Update (October 15, 2018): Lawyers know that something as seemingly simple as measuring a six-year period of time can be an enormous challenge. Six years, starting when?
The thread of posts below highlight that this issue has bedeviled Minnesota litigants and courts in the context of legal malpractice for more than 12 years now (since Antone v. Mirviss).
And we are still wrestling with this incredibly simple but also maddeningly complex question of when to start the six-year clock.
Recently, the Minnesota Supreme Court agreed to accept a petition for review in Hansen v. U.S. Bank, not a legal malpractice case but, closely related, a claim for breach of fiduciary duty.
To start the six-year timer, our courts are supposed to apply two distinct concepts, the “some damage” rule and the “point of no return” rule. But, in many cases, these two different rules point to two different start-times and, sometimes, sharply different start-times.
The facts of Hansen v. U.S. Bank are straight-forward and appear to highlight the problem: Mr. Robert Hansen and his brother entered into a deal to sell property to a buyer, CFP. Between the purchase agreement in 2009 and the closing in 2010, Mr. Robert Hansen died, and U.S. Bank took his place in the transaction as the personal representative of his estate.
Part of the terms of the sale provided that there should have been “due diligence” by an independent CPA to certify the buyer’s financial forecasts (since the sale would entail payments to the sellers made over time). U.S. Bank allegedly failed to ensure that this term was met.
If you’re still reading this admittedly dry reading, you know where this is going.
The deal closed. The buyer eventually defaulted on the note.
Making matters worse in terms of U.S. Bank’s alleged culpability, at the time of the closing, two forecasts allegedly had been prepared by others and both forecasted that revenue projections were overstated and incorrectly or erroneously relied upon unsupported revenue commitments and sources. In other words, the allegation is that if U.S. Bank had obtained the independent CPA report which the seller had negotiated for in connection with the property sale, U.S. Bank would have identified the buyer’s lack of financial backing and halted what, in hindsight, was a bad deal.
Mr. Hansen’s heirs sued U.S. Bank for its alleged breach of fiduciary duty owed to the estate in the performance of its obligations.
The date of the closing was presumably “the point of no return.”
But, Hansen’s lawyers argue, “some damage,” did not occur until later, when the buyer defaulted on the note.
The root problem, here, in our view (as stated bluntly below) is the Antone v. Mirviss case, which introduced the concept of the “point of no return” along with the “some damage” rule. Counsel for Hansen makes compelling arguments for distinguishing the Antone v. Mirviss facts (see here at pages 5-6) in the Hansen case.
U.S. Bank’s counsel opposed the petition for Supreme Court review, essentially arguing that the Antone v. Mirviss rule is clea and that the Court of Appeals properly applied the rule. “There is nothing to see here.”
Some on the Minnesota Supreme Court apparently feel otherwise and we hope to get some harmonization of these two critical concepts for fixing the start-time of professional negligence/breach of fiduciary duty claims under Minnesota law.
Update (February 8, 2018) (under the headline “A Partial (And Unsatisfactory) Answer to the Puzzle of the “Accrual Date” in Cases of Legal Malpractice”): As discussed below and in other posts, the statute of limitations for legal malpractice cases in Minnesota is six years but “when the clock starts” — the starting time is for the six-year statute — is often complicated.
On one extreme, some states have the so-called “occurrence” rule (when the negligent services were provided). At the other extreme, some states have the “discovery” rule (when the client knew or should have known about the negligent services). Minnesota rejects both of these rules and seeks a middle road. (See the linked decision at p. 18.) In Antone v. Mirviss, the Minnesota Supreme Court adopted the “some damage” rule (a “cause of action accrues when ‘some’ damage has occurred as a result of the alleged malpractice,” with “some damage” defined as “any compensable damage”).
Antone v. Mirviss involved a botched antenuptial agreement and the Minnesota Supreme Court ruled that the six-year clock started on Mr. Atone’s wedding day. In our view, some might reasonably ask what damage, exactly, did Mr. Antone suffer on his wedding day?
It seems the Court has a related but unstated rule: the “point of no return” rule. That is, “some damage” occurred to Mr. Antone at the “point of no return” — when Mr. Antone was “exposed to a claim upon a portion of any appreciation of his premarital property.” So Mr. Antone did not literally suffer “some damage” (or any damage) on his wedding day due to the botched antenuptial agreement. He was simply “locked in” by the bad lawyering as of that date. As of the day of his marriage, he definitively lost what he had gone to his lawyer to obtain — protection of assets that he would otherwise have kept if the lawyer had done a decent job on the antenuptial agreement.
The Minnesota Supreme Court did not overrule Antone this week in Frederick v. Wallerich, as we have advocated. Rather, it distinguished Antone over a dissent by two justices, Chief Justice Gildea and Justice Anderson. They argued that Antone’s rule applied and barred Mr. Frederick’s claim. In the Frederick case, however, the plaintiff returned to the lawyer after his marriage for legal services and the Supreme Court, in a majority opinion written by Justice Hudson, ruled that these later representations were within the six-year statute and could be the premise of Mr. Frederick’s legal malpractice claim.
