LeRette v. Howard, 912 N.W.2d 706

Background

In 2006 Master Blaster, Inc. (owned by David LeRette Jr.) obtained a judgment against Johnnie Anderson for unpaid purchase-money obligations; Anderson later filed bankruptcy but the bankruptcy court denied discharge as to that debt and the state-court judgment was entered in 2009.
LeRette (individually and as owner of Master Blaster) and Anderson retained attorney Steven H. Howard to pursue a legal-malpractice claim against Anderson’s bankruptcy counsel; Howard advised LeRette not to execute on the Master Blaster judgment and told LeRette he would be paid from any recovery.
Howard settled Anderson’s malpractice claim in July 2012 for $350,000, disbursing $235,964.78 to Anderson and retaining $114,035.22 in fees; LeRette never received any settlement proceeds and later sued Howard for legal malpractice and fraudulent misrepresentation.
A jury returned a general verdict for LeRette and Master Blaster awarding $775,000; defendants moved for JNOV and the district court reduced the award to $235,968.78 (the amount Anderson received) and denied plaintiffs’ motion for sanctions.
On appeal the Nebraska Supreme Court affirmed the JNOV reduction but modified the award upward to $350,000 (adding the fees Howard retained) on the ground that Howard violated rules on conflicts of interest and therefore could not recover his fees; the court also rejected defendants’ subject-matter-jurisdiction challenge and upheld denial of sanctions.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Subject-matter jurisdiction / real party in interest	LeRette and Master Blaster were proper plaintiffs; pleadings and trial documents show both were plaintiffs	Howard: LeRette lacked standing because the judgment was owned by Master Blaster, so the suit was not by the real party in interest	Court: Pleadings, verdict form, judgment, and motions identified both LeRette and Master Blaster as plaintiffs; jurisdiction proper
Reduction of jury award (JNOV) — measure of damages	Damages equal value of Master Blaster’s judgment (up to $775,000) because malpractice deprived them of full judgment recovery	Only damages proximately caused by Howard were the settlement proceeds Anderson actually received; no proof Howard could have obtained a greater recovery	Court: JNOV reduction affirmed as matter of law because plaintiffs failed to show Anderson’s claim would have produced a larger recovery or that Howard performed deficiently in obtaining settlement; however, court modified award to $350,000 by disallowing Howard’s retained fees due to conflict of interest
Attorney fees retained by Howard given alleged conflict of interest	Plaintiffs sought full recovery of lost proceeds (including amounts paid to Howard)	Howard contended his fees were proper for services rendered	Court: Applying rule that attorneys who violate conflict-of-interest rules may not recover fees, court held Howard not entitled to his $114,035.22 and included that amount as recoverable, increasing plaintiff recovery to $350,000
Sanctions for discovery/fraud on court	Plaintiffs argued pattern of misconduct, discovery abuses, and fraud warranted striking answers, disgorgement, and fees	Defendants argued conduct did not rise to sanctionable bad-faith or fraud; protections for client confidentiality applied	Court: Affirmed denial of sanctions — trial court likely found defendants did not act in bad faith in protecting client files and privilege; no abuse of discretion shown

Key Cases Cited

Deutsche Bank Nat. Trust Co. v. Siegel, 279 Neb. 174 (jurisdiction is a question of law reviewed de novo)
Bellino v. McGrath North, 274 Neb. 130 (standards for JNOV and that court may resolve controversy as matter of law)
State ex rel. FirsTier Bank v. Mullen, 248 Neb. 384 (attorney who violates professional-conduct rules may not recover fees)
Heckman v. Burlington Northern Santa Fe Ry. Co., 286 Neb. 453 (presumption that a general verdict may be treated as having been based on any valid theory presented to the jury)