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Estate of Cox v. Dunakey & Klatt, P.C.

Supreme Court of Iowa

April 7, 2017

ESTATE OF MICHAEL G. COX II by Executors, JOLEEN COX and MICHAEL G. COX SR., and JOLEEN COX, Individually and MICHAEL G. COX SR., Individually. Appellants,

         Appeal from the Iowa District Court for Black Hawk County, Richard D. Stochl (trial judge) and Kellyann M. Lekar (order denying plaintiffs' motion for out-of-district judge), Judges.

         Plaintiffs appeal a district court order granting the defendant's motion to enforce a settlement agreement. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

          Marc S. Harding of Harding Law Office, Des Moines, for appellants.

          Thomas J. Joensen and Catherine M. Lucas of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des Moines, for appellee.

          MANSFIELD, Justice.

         In this case, we are asked to determine whether the parties in a legal malpractice case entered into a binding settlement agreement, and if so, whether the settlement's confidentiality provision would result in a violation of our rules of professional conduct. Here, following mediation, the parties agreed on what would be paid to settle the case. They also exchanged versions of a confidentiality provision to be included in the settlement agreement, although they never settled on the same version at the same time. The defendant law firm nonetheless asked the district court to enforce the settlement.

         Following a hearing, the court concluded that the parties had reached a final settlement and dismissed the underlying malpractice case. Plaintiffs now appeal, arguing (1) there was no meeting of the minds on settlement; (2) the confidentiality provision in the settlement as approved by the district court restricts the right of plaintiffs' counsel to practice law in violation of Iowa Rule of Professional Conduct 32:5.6(b); (3) the court had no authority to seal documents relating to the settlement; and (4) because the defendant law firm practices primarily in Black Hawk County, this case should have been heard by a judge from a different judicial district.

         For the reasons discussed below, we hold that the parties never mutually assented to the same settlement agreement. We therefore do not reach the question whether a confidentiality provision requiring the attorneys not to disclose the existence and terms of the settlement may violate Iowa Rule of Professional Conduct 32:5.6(b). We also conclude the district court did not abuse its discretion in sealing documents related to the parties' mediation and follow-up negotiations or in declining to arrange for an out-of-district judge to preside over the case.

         Accordingly, we reverse the judgment enforcing the settlement, we affirm the court's orders sealing portions of the file and declining to arrange for an out-of-district judge, and we remand for further proceedings.

         I. Background Facts and Proceedings.

         A. The Malpractice Suit.

         This legal malpractice case arises from work performed by the Dunakey & Klatt law firm for Michael Cox II. The law firm is based in Waterloo and regularly practices in Black Hawk County. In early 2010, the law firm drafted a prenuptial agreement purporting to waive the rights of Cox's future spouse to Cox's 401(k) plan. The prenuptial agreement was executed, and approximately fourteen months later, a petition for dissolution of marriage was filed. However, before the divorce was finalized, Cox died in May 2011. A dispute arose as to whether the prenuptial agreement operated as a valid waiver of spousal rights to the 401(k) account. The matter was litigated in the federal courts, and ultimately any waiver was determined to be ineffective. Hence, the 401(k) account passed to Cox's widow rather than his parents.

         In February 2014, Michael Cox II's parents, Michael and Joleen, filed this action for legal malpractice against the law firm and the two attorneys in the firm who had worked on the prenuptial agreement.[1] Although the action was brought in Bremer County, the parties jointly requested the matter be transferred to Black Hawk County. In November, a district judge who regularly offices in Chickasaw County was assigned to preside over the case.

         B. Mediation and Settlement Negotiations.

         In May 2015, after several months of discovery had occurred and a motion for summary judgment had been filed by the law firm, the parties agreed to mediate their dispute. On May 29, Michael and Joleen Cox attended the mediation session along with their attorney, Marc Harding. Troy Miller, an insurance claims adjuster, appeared on behalf of the law firm's insurer. The parties did not reach a settlement during the mediation; however, Harding, Miller, and the law firm's attorney, Tom Joensen, agreed to continue working with the mediator in the ensuing days to try to resolve the case.

