("Regardless of the conduct of [former attorney and law firm], [successor attorney's] refusal to settle was the superseding proximate cause of [malpractice plaintiff's] exposure."); see also Faulkner v. Ensz, 109 F.3d 474, 477 (8th Cir. 1997) ("The termination of [former attorney's] involvement, coupled with [successor attorney's] assumption of the case, ended the causal relationship between [former attorney's] actions and [client's] injury."); Rodgers v. Czamanske, 862 S.W.2d 453, 458 (Mo. Ct. App. 1993) ("[Successor attorney] dismissed the [clients'] counterclaim with the intention of refiling it in a different county. Due to the compulsory nature of the counterclaim, it could not be refiled. . . . [Successor attorney's] actions interrupted the chain of events set in motion by [former attorney's] alleged negligence at trial and constituted an independent force which was the direct and proximate cause of the damages sustained by the [clients] as to their counterclaim."). II. NONE OF APPELLANTS COULD PROVE THAT THEY WOULD HAVE PREVAILED IN THE UNDERLYING CASE.
¶21 Appellants contend that "[e]ven if this court were to conclude that . . . Danro assigned any damages from the Timco case to JV, Appellants still have a valid claim for the amount they spent to obtain professional services in the Timco case whose value proved worthless," because "[i]f the claims were futile, B&N negligently failed to advise Appellants of this fact."
¶22 B&N answers Appellants' contention by arguing that "[t]he only fees incurred during the B&N time frame were approximately $13,000 . . . [and] B&N made considered decisions based upon the information provided by its client. At most then, JV could ask for $13,000 from B&N, but this is not what they pursue[d] in their First Amended Complaint."
¶23 Appellants' complaint introduced the case as "a legal malpractice case against B&N . . . for its failure to advise its client properly of the risks and options presented by the [statute-of-limitations and real-party-in-interest] defenses being asserted by [TIMCO] in the [underlying] case." The complaint asserted that B&N had breached its duty of care because "not one lawyer ever told Mr. Alpert that the Timco Case was a loser, or could not be won," and "[n]o one discussed with Mr. Alpert any risk that JV was not the proper party." The complaint specifically alleged that B&N had caused "harm to [Appellants] by keeping [Appellants] committed to a lawsuit after [B&N]'s actions made it improbable if not impossible to win the lawsuit, thereby not only increasing [Appellants'] fees, but also increasing the attorneys' fees of Timco that became a counterclaim against [Appellants]." B&N supported its allegations with an expert affidavit opining that Appellants had "paid substantial and unwarranted attorneys fees to pursue a flawed course of prosecution for their case that could not succeed because of procedural obstacles that were avoidable." According to the expert,
[B&N and its attorneys] would [presumably] agree that they probably would have won the case for the Alpert Parties if they had tried it on the merits. If not, then any opinion to the contrary should have been shared with . . . Alpert so that he could make an informed decision about going forward and incurring the substantial fees and expenses the Alpert Pa[r]ties incurred. . . . Any failure to inform Alpert that the Alpert Parties' case presented a significant risk of loss caused them hundreds of thousands of dollars of damages for unnecessary legal fees and expenses that were incurred.
¶24 It is well established that "a plaintiff asserting legal malpractice must prove the existence of a duty, breach of duty, that the defendant's negligence was the actual and proximate cause of injury, and the 'nature and extent' of damages." Glaze v. Larsen, 207 Ariz. 26, 29, ¶ 12, 83 P.3d 26, 29 (2004). In Glaze, our supreme court confirmed that "[a] necessary part of the legal malpractice plaintiff's burden of proof of proximate cause is to establish that 'but for the attorney's negligence, he would have been successful in the prosecution or defense of the original suit.'" Id. (quoting Phillips, 152 Ariz. at 418, 733 P.2d at 303); see also Miller v. Byrne, 916 P.2d 566, 579 (Colo. App. 1995) ("When an action for legal malpractice is predicated upon an error in handling an underlying matter, the claim has been characterized as a 'case within a case' requiring proof not only that the lawyers failed to exercise reasonable care, but also that the plaintiff should have been successful in the underlying action if the attorney had performed properly.").
