This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).





STAR Centers, Inc., 





Faegre & Benson  L.L.P.,



Filed June 5, 2001


Amundson, Judge


Hennepin County District Court

File No. 99-006178



Patrick T. Tierney, Collins, Buckley, Sauntry, & Haugh, W-1100 First National Bank Building, 332 Minnesota Street, Saint Paul, MN 55101 (for appellant)


Lewis A. Remele, Jr., Robin Ann Williams, Bassford, Lockhart, Truesdell & Briggs, P.A., 33 South Sixth Street, Suite 3550, Minneapolis, MN 55402 (for respondent)


Considered and decided by Amundson, Presiding Judge, Toussaint, Judge, and Huspeni, Judge.*

U N P U B L I S H E D   O P I N I O N


Appellant corporation retained respondent law firm to assist with drafting and reviewing financing documents for a proposed indoor soccer arena.  Respondent also represented the company from which appellant sought financing to build the arena; respondent disclosed this representation.  The funding company was later found to have engaged in fraud.  Appellant sued respondent contending that the law firm breached a fiduciary duty to disclose information about the company and that the breach was a direct cause of appellant's damages.  Summary judgment was granted in favor of respondent.  We affirm.


Appellant STAR Centers, Inc. (STAR Centers) and its principal, Paul Selle, retained the firm of Faegre & Benson, L.L.P. (Faegre & Benson) to assist with drafting and reviewing documents in connection with a plan to finance an indoor soccer arena in the Twin Cities.  In early 1995, Selle spoke with representatives of Consortium International, Ltd. (Consortium), a financing company willing to lend STAR Centers money without requiring personal guarantees from contributing investors.  Selle called Faegre & Benson attorney Andrew Humphrey in Minneapolis to inquire if Humphrey had ever heard of Consortium.  After checking, Humphrey indicated that Faegre & Benson had represented Consortium in some small matters, but that he had no other information about the company.  Consortium had in fact retained Faegre & Benson for a brief review of some securities laws and a press release.            

After Selle negotiated with Consortium on his own, STAR Centers and Consortium signed a preliminary commitment agreement for Consortium to fund the arena project for $1,950,000.  Selle then brought the financing documents to Faegre & Benson for review.  Humphrey noted that the terms of the financing agreement were very aggressive; Selle acknowledged that Consortium was a lender of last resort.  Humphrey, who performed a conflict check, informed Selle that the firm could not represent both parties in the transaction. When Selle indicated he wanted Faegre & Benson to represent STAR Centers, the firm obtained waivers of conflict from both parties and agreed to represent STAR Centers in the transaction. 

An initial closing was delayed, mostly because Consortium demanded certain further documentation from STAR Centers.  As a result, several private investors withdrew their support from the project.  Selle then renegotiated the financing terms by securing a $750,000 commitment from the Small Business Adminstration (SBA), with a reduced loan amount ($1.5 million) and a lower interest rate from Consortium.  Nonetheless, another anticipated closing also failed to occur. 

Shortly thereafter, Consortium asked Faegre & Benson to defend it in a breach of contract action brought in Colorado by Denver Golf, Ltd. (Denver Golf).[1]  Denver Golf, a start-up corporation, alleged that Consortium had refused to fund an agreed-upon construction loan for a golf course.  The Minneapolis office of Faegre & Benson immediately delegated the matter to its partners in the Denver office.   The Denver partner responsible for handling most of the Denver Golf litigation was unaware that the firm represented STAR Centers in an agreement concerning potential funding by Consortium; she knew only that some transactional work involving Consortium was being performed in Minneapolis.  No Faegre & Benson attorney in Minneapolis performed work on the Denver Golf lawsuit.

At the same time, attorneys in the Minneapolis Faegre & Benson office continued drafting documents for another closing date with Consortium.  Faegre & Benson drafted a new retainer agreement acknowledging STAR Centers’s continuing indebtedness from past representation and stipulating that it would be paid by the commercial lender at closing.  Consortium, however, again delayed the closing and finally advised Faegre & Benson directly that it refused to fund the loan.  STAR Centers asked Faegre & Benson to sue Consortium.  Citing a conflict of interest, the firm declined, but immediately located other counsel for STAR Centers. 

