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Thomas J. Joensen and Thomas M. Boes of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des Moines, for appellants.
Marc S. Harding and David A. Hirsch of Harding Law Office, Des Moines, for appellee.
This legal malpractice action presents three questions of first impression. In Hook v. Lippolt, we held the defendants in plaintiff Pamela Hook's personal injury action— the State of Iowa and a volunteer driver for the Iowa Department of Human Services— were entitled to summary judgment under the statute of limitations and volunteer-immunity provisions of the Iowa Tort Claims Act, respectively. 755 N.W.2d 514, 517 (Iowa 2008). Hook then brought this malpractice action against her attorney in that case, Tito Trevino, who appeals from the judgment on the jury
verdict in her favor. Hook cross-appeals a ruling denying her claim for additional interest.
First, we must decide an issue not reached in Lippolt — whether the driver's volunteer immunity precludes the state's respondeat superior liability for his negligence. If so, Hook's legal malpractice claim against Trevino fails because she could not have recovered in the " case within the case" had it been timely filed against the state. We hold that this defense is personal to the driver and does not extend to the state.
Second, we must decide whether Trevino can reduce the malpractice-damage award by the contingent fee he would have taken if the underlying action had been successful. Courts in other jurisdictions are divided on this issue. We adopt the majority and better-reasoned rule reflected in the Restatement (Third) of the Law Governing Lawyers, declining such a setoff because Trevino never earned the fee and Hook must pay new counsel who prosecuted the malpractice action.
Third, we must determine what interest is recoverable. Hook sought interest from the date the underlying action would have been tried. The district court denied that request and awarded interest on the entire judgment from the filing date of the malpractice action. We conclude Hook is entitled to interest running from December 9, 2004, the date by which her underlying action should have been tried, absent Trevino's negligence. Accordingly, for the reasons elaborated below, we affirm on the appeal, reverse on the cross-appeal, and remand with instructions.
I. Background Facts and Proceedings.
On June 9, 2000, Carl Lippolt ran a red light and struck Pamela Hook's vehicle, injuring her. The following year, Hook hired Trevino to represent her " in connection with injuries from [the] motor vehicle accident," according to their " Contract for Employment of Attorneys." Their agreement, signed July 12, 2001, provided for a contingent fee as follows:
CONTINGENT FEE: In the event of recovery, the Client(s) shall pay Attorneys a fee based upon total recovery. This fee shall equal 33 1/3 percent of the recovery if settled without filing a suit or if recovery is made after suit is filed and prior to 21 days before trial or hearing date. The fee for settlement or recovery after 21 days before trial or hearing date and before notice of appeal shall equal 40% for any recovery made pursuant to this representation. IN THE EVENT NO RECOVERY IS MADE, ATTORNEYS SHALL RECEIVE NO FEE FOR SERVICES PERFORMED UNDER THIS CONTRACT.
On March 13, 2002, with nearly three months remaining on the two-year statute of limitations, Trevino filed Hook's first civil action against Lippolt alone. On April 8, Lippolt filed an answer to the petition that admitted his " negligence was a proximate cause of the collision and any resulting damages." In July, more than two years after the accident, Trevino served interrogatories. On September 6, Lippolt answered the interrogatories, disclosing for the first time that he had been serving as a volunteer driver for the Iowa Department of Human Services, transporting a patient for treatment, when he collided with Hook. On May 23, 2003, Lippolt amended his answer to plead affirmative defenses based on Iowa Code section 669.24 (2001), which provides immunity from personal liability for state volunteers, and on Hook's failure to submit her tort claim to the state appeal board as required by section 669.13.
In June 2003, Trevino filed an administrative claim on Hook's behalf with the state appeal board. Trevino dismissed without prejudice Hook's lawsuit against Lippolt. After six months went by with no response from the board, Trevino withdrew Hook's administrative claim and filed a second civil action against Lippolt, this time naming the state as a codefendant. Lippolt and the state moved for summary judgment on statute of limitations grounds. Hook resisted, arguing her claims were timely under the discovery rule. Lippolt also moved for summary judgment on the volunteer-immunity defense, which Hook resisted on the theory that the statute protected only the volunteer's personal assets, not liability insurance. The district court denied defendants' motions for summary judgment, and we allowed their interlocutory appeal.
In Lippolt, we held Lippolt was immune from liability under the volunteer-immunity statute, Iowa Code section 669.24. 755 N.W.2d at 520-21. Moreover, we concluded the two-year statute of limitations was not tolled by the discovery rule. Id. at 524 (" As a matter of law, a reasonably diligent inquiry would have led to [timely] discovery of the State's liability." ). We held both defendants were entitled to summary judgment. Id. at 527-28. Our discussion of Trevino's duty to investigate foreshadowed this malpractice action:
If a duty to investigate the existence of a vicariously liable defendant did not arise until the injured party discovered the tortfeasor's immunity, the statute of limitations would never commence against a vicariously liable defendant in cases in which the tortfeasor is not immune. We think an injured party who knows of her injury and its cause must conduct a reasonable investigation of the nature and extent of her legal rights that includes inquiry into the identity of any vicariously liable parties. An injured party's duty to investigate the identity of persons liable for her injury is not a seriatim process that stops upon the discovery of one defendant and arises again only when that defendant's liability is questioned.
Id. at 523.
