                              NOTICE: NOT FOR PUBLICATION.
    UNDER ARIZ. R. SUP. CT. 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT
                    AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.




                                     IN THE
               ARIZONA COURT OF APPEALS
                                 DIVISION ONE


       JOHN KLEE and CATHERINE KLEE, Plaintiffs/Appellants,

                                         v.

       DAVID W. LUNN and GALLAGHER & KENNEDY, P.A.,
                     Defendants/Appellees.

                             No. 1 CA-CV 13-0060
                              FILED 03/04/2014


          Appeal from the Superior Court in Maricopa County
                         No. CV 2009-054004
               The Honorable Alfred M. Fenzel, Judge

      AFFIRMED IN PART; VACATED IN PART; REMANDED


                                   COUNSEL

The Nathanson Law Firm, Scottsdale
By Philip J. Nathanson
Counsel for Plaintiffs/Appellants

Broening Oberg Woods & Wilson, P.C., Phoenix
By Donald Wilson, Jr. and Brian W. Purcell
Counsel for Defendants/Appellees
                           KLEE v. LUNN, et al.
                           Decision of the Court



                      MEMORANDUM DECISION

Judge Margaret H. Downie delivered the decision of the Court, in which
Presiding Judge Kent E. Cattani and Judge Michael J. Brown joined.


D O W N I E, Judge:

¶1           This appeal arises out of a legal malpractice action filed by
John and Catherine Klee 1 against attorney David Lunn and the law firm of
Gallagher & Kennedy, P.A. (“G&K”) (collectively, “Appellees”). The
superior court granted summary judgment to Appellees on the Klees’
complaint.     It also granted summary judgment to G&K on its
counterclaim. We affirm the grant of summary judgment on the
malpractice claim but vacate summary judgment on the counterclaim and
remand for further proceedings.

                FACTS AND PROCEDURAL HISTORY 2

¶2             On December 5, 2005, John Klee, Thomas W. Anderson, and
Alan Scott Ferguson (“the Borrowers”) borrowed $90,000 from the Robert
Nichols Family Trust (“the Trust”) and signed a promissory note agreeing
to repay $135,000 by March 8, 2006. If the Borrowers did not pay in full by
the stated date, late fees would apply, and the note provided for a default
interest rate of 18% and recovery of attorneys’ fees and costs. Anderson
individually signed a second promissory note when he borrowed
additional sums from the Trust.

¶3           Defaults occurred under both promissory notes. The Trust
sued Klee, Anderson, and Ferguson under the first note and Anderson
under the second note (“the underlying litigation”). Ferguson settled with
the Trust and was dismissed from the lawsuit.

¶4           Anderson and Klee consulted with Lunn, who was then an
attorney at G&K. Lunn concluded that representing both Anderson and


1     References to “Klee” in the singular are to John Klee.
2     We view the facts in the light most favorable to the Klees. See
AROK Constr. Co. v. Indian Constr. Servs., 174 Ariz. 291, 293, 848 P.2d 870,
872 (App. 1993).



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                           KLEE v. LUNN, et al.
                           Decision of the Court

Klee was permissible because they had co-signed the first note and were
jointly and severally liable under it. Lunn advised Anderson and Klee,
though, that he would have to withdraw in the future if a conflict of
interest arose. Anderson agreed to pay the legal fees and costs for the
joint representation.

¶5           Appellees entered an appearance on behalf of the Klees and
Anderson in the underlying litigation. The Trust moved for summary
judgment. Appellees responded in opposition, arguing that “[a]lthough it
is undisputed that certain amounts of principal remain outstanding for
each promissory note, the terms of repayment are so unconscionable the
total amount owed under the promissory notes is greatly disputed.” The
superior court granted the Trust’s motion for summary judgment “as to
every issue raised therein . . . except for the issue of unconscionability
which must abide the further development of the record or an evidentiary
hearing.”

