APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY. The Honorable Sandra C. Midkiff, Judge.
Mary R. Russell, Chief Justice. Fischer, Stith, Draper, Wilson and Teitelman, JJ., concur. Breckenridge, J., not participating.
Mary R. Russell, J.
Brian Nail appeals from the trial court's entry of judgment in favor of Husch Blackwell Sanders, LLP in a legal malpractice action. Prior to this case, Husch Blackwell represented Nail in a dispute with his former employer over his stock options. Nail had options to purchase the employer's stock within 18 months after the termination of his employment, but, when his former employer merged with another company, the stock was " locked up" for 12 months after the merger. The value of the stock declined significantly during the lockup period. Husch Blackwell eventually negotiated a settlement that extended Nail's option period, but when Nail attempted to exercise his options under the settlement agreement, complications arose that prevented him from immediately obtaining the stock.
Nail later sued Husch Blackwell for legal malpractice, alleging that Husch Blackwell (1) negligently advised him regarding his remedies in the dispute with his employer; and (2) negligently drafted the settlement agreement. He sought to recover the highest value of the stock during the lock-up period, or, alternatively, the amount of the settlement agreement's liquidated damages clause. The record does not show, however, that the decline in the value of Nail's stock options was a reasonable or probable result of Husch Blackwell's allegedly deficient advice. Nor does it show that Nail's employer would have
agreed to include provisions in the settlement agreement that would have allowed Nail to receive liquidated damages, and there was no evidence that the employer would have then breached any such provisions. Accordingly, the trial court's judgment is affirmed because Nail failed to prove that Husch Blackwell's alleged negligence caused his claimed damages.
Factual and Procedural Background
As the chief financial officer of MTW Corporation, Nail acquired options to purchase stock in the company from its owner, Richard Mueller. When his employment was terminated in March 2001, he negotiated a separation agreement that permitted him to exercise his stock options until September 2002. The separation agreement provided that if MTW merged with another corporation, Nail's stock options would be converted into options to purchase stock in the successor company.
In July 2001, MTW was acquired in a stock-for-stock merger by The Innovation Group (" TIG" ), a United Kingdom corporation with stock traded on the London Stock Exchange. The merger converted Nail's options to purchase MTW stock into options to purchase shares of TIG stock. As a condition of the merger, Mueller agreed to " lock up" his shares of TIG stock for one year, during which time he could not sell or transfer TIG stock without board approval. This included the stock to which Nail held options.
Nail learned of the MTW-TIG merger shortly before it became final, and he retained Husch Blackwell for advice on how to protect his stock option rights. Husch Blackwell first asked TIG's board of directors to approve Nail's exercise of his stock options, but it refused. Nail and his attorneys then had several discussions regarding his possible courses of action. Nail knew he always had the option to sue. According to Nail, however, Husch Blackwell consistently advised him that litigation was unlikely to be successful, and he should attempt to settle with Mueller.
In March 2002, on Husch Blackwell's advice, Nail attempted to exercise some of his stock options. Mueller refused to transfer the stock, and Husch Blackwell threatened litigation. Shortly thereafter Nail and Mueller entered into a settlement agreement under which Mueller agreed to extend the option period by five years, place the shares Nail had options to purchase in an escrow account, and give Nail a $50,000 credit toward the exercise of his options. In return, Nail released Mueller from liability for breach of the separation agreement. Under the settlement agreement, Mueller was required to deliver a transfer notice at the expiration of the lock-up period, which would place the shares of TIG stock Nail had options to purchase in escrow. Once the transfer notice was delivered, Nail would be free to exercise his stock options. To ensure Mueller's compliance, the settlement agreement included a liquidated damages clause, which provided that Mueller's failure to timely deliver the transfer notice would result in damages equal to the highest value of TIG stock during the remainder of the lock-up period without regard to the cost of exercising the options. The settlement agreement also required Mueller to execute and deliver any other documents necessary to transfer the stock.
Meanwhile, the price of TIG stock rose following the merger and then declined. From a ...