Thomas & Thomas Court Reporters, L.L.C. v. Switzer

283 Neb. 19

810 N.W.2d 677

THOMAS & THOMAS COURT REPORTERS, L.L.C., appellee and cross-appellant,

v.Douglas SWITZER, an individual, and Hathaway & Switzer, L.L.C., appellants and cross-appellees.

No. S–11–029.

Supreme Court of Nebraska.

Jan. 13, 2012.

Syllabus by the Court

1. Breach of Contract: Damages. A suit for damages arising from breach of a contract presents an action at law.

2. Judgments: Appeal and Error. In a bench trial of a law action, the trial court's factual findings have the effect of a jury verdict and will not be disturbed on appeal unless clearly wrong. The appellate court does not reweigh the evidence, but considers the judgment in a light most favorable to the successful party and resolves evidentiary conflicts in favor of the successful party, who is entitled to every reasonable inference deducible from the evidence.

3. Judgments: Appeal and Error. When reviewing questions of law, an appellate court has an obligation to resolve the questions independently of the conclusion reached by the trial court.

4. Attorney Fees: Appeal and Error. A trial court's decision denying attorney fees will be upheld absent an abuse of discretion.

5. Contracts: Principal and Agent: Liability. When a party contracts with a known agent acting within the scope of his or her authority for a disclosed principal, the contract is that of the principal only and the agent cannot be held personally liable thereon, unless the agent purports to bind himself or herself, or has otherwise bound himself or herself, to performance of the contract.

6. Contracts: Principal and Agent: Liability. An agent for a disclosed principal is not liable on a contract in the absence of some other agreement to the contrary or other circumstances showing that the agent has expressly or impliedly incurred or intended to incur personal responsibility.

7. Attorney and Client: Agency. The relationship between attorney and client is one of agency, and the general agency rules of law apply to the relation of attorney and client.

8. Attorney and Client: Contracts: Liability. Unless a lawyer or third person disclaims such liability at the time of contracting, a lawyer is subject to liability to third persons on contracts entered into on behalf of a client if the contract is between the lawyer and a third person who provides goods or services used by lawyers and who, as the lawyer knows or reasonably should know, relies on the lawyer's credit.

9. Corporations: Liability. The individual members and managers of a limited liability company are generally not liable for a debt, obligation, or liability of the company.

10. Corporations: Fraud. A court will disregard a limited liability company's identity only where the company has been used to commit fraud, violate a legal duty, or perpetrate a dishonest or unjust act in contravention of the rights of another.

11. Corporations. A limited liability company's identity as a separate legal entity will be preserved, as a general rule, until sufficient reason to the contrary appears.

12. Corporations: Liability: Proof: Fraud. A plaintiff seeking to impose liability on an individual member or manager of a limited liability company has the burden of proving that the company's identity should be disregarded to prevent fraud or injustice to the plaintiff.

13. Actions: Attorney Fees: Words and Phrases. A frivolous action is one in which a litigant asserts a legal position wholly without merit; that is, the position is without rational argument based on law and evidence to support the litigant's position.

14. Actions: Attorney Fees: Words and Phrases. The term “frivolous” connotes an improper motive or legal position so wholly without merit as to be ridiculous.

15. Actions: Attorney Fees. Pro se litigants are not entitled to recover attorney fees, even if the pro se litigant is a licensed attorney.

Douglas Switzer and Richard P. Hathaway, of Hathaway Switzer, L.L.C., pro se.

Ronald E. Reagan, of Reagan, Melton & Delaney, L.L.P., for appellee.

HEAVICAN, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER–LERMAN, JJ.

GERRARD, J.

Thomas & Thomas Court Reporters, L.L.C. (Thomas & Thomas), sued Douglas Switzer, an attorney, and his law firm, Hathaway & Switzer, L.L.C. (Hathaway Switzer), for failure to pay for court reporting services. The primary issue presented in this appeal is whether Hathaway Switzer is liable to Thomas & Thomas for its fees or whether Hathaway Switzer's clients are. We conclude that Hathaway Switzer is liable.

