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Finch v. Campbell

Court of Appeals of Missouri, Western District, Third Division

December 12, 2017

FLOYD FINCH, Appellant-Respondent,
v.
BRUCE WAYNE CAMPBELL, et al., Respondent-Appellants.

          APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY, MISSOURI THE HONORABLE W. BRENT POWELL, JUDGE

          Before: Victor C. Howard, Presiding Judge, Alok Ahuja, Judge and Anthony Rex Gabbert, Judge

          VICTOR C. HOWARD, JUDGE

         Floyd Finch and Bruce Campbell appeal the judgment of the Jackson County Circuit Court pertaining to the dissolution of their law firm. Finch presents four points on appeal. Campbell presents five points on appeal. The judgment is affirmed in part and reversed in part.

         Facts

         This case involves disputes between two attorneys regarding the operation and dissolution of a law firm partnership.[1] Final judgment was entered following three and a half years of contentious litigation, two bench trials, and one jury trial.

          Floyd Finch and Bruce Campbell became partners in a law firm in September 2009. The partnership dissolved effective August 1, 2012. It continued to exist after that date solely for the purpose of winding up its affairs. They did not have a written partnership agreement or operating agreement, but they effectively operated a 50/50 partnership with each partner equally sharing the expenses and profits of the partnership. The partnership operated on a cash basis, and no accrual basis financial statements were ever created by the partnership.

         Months prior to August 2012, Campbell sought to dissolve the partnership. When negotiations about the dissolution fell apart, Campbell locked Finch out of the law firm's office space with only his laptop computer.

         After 2012, Campbell established his own law practice. He continued, however, to absorb 100% of the profits, losses and expenses of the partnership. Even though the partnership was effectively dissolved at this time, it was still experiencing profits from accounts receivable and incurring expenses as the partnership wrapped up its affairs.

         In February 2013, Finch filed a first amended petition against Bruce Campbell, Finch's former law partner, and The Bruce Campbell Law Firm LLP. Finch alleged that Campbell improperly excluded Finch from the law firm of Finch & Campbell and from the firm's profits. The suit sought an accounting, access to records and other information, the imposition of a constructive trust, injunctive relief, and alleged breach of fiduciary duty.

         In March 2013, Campbell filed a first amended answer and first amended counterclaims. The counterclaims alleged Finch failed to record or bill time for legal services rendered for several clients, breach of fiduciary duty, breach of contract and implied duty of good faith and fair dealing, and unjust enrichment.

          In January 2014, the trial court granted in part Finch's motion for an immediate accounting, stay of discovery other than accounting issues, and for protective order. The trial court appointed Daniel J. Welsh as Special Master/Forensic Accountant for the purpose of conducting a full and complete accounting of Finch & Campbell. Because the partnership financial statements were prepared on a cash basis, Welsh searched for unrecorded assets and unrecorded liabilities.

         The identified unrecorded assets were divided into two main categories: (1) accounts receivable and (2) work performed by attorneys and the paralegal on or before August 1, 2012 but billed after August 1, 2012 (Work in Progress). Identifying Work in Progress was very difficult due in large part to Finch's poor billing practices. Instead of using the partnership's billing software to track time spent on a client matter contemporaneously to the work performed, Finch would review emails and other work product and ask the office manager to create and generate a bill months or sometimes years after the work had been performed. As a result, large amounts of the accounts receivable and Work in Progress were identified by Welsh and determined to be uncollectable.

         In December 2014 and January 2015, the trial court conducted a bench trial on issues pertaining to the forensic accounting ordered pursuant to Finch's motion and Count I (Action for Accounting and Production of Documents) of his amended petition. Marc Vianello, CPA, testified as Finch's expert witness. He opined that the minimum liquidity value of the partnership was $412, 435.56 as of July 2012. That same expert had opined in Finch's 2012 marriage dissolution case that the value of the partnership was $1, 038.75. The trial court found that Vianello's testimony was not as credible as Welsh's testimony. The court found that the total equity of the partnership was $253, 921.16 as of August 1, 2012. The trial court addressed the value of invoices expected to be received and adjusted that number to $350, 376.29.

          The trial court discussed Finch's position regarding the partnership during his dissolution proceedings. It found that Finch's position in the current case regarding the assets and liabilities of the partnership was inequitable. The court noted that the trial court adopted Finch's valuation during the dissolution trial and awarded his former spouse $519.38 for her marital interest in the partnership. The trial court further noted that if the dissolution court had used the numbers Finch proposed during the current case, his former spouse would have been awarded $206, 218.28 for her marital interest in the partnership. The trial court adjusted the partnership's value to Finch's detriment, using numbers he claimed during his dissolution proceeding and equity.

