McFadden, Presiding Judge.Robert J. Stewart filed this lawsuit against attorney Gus McDonald for legal malpractice, among other things. Stewart claimed that, as a result of that malpractice, he had suffered financial loss in connection with the 2010 sale of a business which he had formed in 2001 with Chip Smith. A Rabun County jury returned a $392,000 verdict in favor of Stewart, but the superior court granted McDonald’s motion for judgment notwithstanding the verdict. Stewart appeals from that order as well as the trial court’s grant of McDonald’s motion for a directed verdict on Stewart’s other claims. Because Stewart presented evidence to create a jury question on his claim of legal malpractice, the trial court erred in granting McDonald’s motion for judgment notwithstanding the verdict on the claim. Any error in the grant of a directed verdict on Stewart’s breach of fiduciary duty and fraud claims, which duplicate the legal malpractice claim, was harmless, given our reversal of the grant of the motion for judgment notwithstanding the verdict on the malpractice claim. Finally, the jury should have been allowed to consider Stewart’s claims for attorney fees and punitive damages. So we reverse the judgment and remand the case with direction.1. Factual background. In his complaint, Stewart asserted claims against McDonald for, inter alia, fraud, breach of fiduciary duty, and legal malpractice. He sought compensatory damages, punitive damages, and attorney fees. Stewart claimed that his lawyer, McDonald, conspired with Stewart’s business partner, Chip Smith, to defraud him out of his “fair share of the proceeds of the sale of a company that Stewart and Smith jointly owned.” Stewart asserted that McDonald’s negligence damaged him by depriving him of economic benefits that he was entitled to by virtue of his “equal ownership” position in the company. McDonald denied these claims, arguing at trial that he was not Stewart’s lawyer, that he only agreed to help Stewart and Smith reduce to paper a sale that the two had already negotiated with the company’s buyer, and that he did not cause any of Stewart’s alleged damages. During the trial, the trial court granted McDonald’s motion for a directed verdict on all but Stewart’s legal malpractice claim. After the jury returned a verdict for $392,000 in Stewart’s favor, the trial court granted McDonald’s motion for a judgment notwithstanding the verdict based on its determination that Stewart had failed to present evidence that McDonald’s negligence was the proximate cause of his claimed damages. For the following reasons, we disagree. On appeal from a trial court’s rulings on motions for directed verdict and judgment notwithstanding the verdict, we review and resolve the evidence and any doubts or ambiguities in favor of the verdict; directed verdicts and judgments notwithstanding the verdict are not proper unless there is no conflict in the evidence as to any material issue and the evidence introduced, with all reasonable deductions therefrom, demands a certain verdict.
Vol Repairs II v. Knighten, 322 Ga. App. 416, 417 (745 SE2d 673) (2013) (citations and punctuation omitted). So viewed, the record shows as follows.Stewart and Smith form CES. In 1996, Smith worked as the fitness director at the Atlanta Athletic Club and he had a side business training athletes. Smith approached Stewart about working with him as a strength trainer, and he offered him a position at the Atlanta Athletic Club. The two later left the Atlanta Athletic Club and, in 2001, formed Competitive Edge Sports, LLC (“CES”). The company’s operating agreement provided that Smith had a 51 percent, controlling interest in the company and that Stewart owned the remaining 49 percent. CES’s operating agreement did not address whether CES, Smith, or Stewart owned any intellectual property. At trial, Smith testified that he was the sole owner of the intellectual property used by CES. He elaborated that he created and continuously owned all of the intellectual property used by CES, including a logo, a unique training system, a training manual, and various pieces of athletic equipment. Smith presented evidence showing that at some point, he obtained patents, trademarks, and copyrights in the intellectual property. Stewart, however, testified at trial that everything used in the business — including the intellectual property — belonged to CES. Stewart introduced evidence that the agreed 51-49 split was intended to reflect a fair allocation of the value of the company, based on his and Smith’s complimentary efforts and contributions, including Smith’s contribution of the company’s logo. He explained that although he and Smith each had developed his own training system prior to forming CES, when they “got together, all of that changed and became a whole new system with both parts being added into it.” He testified that while they were operating CES, there were no patents or trademarks; that they had used their logo from the beginning, although they refined it over time; and that they and their staff jointly wrote the training manuals that Smith ultimately turned into a copyrighted book. In 2007, CES was having financial difficulties, and Smith and Stewart began looking for ways to improve the company’s cash flow. They spoke with two businessmen about franchising CES and its training methods. The businessmen testified at trial that they were assured by both Smith and Stewart that Smith was the sole owner of the intellectual property used by CES. Stewart, however, denied saying that he had no interest in any of CES’s intellectual property. He explained that, because the costs of constructing weight rooms made it too expensive to license the weightlifting component of the program, which was Stewart’s speciality, the discussions concerned only the running component of the CES training program, Smith’s speciality. In any event, Smith and Stewart abandoned the negotiations and decided to pursue a sale of CES instead. CES Holdings acquires CES. Shortly after ending the franchising negotiations, Smith and Stewart struck a deal with Todd Robison, an international business consultant, to get the funds necessary to keep