“A Tough Knot to Crack” (photo by Jay Fanelli)

Update (May 19, 2017): This week’s published Minnesota Court of Appeals decision, Security Bank & Trust Co. (“SB&T”) v. Larkin, Hoffman, Daly & Lindgren, Ltd. (“LHD&L”) is yet another thread in Minnesota’s knotty jurisprudence on the appropriate accrual date of a legal malpractice case.

Mr. Gordon Savoie got allegedly bad estate planning help from LHD&L in 2009. The papers drawn up by LHD&L failed to include a provision for a generation-skipping trust or other mechanism to avoid a  generation-skipping tax. This lapse is alleged to have been legal malpractice.

Mr. Savoie died, SB&T became the personal representative and successor trustee to the estate, and, SB&T alleged that LHD&L’s negligence caused the estate a tax burden of $1.654 million.

So, the question before the court was when did the claim accrue? When LHD&L did the allegedly negligent work? When Savoie paid for it? When Mr. Savoie died? When the tax was imposed? When Mr. Savoie suffered “some damage” (or did he?)? When the trust suffered “some damage” (or did it?)? And when did Mr. Savoie suffer “some damages? When did the trust?

In an atypical twist, the malpractice plaintiff in SB&T argued for the earlier accrual date and the defendant the later one because the question was whether Mr. Savoie would have had a legal claim when he was alive. If he did not, then, under the law, the personal representative appointed after his death would not have a claim. Minn. Stat. 524.3-703(c).

So “the pivotal question: did Savoie have a claim for legal malpractice against Larkin Hoffman while he was alive?”

The Court of Appeals held that he did. “Savoie sustained ‘some damages’ when he signed the will and trust after Larkin Hoffman allegedly failed to inform him that his estate would be subject to a generation-skipping tax and failed to provide him with alternatives for avoiding such a tax…We note that Savoie also incurred liability for attorney fees paid for services that, it may be argued, lessened the value of his estate.”

The problems with this analysis are: (1) this analysis collapses the “some damages” rule and the “occurrence rule,” which the Minnesota Supreme Court has expressly rejected; and/or (2) the upshot is that the malpractice statute of limitations starts when the client writes a check for the allegedly bad lawyering. Does that not seem crazily arbitrary? Is there any other form of negligence where the statute starts to run when the victim paid the tort-feasor? And what happens if the negligent lawyer never billed his client?

These issues pend before the Minnesota Supreme Court in Frederick v. Wallerich, which we’ve discussed at length previously. Unfortunately, the decision in Security Bank & Trust Co. v. Larkin, Hoffman, Daly & Lindgren, Ltd. does not help clarify this muddled area of Minnesota law.

Original post (March 31, 2017)(under the headline: Another Case Implicating (and Dooming?) Antone v. Mirviss): Regular readers of Minnesota Litigator know that we are rooting for the overruling of Antone v. Mirviss, now under review by the Minnesota Supreme Court. The holding in Antone was that the statute of limitations for a defective prenuptial agreement started to run on the client’s wedding day so, when the prenup later turned out to be useless, Antone’s claim against the negligent lawyer was time-barred.

In our view, simply stating the Antone holding should suffice to reveal its fundamental unsoundness.

U.S. Chief Judge John R. Tunheim (D. Minn.) recently held that an accounting malpractice lawsuit was not time-barred. His reasoning is consistent with a more sensible approach to the statute of limitation for professional negligence.

In our view, Judge Tunheim properly interpreted the issue. The statute of limitation starts when the plaintiff has suffered “some damage.” The damage suffered by Plaintiff Miksic was not in 2006 when he got the allegedly bad accounting advice. It was not when he paid for the 2006 bad accounting advice. It was not in 2007 when the faulty returns were filed with the IRS. It was in 2011 when the IRS first hammered Miksic (that is, “assessed penalties”) for his allegedly erroneous tax filings. Under the Antone rule, plaintiffs like Mr. Miksic, see their claims for professional negligence extinguished before any of them would have a realistic chance of holding the wrongdoers responsible. The status quo is undoubtedly desirable for negligent professionals and their insurers. For the rest of us Minnesotans, not so much.

 

 

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