         In March 2015, the trial court entered its Findings of Fact, Conclusions of Law and Interlocutory Judgment as to Count I of Finch's amended petition. The trial court awarded Finch $30, 548.57 previously deposited with the court by Finch. The trial court entered judgment for Finch and against Campbell and Campbell Law Firm jointly and severally in the amount of $12, 887.07. The trial court subsequently lifted the discovery stay and authorized Welsh to release the documents collected for his forensic accounting to both Finch and Campbell.

         In February 2016, a jury trial was conducted with respect to Count IV of Finch's amended petition - breach of fiduciary duty by Campbell and aiding and abetting breach of fiduciary duty by Campbell Law Firm. The trial also addressed Campbell and Campbell Law Firm's Counts I, II, and III of their counterclaim - breach of fiduciary duty, breach of contract and implied duty of good faith and fair dealing, and unjust enrichment. Prior to the jury trial, Finch abandoned his aiding and abetting breach of fiduciary claims against Campbell Law Firm.

         In March 2016, the case was submitted to the jury. The jury returned with the following verdicts:

VERDICT A
On the claim of Plaintiff Floyd Finch for compensatory damages for breach of fiduciary duty against defendant Bruce Campbell, we, the undersigned jurors, find in favor of: Plaintiff Floyd Finch.
We, the undersigned jurors, assess the compensatory damages of plaintiff Floyd Finch at $150, 000.
We, the undersigned jurors, find that Bruce Campbell IS NOT liable for punitive damages.
VERDICT B
On the claim of defendant Bruce Campbell for breach of fiduciary duty against plaintiff Floyd Finch, we, the undersigned jurors, find in favor of: Defendant Bruce Campbell.
On the claim of defendant Bruce Campbell for breach of contract and the implied duty of good faith and fair dealing against Floyd Finch, we, the undersigned jurors, find in favor of: Plaintiff Floyd Finch.
We, the undersigned jurors, assess the damages of defendant Bruce Campbell at $100, 000.
VERDICT C
On the claim of defendant Bruce Campbell for unjust enrichment against plaintiff Floyd Finch, we, the undersigned jurors, find in favor of: Plaintiff Floyd Finch.
We, the undersigned jurors, assess the damages of defendant Bruce Campbell at $0.

         In October 2016, the trial court issued its Final Judgment and Omnibus Post-Trial Order. The trial court denied Finch's motion for judgment notwithstanding the verdict and alternative motion for a new trial. The trial court denied Finch's motion to award Finch 50% of the net profits Bruce Campbell Law Firm generated using assets and collections of Finch and Campbell Law Firm. The trial court denied Finch's motion for a constructive trust, to impose an accounting, and for an award of attorney's fees. The Trial court similarly denied Campbell's motion for judgment notwithstanding the verdict and alternative motion for a new trial.

          Both Finch and Campbell appeal to this court.

         Finch's Point I

         In his first point in appeal, Finch says the trial court erred in denying his motions for directed verdict and judgment notwithstanding the verdict and in awarding judgment against Finch for breach of fiduciary duty. He claims he had no fiduciary duty: to record his time in a particular manner, to bill clients on the schedule demanded by his partner, or to cooperate in billing in ways demanded by his partner. Finch argues that his billing or non-billing of partnership clients did not breach a fiduciary duty Finch owed to Campbell.

         "'The standard of review for the denial of a judgment notwithstanding the verdict (JNOV) is essentially the same as review of the denial of a motion for directed verdict.'" City of Harrisonville v. McCall Serv. Stations, 495 S.W.3d 738, 748 (Mo. banc 2016) (quoting All Am. Painting, LLC v. Fin. Solutions & Assocs., Inc., 315 S.W.3d 719, 723 (Mo. banc 2010)).

When reviewing a circuit court's denial of a judgment notwithstanding the verdict, this Court must determine whether the plaintiff presented a submissible case by offering evidence to support every element necessary for liability. Evidence is viewed in the light most favorable to the jury's verdict, giving the plaintiff all reasonable inferences and disregarding all conflicting evidence and inferences. This Court will reverse the jury's verdict for insufficient evidence only where there is a complete absence of probative fact to support the jury's conclusion.

Id. (quoting Smith v. Brown & Williamson Tobacco Corp., 410 S.W.3d 623, 630 (Mo. Banc 2013)). "'When the grant or denial of a directed verdict or a JNOV is based upon a matter of law ... we review the trial court's decision de novo.'" Bailey v. Hawthorn Bank, 382 S.W.3d 84, 92 (Mo. App. W.D. 2012) (quoting Trinity Lutheran Church v. Lipps, 68 S.W.3d 552, 557 (Mo. App. E.D. 2001)).

         The jury found that Finch violated his fiduciary duty. Finch and Campbell did not have a written partnership agreement about anything, including about billing practices. Because of this, Finch argues in his brief that he "had the right to record his time and to bill his clients as he thought best." Finch cites the following subsection of Missouri's Uniform Partnership Law:

The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement ...

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