¶6            The parties reached a settlement agreement in July 2008 that
required Anderson and the Klees to pay the Trust $95,000. The settlement
agreement stated that they were jointly and severally liable and obligated
them to pay $47,500 by August 18, 2008, and an additional $47,500 by
October 2, 2008. If the required payments were not made, the Trust would
be entitled to $200,000, less any payments previously made under the
settlement agreement.

¶7           Anderson and the Klees wished to allocate their respective
obligations under the settlement agreement. Lunn suggested they sign an
agreement setting forth their responsibilities and stating that the failure of
one party to make required payments would give the other an indemnity
claim. Lunn advised the Klees to consult independent counsel regarding
such an agreement. Klee told Lunn that he had done so and wished to
proceed with the agreement. The ensuing indemnity agreement required
Anderson to remit the first $27,500 of each payment due under the
settlement agreement, with the Klees paying the remaining $20,000.

¶8            As the deadline neared for the first settlement payment,
G&K attorney Maureen Welsh e-mailed the Klees to remind them of the
amount and the due date. However, she mistakenly stated that they owed
$17,500 — $2500 less than their actual obligation. Klee sent $17,500 to
attorney Welsh. By the time Welsh notified Klee of her error, it was too
late for him to obtain additional funds. G&K forwarded $20,000 to the
Trust, using $2500 of the firm’s funds.




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                           KLEE v. LUNN, et al.
                           Decision of the Court

¶9             Anderson did not make his required payments under the
settlement agreement. Lunn notified the Klees that there was now a
conflict of interest between them and Anderson such that G&K could no
longer represent them. Appellees later withdrew as counsel from the
underlying litigation.

¶10          The Trust successfully moved to enforce the settlement
agreement. The superior court entered judgment in favor of the Trust and
against the Klees and Anderson for $170,000. The Klees retained new
counsel, who negotiated a second settlement whereby the Klees agreed to
pay the Trust $55,000. The Klees did not fulfill their obligations under that
agreement. In November 2011, the Klees entered into a third settlement
agreement, this time agreeing to pay the Trust $185,000.

¶11          The Klees sued Appellees for legal malpractice. G&K filed a
counterclaim, seeking to recover legal fees from the Klees, as well as the
$2500 G&K sent to the Trust on the Klees’ behalf.

¶12         Appellees moved for summary judgment on both the
complaint and counterclaim. The superior court granted Appellees’
motion, assessed costs of $22,800.11 against the Klees, and entered a
signed judgment. The Klees filed a motion to alter, amend, and vacate the
judgment under Arizona Rule of Civil Procedure 59, which the court
denied.

¶13           The Klees timely appealed. We have jurisdiction pursuant
to Arizona Revised Statutes (“A.R.S.”) sections 12-120.21(A)(1), -
2101(A)(1), and ARCAP 9.

                              DISCUSSION

¶14            We review a trial court’s grant of summary judgment de
novo. Schwab v. Ames Constr., 207 Ariz. 56, 60, ¶ 17, 83 P.3d 56, 60 (App.
2004). Summary judgment is appropriate only when “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).

¶15          A party alleging legal malpractice must establish the four
basic elements of negligence: duty, breach of duty, causation, and
damages. Glaze v. Larsen, 207 Ariz. 26, 29, ¶ 12, 83 P.3d 26, 29 (2004)
(citation omitted). In the case at bar, only the latter two elements —
causation and damages — are at issue. Appellees’ motion for summary


                                     4
                            KLEE v. LUNN, et al.
                            Decision of the Court

judgment was “based solely upon the absolute vacuum of proof (1) that
any assumed breach of the standard of care was the actual and proximate
cause of any injury to [the Klees] and (2) that [the Klees] sustained any
damages.”