the company operating. Robison testified that he organized a group of investors to purchase CES outright from Smith and Stewart through a company that he had formed for that purpose, CES Holdings. Robison’s immediate goal was to provide CES Holdings with an infusion of operating capital. Thereafter, he would find other investors to acquire CES Holdings from the investors who bought CES. On September 8, 2008, CES Holdings entered into a binding letter of intent with CES for the asset acquisition and purchase of CES, a document signed by both Smith and Stewart. The letter of intent expressly provided that the terms outlined in the agreement “are binding” on both parties and that they would be memorialized in a forthcoming “Definitive Agreement.” The parties also agreed that the attorney acting as “outside advisor” concerning the sale, Chad Speck, represented all parties to the agreement and that all parties acknowledged, consented to, and waived any conflict of interest that counsel had with the parties. In the 2008 agreement, CES Holdings promised to assume CES’s debts and to pay Stewart and Smith $100,000 each for their membership interest in the company, to be paid in installments. CES Holdings retained Smith and Stewart as independent contractors and promised to pay them a salary, benefits, and other compensation, including 20 percent of the profits of CES Holdings. Both Stewart and Smith were also given the option to buy equity positions in CES Holdings. The 2008 agreement between CES and CES Holdings did not address the ownership of any intellectual property, other than to note that CES Holdings would continue to purchase any equipment invented by Smith. Robison testified that the 2008 agreement was silent on the issue of ownership of intellectual property because he had determined that Smith, not CES, owned all of the intellectual property relevant to the transaction. The 2008 agreement did, however, address intellectual property as it pertained to licensing agreements. It provided that all existing licensing agreements between CES Holdings and CES would be void and that only those licensing agreements that either Smith or Stewart entered into with CES Holdings would remain in effect. CES Holdings later entered into a separate licensing agreement with Smith for the use of intellectual property, including the CES logo, equipment, the training system, and written materials. Smith also purchased a 10 percent equity position in CES Holdings, which was memorialized in a separate agreement as well. Defendant McDonald was not involved in negotiating or drafting any of these agreements. CES Performance acquires CES Holdings. While Robison looked for investors to acquire CES Holdings, CES Holdings made the agreed installment payments to Smith and Stewart for their membership interests in CES and began retiring CES’s debts. Robison, as the chief executive officer of CES Holdings, offered to sell the company to a group of Texas investors in exchange for $3 million. In late 2009, after a series of negotiations between Robison and the Texas investors, CES Performance (“CESP”) was created to acquire CES Holdings. CESP agreed to assume and ratify all of the contractual obligations of CES Holdings. Robison sold his shares in the company and “exited the picture.” Shortly thereafter, CESP’s attorney began drafting the definitive agreements memorializing the sale of CES to CESP in accordance with the terms his client gave him. He did not complete drafting the documents, as he was informed that McDonald would be taking over. In 2009, before McDonald’s involvement, Smith renegotiated his employment contract with CESP. Smith testified that he also spoke with Todd Leake, the chief executive officer of CESP, in January 2010 concerning the definitive agreement with CESP and the terms of his compensation. Smith said that, since he was still owed money from CES Holdings for licensing fees and equipment sales, he asked Leake to modify his definitive agreement to compensate him with additional CESP stock in lieu of the money owed. An April 8, 2010 email from CESP’s attorney to McDonald confirmed that CES Performance and [Smith] have been negotiating issues relating to [Smith's] compensation, license agreements, and equipment sales. In those negotiations, CES Performance has agreed to grant [Smith] a 10 percent equity interest in the company. The 10 percent granted to [Smith] in these negotiations plus the effective 10 percent he owns through CES Holdings Corp brings his effective ownership to 20 percent. Ultimately, the CESP-Smith agreement (which was drafted by McDonald) granted Smith equity in CESP “as incentive . . . for his knowledge, skill and contributions. . . .” Stewart was granted no equity in CESP and did not know that Smith had been granted equity. Further, upon CESP’s acquisition of the company, Smith received $500,000 more than Stewart. In sum, just prior to McDonald’s involvement in 2010, CESP, as the successor to CES Holdings, intended to complete the purchase of CES, but the terms of the purchase had not been finalized. CESP’s attorney had begun drafting the documents to accomplish the purchase, but then McDonald took over.McDonald enters the transaction. McDonald met Smith and Stewart through CES, which provided athletic training services to McDonald’s son, a high school football player. In 2009, McDonald had helped CES deal with an employee who had embezzled company funds. McDonald had had no formal, written engagement agreement with CES concerning the embezzlement matter; rather McDonald agreed to trade his legal services to the company for nine “free” athletic training sessions for his son. Later, in early April 2010, McDonald agreed to help facilitate the transaction with CESP at the request of Smith and CESP. McDonald testified that Smith and Stewart had already struck a deal to sell their company but that they and CESP needed help moving “the transaction forward” by “basically handing things around to get signed.” (Stewart denied that the terms of the deal had been finalized.) McDonald testified that he did not negotiate the terms of the deal; rather, he helped reduce the deal to writing using terms