¶25 Here, Alpert was not a party in the underlying case and JV was not the real party in interest in that case. Neither could prove that they would have been successful in the underlying case -- a reality fatal to their malpractice claims. See Glaze, 207 Ariz. at 29, ¶ 12, 83 P.3d at 29. Likewise, Danro could not prove that it would have been successful in the underlying case because it assigned the underlying cause of action to JV during the course of the litigation. Summary judgment was therefore appropriate as to all parties.
We note that in an appropriate case, an exception to the case-within-a-case doctrine might be warranted -- for example when counsel pursued what counsel should have known was a frivolous claim under Ariz. R. Civ. P. 11, on behalf of an uninformed client. In such a case, a plaintiff might be able to establish negligence, proximate cause and damages without establishing that it would have been successful in the underlying case, because the attorney's conduct would have been fraudulent with regard to the client. See U.S. Fid. & Guar. Co. v. Frohmiller, 71 Ariz. 377, 380, 227 P.2d 1007, 1009 (1951) ("It is generally held that where the wrongful act of the defendant has involved the plaintiff in litigation with others or placed him in such relation with others as makes it necessary to incur expense to protect his interest, such costs and expenses, including attorneys' fees, should be treated as the legal consequences of the original wrongful act and may be recovered as damages." (citation omitted)). Our objective review of B&N's actions in the underlying case does not reveal any facts that could amount to fraud on a client. See Cecala v. Newman, 532 F. Supp. 2d 1118, 1139 (D. Ariz. 2007) ("[M]alpractice liability will not attach for tactical decisions made in good faith in the course of preparing or trying a case. Injury flowing from such errors in attorney judgment is not foreseeable as a matter of law. Good faith . . . is based on an objective standard of whether the lawyer's decisions were intended to benefit the client in the representation." (citation omitted) (internal quotation marks omitted)), aff'd, 379 F. App'x 584 (9th Cir. 2010); Martin v. Burns, 102 Ariz. 341, 343, 429 P.2d 660, 662 (1967) ("An attorney must act for his client in a reasonably careful and skillful manner in light of his special professional knowledge. He will not be held liable, while acting in good faith and in a belief that his conduct is for the benefit of his client, for a mere error of judgment or for a mistake in a point of law that has not been settled by the highest court of the jurisdiction and upon which reasonable lawyers may differ.").
¶26 Because we hold that none of Appellants could prove a malpractice claim for the reasons already discussed, we decline to address Appellants' further contentions regarding B&N's ability to cure the statute-of-limitations or real-party-in-interest defects. III. APPELLANTS' PROPOSED SECOND AMENDED COMPLAINT WOULD HAVE BEEN FUTILE.
¶27 Appellants next contend that the court erred by finding that their proposed second amended complaint was moot because amending their complaint to add that "Alpert, JV and Danro pursued the purchase and subsequent sale of the Kellstrom Building as a joint venture," "would mean that all three Appellants -- as joint venturers -- had the right to recover from Timco on behalf of the joint venture."
¶28 "A party may amend his pleadings once as a matter of course any time before a responsive pleading is served. After that, a party may amend his pleading only by leave of the court." MacCollum v. Perkinson, 185 Ariz. 179, 185, 913 P.2d 1097, 1103 (App. 1996) (citing Ariz. R. Civ. P. 15(a)). "A motion to amend should be granted 'unless the court finds undue delay in the request, bad faith, undue prejudice, or futility in the amendment.'" Tumacacori Mission Land Dev., Ltd. v. Union Pac. R.R. Co., 231 Ariz. 517, 519, ¶ 4, 297 P.3d 923, 925 (App. 2013) (citation omitted). "Absent these circumstances, leave to amend a pleading should be granted '[i]f the underlying facts or circumstances relied upon . . . may be a proper subject of relief.'" MacCollum, 185 Ariz. at 185, 913 P.2d at 1103 (alterations in original) (citation omitted). "To determine if the trial court abused its discretion in denying the amendment, we presume that the facts alleged in the complaint are true." Id.