After our 2008 decision, Hook hired new counsel and filed a malpractice claim against Trevino on June 23, 2010. Hook asserted Trevino negligently failed to " promptly pursue inexpensive, necessary discovery to ascertain the proper identity of those who should be sued" and failed to timely file an administrative claim with the state appeal board. Trevino moved for summary judgment, arguing that, because the state's agent, Lippolt, was entitled to immunity under section 669.24, Hook's respondeat superior claim against the state failed as a matter of law. The district court denied his motion for summary judgment and, at trial, denied his motion for a directed verdict on the same grounds.
Trevino filed a motion in limine before trial to prevent Hook from arguing interest " should accrue from the time of a jury verdict in the underlying case." The district court, noting that " [p]rejudgment interest generally accrues from the time of filing suit," granted Trevino's motion, but stated, " This court will reconsider this order if an offer of proof ... is made at trial." Hook made no offer of proof regarding interest or the date the underlying case likely would have gone to verdict.
The jury returned a verdict finding Trevino was negligent and that his negligence caused damage to Hook. The jury was asked to determine past and future damages, but was not asked to determine the date the underlying case should have been tried. The jury awarded the following damages on the verdict form:
||Past pain and suffering from the date of injury to when a case against the State of Iowa would have been tried.
||Present value of future pain and suffering determined as of when a case against the State of Iowa would have been tried.
||Past loss of function of the mind and body from the date of injury to when a case against the State of Iowa would have been tried.
||Present value of future loss of function of the mind and body determined as of when a case against the State of Iowa would have been tried.
||Past loss of earnings from the date of injury to when a case against the State of Iowa would have been tried.
||Present value of future earning capacity determined as of when a case against the State of Iowa would have been tried.
In addition, the parties stipulated that Hook's past medical expenses amounted to $60,000. This brought the total award to $473,000. The district court entered judgment against Trevino in that amount with interest on the entire judgment, including future damages, running from June 23, 2010, the date the malpractice action was filed.
Trevino filed a posttrial motion to " offset the verdict by the contingent fee agreement" or, alternatively, by the reasonable value of his legal services. The district court denied that motion. Hook filed a motion seeking interest running from the time her original action would have been tried. The district court denied her motion for additional interest. Trevino's appeal and Hook's cross-appeal followed.
II. Scope of Review.
" We review a district court's ruling on a motion for directed verdict for correction of errors at law." Pavone v. Kirke, 801 N.W.2d 477, 486 (Iowa 2011). We review a ruling on a claimed setoff against a judgment for correction of errors at law. See Collins v. King, 545 N.W.2d 310, 312 (Iowa 1996) (reviewing disability insurance setoff for correction of errors at law). Finally, a ruling on interest is reviewed for correction of errors at law. Wilson v. Farm Bureau Mut. Ins. Co., 770 N.W.2d 324, 327 (Iowa 2009).
A. State Volunteer Liability.
We first address Trevino's argument that he was entitled to a directed verdict because the volunteer immunity enjoyed by Lippolt under Iowa Code section 669.24 extended to the state to bar Hook's respondeat superior claim. This is a question of statutory interpretation.
The Iowa Tort Claims Act (ITCA) provides a limited waiver of the state's sovereign immunity. See Iowa Code ch. 669; Hansen v. State, 298 N.W.2d 263, 265 (Iowa 1980) (" The state may now be sued in tort only in the manner and to the extent to which consent has been given by the legislature." ); see also Thomas v. Gavin, 838 N.W.2d 518, 521 (Iowa 2013) (citing Don R. Bennett, Handling Tort Claims and Suits Against the State of Iowa: Part I, 17 Drake L.Rev. 189, 189 (1968) (" Prior to passage of the Iowa Tort Claims Act in 1965, the maxim that ‘ the King can do no wrong’ prevailed in Iowa." ) (noting the ITCA is " viewed as abolishing traditional common law immunities" )). " Generally, the State may be sued for damage caused by the negligent or wrongful acts or omissions of state employees while acting within the scope of employment to the same extent that a private person may be sued." McGill v. Fish, 790 N.W.2d 113, 117 (Iowa 2010) (citing Iowa Code § 669.2(3)( a ) (2009)). " Employee of the state" is defined to include persons acting on behalf of the state " whether with or without compensation."
Iowa Code § 669.2(4)( a ) (2001); see also Lippolt, 755 N.W.2d at 519 (" [T]he term ‘ employee’ as used in chapter 669 includes unpaid volunteers as well as paid workers." ). Hook argues the state can be sued by a party injured by the negligence of a volunteer such as Lippolt acting on behalf of the state. We agree.
Iowa enacted its state volunteer tort immunity provision in 1987. 1987 Acts ch. 212, § 1 (now codified at Iowa Code § 669.24). Section 669.24 provides:
A person who performs services for the state government or any agency or subdivision of state government and who does not receive compensation is not personally liable for a claim based upon an act or omission of the person performed in the discharge of the person's duties, except for acts or omissions which involve intentional misconduct or knowing violation of the law, or for a transaction from which the person derives an improper personal benefit. For purposes of this section, " compensation " does not include payments to reimburse a person for expenses.
Trevino relies on our common law negligence decisions holding that an adjudication in favor of the agent on a negligence claim bars the plaintiff's vicarious-liability claim against the principal. See, e.g., Peppmeier v. Murphy, 708 N.W.2d 57, 66 (Iowa 2005); Kulish v. Ellsworth, 566 N.W.2d 885, 892 (Iowa 1997) (affirming dismissal of common law vicarious-liability claim against county whose allegedly negligent employees enjoyed statutory immunity). Hook, in turn, cites our ...