         On June 4, the court received an email from Joensen stating his understanding that the case had settled. Harding replied, disputing that the case had settled and instead noting that the parties still disagreed whether a confidentiality provision would be included in the agreement. Nevertheless, Harding wrote he was "cautiously optimistic [the case] will resolve."

         Following that correspondence with the court, a series of emails was sent among Harding, Miller, and Joensen discussing the possibility of including a confidentiality provision in the settlement agreement. Harding wrote that the Coxes "would be willing to enter into a bilateral confidentiality agreement on the amounts paid only, subject to disclosure for tax purposes and if ordered by a court." Harding indicated that if the scope of the confidentiality agreement were any broader, it may cause tax and ethical implications. Several more emails were sent on this subject. Finally, late on June 4, Miller wrote to Harding:

I've attached a couple of releases but need to have approval of my insured as well. Once you review them if you have any issues with them please return with any proposed alternative language and I can run it by [Joensen] and my insured for approval. The next morning, June 5, at around 10:30 a.m., Harding responded:
Pursuant to our discussion, please replace paragraph 15 of the settlement with the exact language from your shorter release, reading as follows:
The existence and terms of this Release shall be and remain confidential between the parties hereto and shall not be disclosed by Releasors, except as required by law or order of court, without the prior written consent of each of the named Releasees, which consent may be withheld for any reason whatsoever. The parties agree that the terms of this settlement may be disclosed to any Court, (only) as required by law.
We would also agree to an additional line that Plaintiffs are permitted to state that the matter has been concluded to their satisfaction or similar language.

         Several hours later, still on June 5, Joensen emailed Harding a document titled "SETTLEMENT AND FULL AND FINAL RELEASE, " which incorporated the confidentiality language requested by Harding. Joensen wrote, "Let us know if you agree to this document." Miller added that he would "of course need to have [his] insured's OK as well, " to which Joensen replied that he "fully expect[ed] them to agree to it, but that is one last moving piece."

         Ten days then passed while Harding was away on a Boy Scout trip to the Boundary Waters. Having returned on June 15, Harding replied that "the Settlement and Full and Final Release, as revised, is agreeable." However, at that point, the law firm had not confirmed acceptance of the settlement.

         Instead, on June 16, Joensen emailed Harding a different version of the settlement, which included changes to the confidentiality provision. Although the provision previously stated that the settlement "shall not be disclosed by Releasors" (the Coxes), the new language provided that the settlement "shall not be disclosed by Releasors, their agents, assigns, wards, executors, successors, administrators, and attorneys." Joensen wrote that it was Harding's decision "whether you have your clients sign" this second version.

         Early on June 17, Harding wrote back. He objected to the new language, maintaining that it was overly broad and unethical. Harding stated that the Coxes "want the June 5 agreement which complies with the [ethical] Rule by 2 pm, or they want to try the case."

         At 11:34 a.m. that day, Joensen responded. He questioned why the parties would proceed to trial if they had already agreed to a settlement on June 15. He offered to remove the word "attorneys" but not the word "agents, " and insisted that " 'agents' includes, in its definition, attorneys."

         Joensen did not respond further by 2 p.m. and, at 3:55 p.m., the Coxes filed a motion to set a new trial date. The Coxes' motion stated there had been "no meeting of the minds" on the proposed settlement agreement.

         In response, the law firm promptly filed a motion to enforce a settlement agreement. The law firm did not identify which version of the settlement agreement it believed the parties had agreed on, but stated that the "[t]he Plaintiffs' concerns regarding the Confidentiality Agreement are unfounded."

         Several days later, the law firm filed an additional motion requesting that the court seal all transcripts, exhibits, and filings related to its motion to enforce the settlement. The law firm asserted that its request was necessary "to prevent the de facto disclosure of the very matters the settlement agreement is intended to keep confidential."

         C. Sealing the ...

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