Update (March 27, 2013): This month, the Minnesota Supreme Court denied Twin Cities law firm Fredrikson & Byron’s petition for review of the underlying adverse decision of the Minnesota Court of Appeals discussed below.
Original post (December 27, 2012): For many years, Twin Cities-based Dorsey & Whitney, L.L.P. has had the benefit of deep experience and wisdom on all matters ethical from the wisest of counsel, Bill Wernz (though clearly not everyone at Dorsey always got the message). (The rest of us Minnesota lawyers are also beneficiaries of Bill’s years of work.) As a former Dorsey trial lawyer, I had the privilege of attending several presentations by Bill Wernz and I learned the important lesson, among many others, about the importance of lawyers’ and law firm engagement letters.
The Twin Cities-based law firm of Fredrikson & Byron may be due for a refresher course.
Mark Saliterman, as president and sole shareholder of The Lofts of Stillwater, Inc. (LOS), sought Fredrikson’s assistance in an arbitration dispute with its contractor and subcontractors. (It was a big and costly dispute.) F&B’s engagement letter for the matter started:
Dear Mr. Saliterman,
Thank you for selecting Fredrikson & Bryon, P.A. to represent you in the litigation matter concerning [LOS].
For a three-judge panel, Judge Roger M. Klaphake, of the Minnesota Court of Appeals, perhaps surprisingly, ruled that,
It is not clear whether “you” refers to Saliterman or LOS. This ambiguity is compounded by the fact that Fredrikson never represented Saliterman personally during the arbitration—Saliterman retained separate counsel to represent his personal interests.
(“Dear John Doe, Thanks for selecting me to represent you…” seems pretty unambiguous to me. Just saying.)
But the Court makes this critical point:
[T]he letter does not directly state Fredrikson’s intention to hold both LOS and Saliterman personally and primarily liable for the attorney fees.
This is a pitfall that a Bill Wernz primer might have avoided. Make very clear in engagement letters: (1) WHO IS THE CLIENT; (2) WHO IS RESPONSIBLE TO PAY; and (3) THE SCOPE OF THE REPRESENTATION. Having this clearly delineated is a major component of law firm risk mitigation/risk management.
We will see whether F&B will seek to petition the Minnesota Supreme Court but even if F&B is able to eventually get paid by Mark Saliterman personally, it has probably lost a significant amount of money from its failure to have an engagement letter making financial responsibility clear from the outset. Congratulations to Paul Sortland for winning the appeal for Mr. Saliterman. For Paul’s sake, let’s hope that Sortland was paid up front or had a more robust and explicit engagement letter?
Finally, this opinion is notable and possibly important for reaching the conclusion that a breach of contract suit against a law firm for excessive fees is not necessarily a claim for professional malpractice requiring compliance with the Minnesota “expert affidavit” statute.
The complaints of many clients unhappy with their lawyers is the cost of legal representation and the sense that bills are padded or that work was performed that was unnecessary or even counter-productive. If such breach of contract claims were to fall outside of the “expert affidavit” statute, this would presumably make these cases easier to bring and more frequent.
As to the importance of this decision, on the other hand, the opinion is “unpublished,” which, in Minnesota means it is “nonprecedential,” which means that one is not supposed to invoke the decision as stating a legal rule for application in other cases. Not only is this decision “unpublished” but the opinion expressly poo-poo’s citation to unpublished decisions (In responding to cases cited by F&B, the Court comments, “But our unpublished cases are not precedential, and we do not consider them to be persuasive.”).
We will have to wait and see whether F&B seeks Minnesota Supreme Court review and, if so, on what grounds, and then, of course, what will the highest state court make of this?