            After Consortium refused to close on the agreement, additional private investors withdrew their support for the STAR Centers project.  Faegre & Benson tried to assist Selle in contacting other funding sources, but these sources declined to participate.  The owner of the underlying land changed his terms so that STAR Centers could no longer afford to purchase the property.  Selle initiated his own investigation of Consortium, discovering that Consortium had been sued for refusing to fund loans, and that Faegre & Benson had been defending Consortium in the Denver Golf lawsuit.  Ultimately, he turned his investigation over to the FBI, who arrested the chairman of Consortium as he was about to flee the country.  Since the proposed financing agreement fell through, STAR Centers has been unable to raise sufficient funds to complete the arena project.

STAR Centers sued Faegre & Benson in Hennepin County District Court for breach of fiduciary duty and legal malpractice.  The district court granted Faegre & Benson’s motion for summary judgment on both issues, dismissing the complaint.  This appeal followed.


Summary judgment shall be granted when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.  Minn. R. Civ. Pro. 56.03.  No genuine issue of material fact exists “[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.”  DLH, Inc. v. Russ,566 N.W.2d 60, 69 (Minn. 1997) (alteration in original) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356 (1986)).  “[T]he party resisting summary judgment must do more than rest on mere averments.” 71.  A genuine issue for trial must be established by substantial evidence. 69-70 (quoting Murphy v. Country House, Inc.,307 Minn. 344, 351, 240 N.W.2d 507, 512 (1976)).  Summary judgment is proper where the facts in a case are not in dispute and where the decision is made on questions of law.  Gaspord v. Washington County Planning Comm'n,312 Minn. 591, 252 N.W.2d 590, 590 (1977).


Appellant first contends that there are material facts in dispute regarding whether Faegre & Benson breached its fiduciary duty to STAR Centers by failing to disclose that it represented Consortium in the Denver Golf lawsuit involving failure to close on a loan.  Minnesota has adopted the dominant fiduciary duty rule for attorneys in the United States:

The attorney is under a duty to represent the client with undivided loyalty, to preserve the client’s confidences, and to disclose any material matters bearing upon the representation of these obligations. 

Padco, Inc. v. Kinney & Lange,444 N.W.2d 889, 891 (Minn. App. 1989), review denied(Minn. Nov. 15, 1989) (quoting Rice v. Perl,320 N.W.2d 407, 410 (Minn. 1982)).  An attorney must impart to the client any information the attorney has that affects the client’s interests.  Id.  Under Minnesota law, the elements required to state a breach-of-fiduciary-duty claim are the same as those required to establish a negligence claim.  See id.

            Appellant first argues that Faegre & Benson’s representation of Consortium in the Denver Golf lawsuit involving failure to fund loans was a material matter relating to the representation of STAR Centers, and therefore, Faegre & Benson was required to disclose that information to STAR Centers.  The Denver Golf lawsuit, however, did not bear upon Faegre & Benson’s representation of STAR Centers, which was limited to drafting and reviewing documents in connection with the loan agreement with Consortium. The Denver Golf matter involved no transaction in which STAR Centers maintained an interest; rather, it was an independent breach-of-contract action in which Faegre & Benson was defending Consortium against an unrelated third party. Any institutional lender, such as Consortium, is likely to be named in lawsuits arising from its funding agreements. STAR Centers appears to argue that all breach-of-contract actions against institutional lenders should be labeled as “material matters” bearing on the representation of anyone with a potential agreement with such a lender.  If this were true, would not all law firms representing institutional lenders be required to disclose the existence of all such lawsuits to all such clients?  The issue here is whether the representation of Consortium in the Denver Golf litigation was a material matter bearing on Faegre & Benson’s duty to perform transactional work for STAR Centers.  We hold that it was not. 

            STAR Centers also argues that a nonwaivable conflict of interest arose when Faegre & Benson began representing Consortium in the Denver Golf litigation without disclosing that representation to STAR Centers.  The comment to Minn. R. Prof. Conduct 1.7 states in part:

An impermissible conflict of interest may exist before representation is undertaken, in which event the representation should be declined.  If such a conflict arises after representation has been undertaken, the lawyer should withdraw from the representation.

Minn. R. Prof. Conduct 1.7 cmt.