I.     Causation

¶16           In what is sometimes called the “case within the case”
doctrine, the plaintiff in a legal malpractice suit must “prove that but for
the attorney’s negligence, he would have been successful in the
prosecution or defense of the original suit.” Phillips v. Clancy, 152 Ariz.
415, 418, 733 P.2d 300, 303 (App. 1986); see also Glaze, 207 Ariz. at 29, ¶ 12,
83 P.3d at 29 (plaintiff must prove attorney’s negligence “was the actual
and proximate cause of injury,” i.e., that plaintiff would have succeeded in
the original action but for the negligence). Expert testimony is generally
required in professional negligence cases. See Asphalt Eng’rs, Inc. v.
Galusha, 160 Ariz. 134, 135, 770 P.2d 1180, 1181 (App. 1989). An exception
to this general rule exists “where the negligence is so grossly apparent that
a lay person would have no difficulty recognizing it.” Id. at 135-36, 770
P.2d at 1181-82; see also Mann v. GTCR Golder Rauner, LLC, 351 B.R. 685,
703 (D. Ariz. 2006) (“[I]n the absence of specific evidence establishing
causation, a claimant must present expert testimony to substantiate the
link between the claimed breach and the alleged injury.”); 4 Ronald E.
Mallen & Jeffery M. Smith, Legal Malpractice § 37:24 (2014) (“Expert
testimony may be essential for the plaintiff to establish causation. . . .
[U]nless the causal link is obvious or can be established by other evidence,
expert testimony may be essential to prove what the lawyer should have
done.”).

¶17          The Klees contend they settled with the Trust based on
Lunn’s advice that their unconscionability defense was “very bad.”
According to the Klees, had Lunn competently defended them, they could
have avoided their entire obligation under the promissory note.

¶18            The causation alleged by the Klees is not so obvious that a
lay person could recognize it. The Klees, though, failed to offer any
competent evidence of causation. See Orme Sch. v. Reeves, 166 Ariz. 301,
309, 802 P.2d 1000, 1008 (1990) (To survive summary judgment, the
proponent must produce evidence which would allow a reasonable trier
of fact to agree with the proponent’s conclusion.). In moving for summary
judgment, Appellees offered detailed expert opinions from Thomas
Zlaket, who stated, inter alia:




                                      5
                           KLEE v. LUNN, et al.
                           Decision of the Court

      The unconscionability defense [Appellees] managed to
      preserve for trial had little or no chance of success, and at
      most might have caused a reduction in fees, interest and/or
      penalties. It would not, in my opinion, have eradicated the
      entire debt. Nonetheless, the lawyers’ success on this
      motion was important in forestalling a judgment and
      providing an opportunity for the clients to secure a favorable
      settlement.

¶19           To defeat summary judgment, the Klees were required to
come forward with controverting evidence, which they failed to do. Their
only expert opinions appear in a preliminary affidavit of Paul Friedman,
who states in conclusory fashion that Appellees “did not develop a case
for the underlying Defendants’ theory that the interest rates of 267% and
400% were unconscionable and, therefore, lost the Motion for Summary
Judgment.”      Not only is Friedman’s affidavit factually incorrect
(Appellees persuaded the trial court to preserve the unconscionability
claim and defeated summary judgment on that basis), it does not suggest,
let alone establish, that but for a breach of duty, the Klees could have
avoided all liability under the promissory note — including the principal
sum that they borrowed. See Phillips, 152 Ariz. at 418, 733 P.2d at 303.
Friedman did nothing to counter Zlaket’s specific opinion that the
unconscionability defense had “little or no chance of success” and that, at
best, the defense could have reduced fees, interest, and/or penalties, not
relieved the Klees of all obligations under the note.

¶20            “When the party moving for summary judgment makes a
prima facie showing that no genuine issue of material fact exists, the
burden shifts to the opposing party to produce sufficient competent
evidence to show that an issue exists.” Kelly v. NationsBanc Mortg. Corp.,
199 Ariz. 284, 287, ¶ 14, 17 P.3d 790, 793 (App. 2000). Based on the record
before it, the superior court could properly conclude that the Klees failed
to proffer causation evidence sufficient to defeat summary judgment on
the malpractice claim.

II.   Damages

¶21           The lack of causation evidence is fatal to the Klees’
malpractice claim. But even if they had demonstrated a genuine issue of
material fact regarding causation, they failed to establish actual injury or
damages.