Congratulations to plaintiff’s counsel, Patrick O’Neill!
But we will still have to grapple with the “some damage/point of no return rule,” which, in our view, is unfortunate. The rule is both imprecise and arbitrary. The discovery rule, in contrast, which has been the law in other states for more than forty years, is neither imprecise nor arbitrary. Other states that apply the discovery rule seem to be perfectly able to handle the supposed “open-ended liability” that Justice Gildea’s dissent seems concerned about. (Consider: California. Tennessee. Hawai’i. Texas. Maryland. New Jersey, to name a few.))
Update (March 10, 2017) (under the headline: Hope on the Horizon for Minnesota Legal Malpractice Plaintiffs?): Excellent argument of the lawsuit, discussed below, earlier this week before the Minnesota Supreme Court.
The concerns of the various justices of the Minnesota Supreme Court are clear.
On the one hand, if Anton v. Mirviss is overruled, what is the limiting principle? How long, effectively, would the statute of limitation be for legal malpractice? Would the rule be limited to legal malpractice cases? If not, why not?
On the other hand, many of the justices probed whether a lawyer’s second-in-time bad legal advice can really be immune from a negligence claim if the initial bad legal advice is outside the statute of limitation. Justice Lillehaug posed this scenario repeatedly with slight alterations. (What if the second-in-time lawyer is a different lawyer? A different lawyer at the same law firm? A doctor giving bad medical care following up on the doctor’s earlier negligent care?)
We’ll see where the case ends up and we will only point out that, as a practical matter, the law as set out in Anton v. Mirviss, the so-called “some damage rule,” leaves Minnesota clients with no recourse for legal malpractice in many circumstances when they would have absolutely no realistic chance of detecting it within the statute of limitations.
So long as the fuse is long enough on the bomb, the bomber/lawyer not only gets away scot-free with the bombing and gets to keep the money billed for it too!
Original Post (November 4, 2016): Imagine that you hire a lawyer to draw you up a “pre-nup” (also known as an “ante-nuptial agreement”) before your marriage. Seven years later, your marriage ends in divorce and the pre-nup is thrown out of court in the divorce proceeding because your lawyer incompetently drafted it in the first place.
Under existing Minnesota law, a malpractice claim against the bad lawyer would be barred by the six-year statute of limitations. Antone v. Mirviss.
I believe that the Antone decision is one of the least defensible appellate decisions I have ever read. I find it staggeringly unfair and nonsensical. Aside from lawyers who might think that any decision that favors them is, by definition, a good decision, I have never heard any argument in favor of the result in Antone. Justice Hanson’s dissent in Antone (joined by Justices Page and Meyer) should have been the majority decision rather than the dissent.
What are clients supposed to do to avoid the risk of bad legal advice and the risk of a bar to any remedy when, over time, they are held to have violated the law or lost a legal right based on bad legal advice?
Maybe Mr. Antone should have gotten divorced sooner? Maybe Mr. Antone and other Minnesotans hiring lawyers should hire two or three at a time to insure against getting bad advice (since they might not be able to rely on a claim for professional malpractice when they suffer later harm)? Should Mr. Antone have gone back to his lawyer every five years so the lawyer could re-advise him on the validity of the lawyer’s original legal work?
Or, here’s another solution: OVER-RULE ANTONE v. MIRVISS.
I hope that help is on the way. This past week the Minnesota Supreme Court granted a petition for review in a case that could put the Antone decision in the cross-hairs: Frederick v. Wallerich, et al. (Linked here is the petition for Minnesota Supreme Court review and here is the opposition to the petition.)
The facts in Frederick’s case seem even stronger than those in the Antone case. After Frederick’s marriage, he repeatedly checked in with his lawyer as to the validity of the pre-nup (which is not a very good sign for Frederick’s marriage, I have to assume). Nevertheless, based on Antone, the trial court dismissed Frederick’s lawsuit against his lawyer as time-barred. The Minnesota Court of Appeals affirmed.
Many might challenge my advocacy on this issue, pointing out that I have brought several plaintiff’s side legal malpractice cases (and have several pending). I concede that I have a bias. On the other hand, I have never heard anyone articulate a persuasive argument in favor of the Antone decision and I am still waiting.
The obvious argument in support of the result in Antone is that, in theory, a lawyer could provide services in Year #1 and client could sustain an injury in Year #51, leading the lawyer to face liability for advice given 50 years earlier even when there is a six-year statute of limitation.
I think responses to that argument include: (1) These were not the facts in Antone nor the facts in Frederick. Such a scenario, should it ever be confronted by a court, should be evaluated at that time. It should not provide the rationale to throw out cases that are quite distinguishable; and (2) Under certain circumstances, a lawyer can give bad advice or faulty legal services with actual knowledge that the results of such bad advice or faulty legal services will not likely come to fruition within six years. Imagine, for example, a young person hiring an incompetent lawyer to draft the young person’s will (or the set-up of a trust, as in this Montana case) In that scenario, do Minnesota courts really think that the Minnesota legislature intended to bar Minnesota citizens claims for malpractice because of the general six-year statute of limitation for tort claims? How is that fair or just?