            Demonstrating that a rule of professional conduct has been violated is not by itself sufficient to establish liability for legal malpractice. Carlson v. Fredrikson & Byron,P.A., 475 N.W.2d 882, 889 (Minn. App. 1991), review denied(Oct. 31, 1991), overruled on other grounds by Rouse v. Dunkley & Bennett, P.A.,520 N.W.2d 406 (Minn. 1994).  In Carlson, this court considered the issue of when a law firm’s failure to inform a client about its representation of another client will result in malpractice liability.  Id. at 888.  We determined that the issue was governed by the standard set out by the Minnesota Supreme Court for determining when a conflict of interest requires disqualification of an attorney or law firm from representing a client. 890; see Jenson v. Touche Ross & Co.,335 N.W.2d 720, 729-33 (Minn. 1983).   That approach to disqualification includes the following three steps:

(a)       Considering the facts and the issues involved, is there a substantial, relevant relationship or overlap between the subject matters of the two representations? * * *

(b)       If so, then certain presumptions apply: First, it is presumed, irrebuttably, that the attorney received confidences from the former client and he or she will not be heard to claim otherwise. * * * Second, it is also presumed, but subject to rebuttal, that these confidences were conveyed to the attorney’s affiliates. * * *

(c)       Finally, at this stage, if reached, the court weighs the competing equities. 

Jenson,335 N.W.2d 720, 731-32  (citations omitted).

The Supreme Court in Jensonfurther noted:

            As the law first developed, disqualification was found quite readily, since the integrity of the profession in the eyes of the public was paramount, and often the mere appearance of impropriety was enough.  In more recent years, attention has also been given to countervailing interests, having in mind the organization and structure of today’s law practice with the increase in size of law firms and the mobility of lawyers among firms.  Thus, it is recognized that disqualification separates the client from his chosen counsel, causes delay, and may subject both the client and the disqualified lawyer to significant economic hardship.

Id. at 731 (citations omitted).

            In this case, there was no substantial, relevant relationship between the subject matters of Faegre & Benson’s representation of STAR Centers and its concurrent representation of Consortium in the Denver Golf lawsuit.  STAR Centers hired Faegre & Benson to perform transactional work on an agreement with a lender that STAR Centers had located on its own.  STAR Centers knew at the outset that Consortium was a lender of last resort, and Faegre & Benson made no representations about the viability of Consortium as a lender.  On the other hand, Faegre & Benson’s defense of Consortium in the Denver Golf lawsuit was an entirely separate matter involving a contract in which STAR Centers maintained no interest.  Even if we were to assume that a substantial relationship existed, and it could be irrebuttably presumed that Faegre & Benson received confidences from both clients, the presumption that these confidences were conveyed between attorneys in the Denver and the Minneapolis offices can be rebutted in this case. 

Faegre & Benson is a large law firm, with approximately 300 attorneys in the Minneapolis office and 60 attorneys in the Denver office.  James Nicholson, the billing partner for Consortium in Minneapolis, immediately delegated the Denver Golf matter to the Faegre & Benson office in Denver and never saw a copy of the Denver Golf complaint.  Cathy Lemon, the Denver partner working on the lawsuit, knew only that some transactional work was being done in Minneapolis for Consortium; she knew nothing of the STAR Centers agreement.  Minneapolis partner Andrew Humphrey, who was assisting STAR Centers with the financing agreement, had no contact with the Denver attorneys concerning the Denver Golf matter.  There is no evidence of the sharing of confidences between the two offices regarding these two clients.   Finally, in weighing the competing equities, we note that the Faegre & Benson attorneys working on the Denver Golf action received no information from Consortium that would have prejudiced the firm in its ability to represent STAR Centers.  At the time of the Denver Golf lawsuit, Faegre & Benson believed Consortium to be a legitimate business, which was being sued for breach of contract.

Under the Carlson analysis, Faegre & Benson was not required to withdraw; consequently, the law firm was not required to inform STAR Centers of its representation of Consortium in the Denver Golf lawsuit.   In fact, had the firm revealed information concerning the lawsuit to STAR Centers, it would have breached its fiduciary duty to Consortium.  See Minn. R. Prof. Conduct 1.6.  There was no genuine issue of material fact concerning breach of fiduciary duty to STAR Centers, and the district court properly granted summary judgment for the defendant as a matter of law. 

            Because no fiduciary duty was breached, it is unnecessary to address STAR Centers’s argument concerning causation in any depth.   We note, however, that the record contains no evidence tending to establish that Faegre & Benson’s failure to disclose the existence of the Denver Golf lawsuit was a substantial factor in bringing about the losses, such as that of investment capital, incurred by STAR Centers in its attempts to fund this project.



Dated:  May 30, 2001                                          ________________________________

                                                                                  Judge Roland C. Amundson

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1]  Shortly before the Denver Golf matter, an Oklahoma attorney contacted the Minneapolis office of Faegre & Benson and asked if the firm would be willing to act as escrow agent in an unrelated transaction between Consortium and his corporate client.  Since this matter never proceeded beyond an initial inquiry and involved no further exchange of information, we decline to consider it in reaching our decision.