provided to him by the parties to the agreement. McDonald testified that he had understood his assignment to be one of assistant scrivener and messenger who was “doing a favor for friends.” McDonald testified that he had no engagement letter with Smith, Stewart, or CESP, and that he was not compensated for these services in money or trade. CESP’s lawyer testified that he had already received the terms of the transaction from his employer and had prepared drafts of the definitive agreements before McDonald was asked to help expedite the closing. An April 15 email from CESP to its lawyer shows that McDonald had agreed to “finish the paperwork pertaining to Chip Smith and CES.” Stewart, on the other hand, testified that he believed that McDonald did represent him and was negotiating on his behalf. He testified that, with respect to the 2010 transaction, he had assumed that McDonald was his lawyer because “[Smith] told [him] that [McDonald] would represent [them].” He further testified that, although he could not remember the exact words or whether the discussion was in person or over the telephone, he believed that McDonald had said as much to him as well. He testified that McDonald sent him no bill for his services; rather, he assumed that McDonald would be paid as he had been in the past, with free athletic training sessions for his son. Stewart did not know when McDonald got involved in the transaction or the extent to which he was involved in drafting the definitive agreements. He testified: “At that time[,] whenever it happened, I had no clue to anything that had transpired.” The record shows that, in early April 2010, McDonald received a number of draft documents from CESP’s attorney and began reviewing them. McDonald testified that, before he received the documents, he was not familiar with how Smith and Stewart’s “business was organized or what was going on [with respect to the transaction].” But, after reviewing the documents, McDonald saw that CESP had dealt with Smith and Stewart differently. CESP’s draft documents, which included an “Acknowledgment and Release” dated February 2010, showed that Stewart was being released from his employment with CESP pursuant to the 2008 agreement and that he would be paid the final $50,000 installment owed to him for his 49 percent membership interest in CES. The documents also showed that Smith was still owed a $50,000 installment for his 51 percent ownership interest in CES as well as outstanding amounts for equipment sales and license fees. Moreover, the documents revealed that Smith was a shareholder in CES Holdings and that he would remain a shareholder in CESP with a 20 percent equity stake. Stewart, on the other hand, had no equity position in CES Holdings and had not taken advantage of the opportunity to buy stock, as Smith had done. McDonald testified that, after meeting with Stewart, he was left “scratching [his] head” because, although the documents he reviewed showed that Stewart had sold his membership interest in the company in 2008, Stewart did not seem to understand what that meant. McDonald testified that he believed that Stewart had a fundamental misunderstanding about what he did and did not own and that he had confused his right to a share of the profits going forward with an equity stake in CES Holdings. At this point, McDonald did not tell Stewart that he should retain an attorney to advise him on what had transpired in 2008 and how that sale affected the instant transaction. Nor did he explain to Stewart that he did not represent him in the transaction and that his role was limited to facilitating the closing by drafting and delivering documents. Instead, McDonald engaged in the following conduct. At Stewart’s request, McDonald called his contacts at CESP and asked: “[W]ill y’all give [Stewart] some stock?” He told Stewart that they said “no” because “[t]hey were reluctant to revise the agreement.” Stewart testified that McDonald falsely told him that CESP was not granting equity to anybody, although in fact, as noted, the CESP-Smith agreement (drafted by McDonald) had granted Smith equity in CESP “as incentive . . . for his knowledge, skill and contributions. . . .” McDonald also negotiated Stewart’s five-year employment contract with CESP and was able to obtain a salary increase for him. Stewart testified that, based on these representations and concessions, he signed the closing document, which was styled as an “Agreement, Release and Indemnification Between Robbie Stewart and CES Performance, LLC.”The record shows that, after Stewart signed the agreements and began working for CESP, he voiced no objection to the terms of the transaction for three years. Stewart testified that he did not discover that he and Smith had been treated differently in the transaction until 2013, when CESP and Smith became embroiled in a dispute and Leake informed Stewart of the details of Smith’s agreement with the company. In his appellate brief, Stewart contends that McDonald’s negligence directly cost him $735,000. He argues that he was entitled to 49 percent of the total proceeds of the sale of the company, not just the cash amount he was to be paid pursuant to the 2008 agreement. Specifically, he claims that Smith got an additional $500,000 pursuant to a licensing agreement and a 20 percent equity stake in CESP, compensation that Stewart contends he would have shared had McDonald been acting as his advocate. 2. Legal malpractice.Stewart contends the trial court erred in granting McDonald’s motion for judgment notwithstanding the verdict on his legal malpractice claim because the record shows that he presented sufficient evidence, though disputed, on each of the essential elements of that claim and that the evidence did not demand a verdict in McDonald’s favor. We agree.In a legalmalpractice case, a plaintiff has the burden of proving the three elements of such an action: (1) employment of the defendant attorney (i.e., the plaintiff had an attorneyclient relationship with the attorney); (2) failure of the attorney to exercise ordinary care, skill, and diligence; and (3) that the attorney’s negligence was the proximate cause of the plaintiff’s damages.