FACTS

Thomas & Thomas sued Switzer and Hathaway Switzer for failure to pay for court reporting services provided in five cases between January 28 and October 14, 2009. (Switzer's partner was never named as an individual party to the action.) Thomas & Thomas alleged that it was owed a total of $5,992. Thomas & Thomas alleged that demand had been made for payment more than 90 days prior to the filing of the complaint and that therefore, it was also due attorney fees pursuant to Neb.Rev.Stat. § 25–1801 (Cum.Supp.2010). Thomas & Thomas sought a total judgment of the $5,992 it was owed and attorney fees totaling $624.21.

In an answer, Switzer individually and Hathaway Switzer denied that they requested services from Thomas & Thomas. Switzer and Hathaway Switzer also alleged that Thomas & Thomas had failed to join as necessary parties those on whose behalf the depositions were taken and who were properly liable for the costs. Hathaway Switzer alleged that it acted as an agent for its clients in its interactions with Thomas & Thomas. As an affirmative defense, Switzer asserted that Thomas & Thomas had no claim against him as an individual because he interacted with Thomas & Thomas only as a member of a limited liability company. Switzer also counterclaimed that he should be awarded at least $4,000 in attorney fees because the action against him was frivolous.

A bench trial was held. At trial, one of the owners of Thomas & Thomas, John Thomas, testified that he had been a court reporter for 35 years and that his wife and co-owner had been a court reporter for 33 years. Thomas explained the procedure used to retain Thomas & Thomas' services. In most cases, a law firm telephones Thomas & Thomas to schedule a deposition. Thomas & Thomas asks the law firm to send it a notice. The deposition request is entered in Thomas & Thomas' billing and scheduling software, which generates a confirmation sheet. The confirmation is faxed or e-mailed to the law firm that requested the services.

Thomas stated that if he had been advised that Hathaway Switzer would not be responsible for services provided for its clients, he would have either demanded cash on delivery, obtained payment before the deposition, or declined the assignment. Thomas' wife also testified that if a law firm said it was not going to be responsible for payment, Thomas & Thomas would require a retainer or payment on delivery. If payment was not promised by either of these methods, Thomas & Thomas would not accept the assignment. Thomas' wife said these procedures are standard in the court reporting industry. However, Thomas admitted during his deposition that a majority of the payments Thomas & Thomas had received from Hathaway Switzer over the years were payments actually received from clients—e.g., a check written by a client.

The district court entered judgment for Thomas & Thomas. The court noted Thomas & Thomas' evidence that the industry standard in the local community is that the attorney is primarily responsible for the cost of court reporting services, absent an agreement to the contrary. The court found no evidence that Hathaway Switzer had informed Thomas & Thomas that the clients would be responsible for payment until after all the invoices were presented to Hathaway Switzer.

The court found, based on the custom and usage or course of dealing in the industry as proved by Thomas & Thomas, that an implied or constructive contract is created between an attorney and a court reporter that makes an attorney primarily responsible for court reporting services ordered by the attorney and rendered for the client, absent an express disclaimer of responsibility by the attorney. The court found that Thomas & Thomas proved performance of the reporting services on the order of Switzer and Hathaway Switzer, that Switzer and Hathaway Switzer were properly invoiced for the services, that the invoices were fair and reasonable for the services performed, and that Switzer and Hathaway Switzer failed to pay the invoices. The court entered judgment against Switzer and Hathaway Switzer in the amount of $5,992, along with costs. The court declined to award attorney fees to either party.

ASSIGNMENTS OF ERROR

Switzer and Hathaway Switzer assign, restated, that the district court erred in finding (1) that Hathaway Switzer was a party to a contract with Thomas & Thomas and therefore liable for payment, when Thomas & Thomas had notice that Hathaway Switzer was acting as an agent for a disclosed principal and Hathaway Switzer had disclaimed contractual liability by its prior course of dealing with Thomas & Thomas, and (2) that Switzer was liable to Thomas & Thomas although it presented no evidence to pierce Hathaway Switzer's company veil.

On cross-appeal, Thomas & Thomas assign that the court erred in not awarding it attorney fees.

STANDARD OF REVIEW

A suit for damages arising from breach of a contract presents an action at law.¹ In a bench trial of a law action, the trial court's factual findings have the effect of a jury verdict and will not be disturbed on appeal unless clearly wrong.² We do not reweigh the evidence, but consider the judgment in a light most favorable to the successful party and resolve evidentiary conflicts in favor of the successful party, who is entitled to every reasonable inference deducible from the evidence.³ When reviewing questions of law, however, we have an obligation to resolve the questions...