                                     6
                            KLEE v. LUNN, et al.
                            Decision of the Court

¶22            “A claim of legal malpractice requires more than negligence
by an attorney; in addition, ‘actual injury or damages must be sustained
before a cause of action in negligence is generated.’” Glaze, 207 Ariz. at 29,
¶ 15, 83 P.3d at 29. A plaintiff must establish both the fact of damages
attributable to the defendant and the amount of damages. “[T]he amount
of damages may be established with proof of a lesser degree of certainty
than required to establish the fact of damages.” Rancho Pescado, Inc. v. Nw.
Mut. Life Ins. Co., 140 Ariz. 174, 184, 680 P.2d 1235, 1245 (App. 1984); see
also Farr v. Transam. Occidental Life Ins. Co. of Cal., 145 Ariz. 1, 6, 699 P.2d
376, 381 (App. 1984) (“Speculative or uncertain damages, however, will
not support a judgment and proof of the fact of damages must be of a
higher order than proof of the extent thereof.”).

¶23            The Klees established neither the fact of damages nor an
amount of damages attributable to Appellees’ conduct. In responding to a
question about damages at his deposition, Klee responded, “until I have
consultants’ interpretation back and a study done on it, I don’t think I can
answer that question.” In response to a different question regarding
damages, he stated, “I’m not an accountant or an economist. And I don’t
believe I can calculate or make that assessment. . . .” Catherine Klee
similarly testified that she had not computed any damages and “wouldn’t
even know where to begin.” 3

¶24           Nor did the Klees offer competent evidence of the fact of
damages. Their expert’s preliminary affidavit makes only passing
reference to damages, stating in conclusory fashion that Appellees’
“failure to comply with the standards of care and conduct caused the
Klees’ damages.” An expert’s conclusory statements are insufficient to
defeat summary judgment. Nolde v. Frankie, 192 Ariz. 276, 282, ¶ 28, 964
P.2d 477, 483 (1998); see also Florez v. Sargeant, 185 Ariz. 521, 526, 917 P.2d
250, 255 (1996) (“[A]ffidavits that only set forth ultimate facts or
conclusions of law can neither support nor defeat a motion for summary
judgment.”).      In contrast, Zlaket’s affidavit avowed that the
unconscionability defense would not have relieved the Klees of their
obligation to repay principal sums owing under the promissory note and


3      The Klees suggest they were damaged because they had to liquidate
investments and borrow funds to make payments due under the
settlement agreement. The relevant inquiry, though, is whether the Klees
were damaged by having to pay more than they would have paid but for
the alleged malpractice.



                                       7
                           KLEE v. LUNN, et al.
                           Decision of the Court

that, as a result, they suffered no damages by entering into the settlement
agreement that Appellees negotiated with the Trust.

¶25         The Klees’ failure to offer competent evidence of the fact or
measure of damages provided an independent basis for granting
summary judgment to Appellees on the malpractice claim.

III.   Counterclaim

¶26           G&K’s counterclaim alleges breach of contract and unjust
enrichment claims against the Klees. 4 Lunn and Klee both testified that
Anderson agreed to pay G&K’s fees and to be financially responsible for
the defense of the underlying litigation. Appellees had no separate
retainer agreement with the Klees, as Lunn testified at his deposition:

             Q.    . . . [D]id the firm of Gallagher &
             Kennedy      have   a    separate  attorney
             representation agreement with John and
             Catherine Klee?

             A.    Not to my knowledge.

             Q.   Was there a written representation or retention
             agreement with Mr. Anderson?

             A.    Yes.

             Q.    Did that document refer to the Klees?

             A.     I believe so.

             Q.    Did the Klees sign it?

             A.    I don’t know.

The record does not include any representation agreement, including the
one reportedly signed by Anderson.