¶29 In this case, nothing in Appellants' proposed second amended complaint would alter our above conclusions. Assuming the added fact to be true, Appellants have still failed to assert in any of their complaints that B&N represented Alpert, JV and Danro as a joint venture in the TIMCO litigation. The holding on the factually similar situation in Turkey Creek, LLC v. Rosania, 953 P.2d 1306 (Colo. App. 1998), is instructive. There, co-venturer Miller contended that co-venturer Gold Fields' attorneys also represented the joint venture and Miller as a member of that joint venture. Id. at 1310-11. Miller supported his contention by arguing that the work of Gold Fields' attorneys benefitted the joint venture and that Miller had reimbursed Gold Fields for some of its attorney's fees. Id. at 1310. Miller also argued that Gold Fields had acted as an agent of the joint venture in hiring the attorneys and therefore the scope of the attorney-client relationship extended to the joint venture and Miller as well. Id. at 1311. The court found nothing to indicate that the attorneys represented or intended to represent the joint venture or Miller merely because they represented Gold Fields, and accordingly held that no attorney-client relationship existed between Gold Fields' attorneys and the joint venture or Miller. Id. at 1311-12.
¶30 Here, MH&B's engagement letter with JV, addressed to Alpert, reads:
We are pleased that you have decided to engage Meyer, Hendricks & Bivens, P.A. (the "Firm") to represent you in connection with the claims of James Ventures, L.P., against Timco Aviation Services, Inc., f/k/a Aviation Sales Company. This engagement letter will confirm our mutual understanding about the work to be performed by our Firm in this case, and the manner in which our fees and related expenses will be charged and paid. This letter applies only to our work on the Timco litigation. It does not obligate us to provide services or advice to you on any other matter.It is undisputed that B&N represented JV in the TIMCO matter. As in Turkey Creek, however, there is no indication that B&N thereby undertook to represent Danro and Alpert (in his individual capacity) as a joint venture together with JV. See Ariz. R. Sup. Ct. 42, ER 1.2(c) ("A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent."); ER 1.5(b) ("The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client in writing . . . ."). Without an attorney-client relationship, B&N could not be held liable for malpractice to the three of them as a joint venture, nor to Danro or Alpert as members thereof. See Toy v. Katz, 192 Ariz. 73, 85, 961 P.2d 1021, 1033 (App. 1997) ("In the context of reviewing a summary judgment on a claim for attorney negligence, we review whether the plaintiff has established triable issues of fact regarding . . . the existence of an attorney-client relationship . . . ." (citation omitted)).
In their previously filed response to B&N's motion for summary judgment, Appellants similarly argued: "All three of [Danro, JV and Alpert] walked into Mr. Bivens' office at the same time and all three hired Bivens and were represented by him. . . . Together, they share one claim against B&N. Each played a role in the underlying Timco promise and together they suffered damages." Even if we were to assume that B&N represented each of JV, Alpert and Danro against TIMCO, there is still no evidence that B&N represented all three of them as a joint venture, which would have been necessary to support the claim that malpractice committed as to one of them damaged all of them together. As it stands, any alleged malpractice committed as to one of them cannot support a finding of malpractice as to the others. We also note that if B&N indeed had represented Alpert, JV and Danro as a joint venture, Appellants surely would have known this fact by the time they filed the original or first amended complaint. See Reisner v. Gen. Motors Corp., 511 F. Supp. 1167, 1172 & n.8 (S.D.N.Y. 1981) ("[T]he proposed second amended complaint . . . adds many new factual allegations . . . . For example, the proposed second amended complaint states: 'At all relevant times, plaintiffs [R] and [V] were engaged in a joint venture . . . .' Not only do the earlier complaints fail to mention this 'joint venture,' . . . the existence of a joint venture between [R] and [V] was certainly within the knowledge of the plaintiffs when the original complaints were drafted."), aff'd, 671 F.2d 91 (2d Cir. 1982).
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¶31 In addition, Appellants' proposed second amended complaint sought to add as a theory of liability that B&N should have added Danro as a plaintiff in the underlying case under Fed. R. Civ. P. 15. Adding this theory would not have affected Danro's lack of predicate damages as a basis for summary judgment, nor would it change the fact that none of Appellants could prove that they would have been successful in the underlying case.
¶32 We therefore conclude that the trial court acted within its discretion by denying Appellants' motion for leave to file a second amended complaint because the proposed amendments were futile.
CONCLUSION
¶33 For the foregoing reasons, we affirm the trial court's summary judgment order and denial of Appellants' motion for leave to file a second amended complaint.