4      Although G&K also asserted a quantum meruit cause of action,
“[q]uantum meruit is actually a measure of damages, not a remedy. . . . The
claim for relief is for unjust enrichment.” Landi v. Arkules, 172 Ariz. 126,
135, 835 P.2d 458, 467 (App. 1992).



                                     8
                            KLEE v. LUNN, et al.
                            Decision of the Court

¶27            It is undisputed that Anderson failed to pay G&K for its
services. Lunn testified that “at some point,” Klee said he wanted G&K to
continue representing him “and that he would be responsible for their
portion of the fees.” According to Lunn, Klee confirmed that he would
pay G&K in an e-mail message. No such message is in the record, though,
and Klee denied under oath ever promising to pay G&K’s fees. Similarly,
although Lunn testified that Klee agreed to repay the $2500 G&K
advanced, Klee testified he never promised to repay G&K, “wasn’t billed
for it,” and “didn’t pay it.”

¶28           To prevail on a breach of contract claim, a plaintiff must
establish: (1) a contract; (2) breach thereof; and (3) resultant damages.
Thunderbird Metallurgical, Inc. v. Ariz. Testing Labs., 5 Ariz. App. 48, 50, 423
P.2d 124, 126 (1967). The record reveals a factual dispute as to the
existence of an enforceable agreement between the Klees and G&K,
making summary judgment on the breach of contract counterclaim
inappropriate. See Corbin-Dykes Elec. Co. v. Burr, 18 Ariz. App. 101, 102-03,
500 P.2d 632, 633-34 (1972) (enforcement of contract for services requires
showing of offer and acceptance).

¶29            Similarly, the elements of G&K’s unjust enrichment claim
are fact-intensive. That claim requires proof of: (1) the Klees’ enrichment;
(2) G&K’s impoverishment; (3) a link between the enrichment and the
impoverishment; (4) lack of justification for the enrichment and the
impoverishment; and (5) absence of a remedy provided by law. See City of
Sierra Vista v. Cochise Enters., Inc., 144 Ariz. 375, 381, 697 P.2d 1125, 1131
(App. 1984). Furthermore, the amount of any award under an unjust
enrichment theory is a question of fact.

¶30          Because factual disputes are apparent from the record, the
superior court erred by granting summary judgment to G&K on its
counterclaim.   We vacate that judgment and remand for further
proceedings regarding the counterclaim.

IV.    Cost Award

¶31          The superior court’s cost award was based on its grant of
summary judgment on all claims, which concluded the litigation entirely
in Appellees’ favor. However, we have vacated summary judgment on
the counterclaim. As a result, the cost award is premature and must be
vacated. See Aida Renta Trust v. Maricopa County, 221 Ariz. 603, 614, ¶ 39,
212 P.3d 941, 952 (App. 2009) (reversal of summary judgment vacates




                                       9
                           KLEE v. LUNN, et al.
                           Decision of the Court

related cost award). Once the entire case is resolved on the merits, the
superior court may revisit the issue of costs.

                             CONCLUSION

¶32          We affirm the grant of summary judgment to Appellees on
the Klees’ malpractice claim. We vacate the entry of summary judgment
on G&K’s counterclaim and remand for further proceedings regarding the
counterclaim.

¶33          We deny G&K’s request for attorneys’ fees incurred on
appeal pursuant to A.R.S. § 12-341.01(A). Section 12-341.01(A) permits an
award of fees to the successful party in a contested action arising out of a
contract.   However, we have vacated summary judgment on the
counterclaim, so neither party has yet prevailed on a contract-based claim.
On remand, the superior court has the discretion to award attorneys’ fees
incurred in this appeal to the party ultimately prevailing on the
counterclaim.

¶34           Lunn is the only party to entirely prevail on appeal. We
therefore award Lunn his appellate costs upon compliance with ARCAP
21. We do not award appellate costs to the Klees or G&K. See Concannon
v. Yewell, 16 Ariz. App. 320, 322, 493 P.2d 122, 124 (1972) (“As a general
rule, where both parties prevail on a material question on appeal, each
must bear his own costs.”).




                                  :gsh




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