may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1994).
STATE OF MINNESOTA
IN COURT OF APPEALS
John M. Lavine,
Dorsey & Whitney,
a partnership including professional corporations,
Filed March 4, 1997
Dissenting, Klaphake, Judge
Hennepin County District Court
File No. MP 95-936
Scott G. Harris, Rolin L. Cargill, III, Skolnick & Harris, P.A., One Financial Plaza, 120 South Sixth Street, Suite 1510, Minneapolis, MN 55402 (for Appellant)
Richard G. Mark, Janel E. LaBoda, Briggs and Morgan, 2400 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for Respondent)
Considered and decided by Parker, Presiding Judge, Klaphake, Judge, and Forsberg, Judge.
Appellant John Lavine challenges the district court's grant of summary judgment in favor of respondent Dorsey & Whitney. Lavine argues that: (1) the district court applied the wrong test for proximate cause; (2) there are genuine issues of material fact regarding proximate cause as established by an expert opinion offered by way of an affidavit; (3) there are genuine issues of material fact regarding the reasonableness of the settlement; (4) the statute of limitations did not begin to run until the buyers' group first asserted fraudulent conveyance claims; and (5) even if the statute of limitations began to run with the signing of the stock purchase agreement, Dorsey & Whitney's continued representation tolled the running of the statute. We affirm.
Respondent Dorsey & Whitney (Dorsey) provided legal services to appellant John Lavine from 1988 to 1994 in connection with a series of transactions relating to the sale of Wisconsin newspaper corporations. The stock purchase agreement was signed on November 23, 1988. As part of the agreement, the parties stipulated that a separate noncompetition agreement would be negotiated. Under that agreement, the buyers' group agreed to pay Lavine (in exchange for his noncompete promise) a series of cash payments totalling $1,956,600. The payments were to be made annually from 1990 to 1993.
The newspapers did not perform as well as the purchasers had hoped. In September 1993, the buyers' group threatened to commence a fraudulent conveyance lawsuit unless Lavine agreed to relinquish the $2.7 million owed to him under the amended noncompete agreement. In March 1994, the buyers' group filed a fraudulent conveyance claim in federal district court. On May 17, 1994, the parties signed a settlement agreement under which Lavine agreed to forego a significant amount of interest in return for the buyers' group dropping the fraudulent conveyance claim.
Lavine then sued Dorsey, alleging that it breached its duty of care by failing to advise him of the risk of fraudulent conveyance claims and by failing to insulate him against such fraudulent conveyance claims.
Dorsey moved for summary judgment. In opposing summary judgment, Lavine submitted an affidavit from Edward Adams, a professor at the University of Minnesota Law School. Professor Adams opined that Dorsey was under a duty to "advise Mr. Lavine of the risk of possible fraudulent transfer claims arising in connection with the Transactions." Professor Adams listed several things Dorsey could have done to insulate Lavine from the risk of such claims. Professor Adams also opined that "Dorsey's breaches of the applicable standard of care in its representation of Mr. Lavine were a substantial factor in bringing about his subsequent damages."
The district court granted summary judgment in favor of Dorsey. In its order, it reasoned that
it is inconceivable that any reasonable attorney would have foreseen that [the buyers' group] would have threatened and instituted fraudulent conveyance claims six years after the sale, apparently as a means to obtain some relief on the purchase of assets which did not perform as well as originally expected. In addition, there is no suggestion in the record that Defendant could have anticipated that any other conceivable "creditor" would challenge the transaction under a fraudulent conveyance theory.
This appeal followed.
D E C I S I O N
The elements of a prima facie case for negligent legal advice that does not involve the loss of an underlying claim are: (1) the existence of an attorney-client relationship giving rise to a duty; (2) the negligent giving of advice or exercise of judgment on which the client detrimentally relies; and (3) the negligent advice or judgment must be the proximate cause of damage to the client. Fiedler v. Adams, 466 N.W.2d 39, 42 (Minn. App. 1991), review denied (Minn. Apr. 29, 1991).
Lavine argues that the sole basis for summary judgment was the district court's application of the test of foreseeability to its determination of proximate cause. Lavine argues that this was an error of law. Lavine claims that foreseeability is a test only in determining whether Dorsey breached a standard of care and was negligent in the first place.
The supreme court has indicated that the following test for proximate cause is to be used in legal malpractice cases:
For negligence to be the proximate cause of an injury, it must appear that if the act is one which the party ought, in the exercise of ordinary care, to have anticipated was likely to result in injury to others, then he is liable for any injury proximately resulting from it, even though he could not have anticipated the particular injury which did happen.
Wartnick v. Moss & Barnett, 490 N.W.2d 108, 113 (Minn. 1992) (quoting Ponticas v. K.M.S. Inv., 331 N.W.2d 907, 915 (Minn. 1983)). The district court cited this test in its decision.
Lavine cites a number of older supreme court cases in support of his argument that foreseeability is not an element of proximate cause and that the Wartnick and Ponticas opinions "blurred the distinctions between negligence and proximate cause." However, that is an argument to be addressed to the supreme court, not this court.
Dorsey argues that because the buyers' group did not have a viable claim under fraudulent conveyance laws, it should not have anticipated that failure to advise Lavine on the subject would be likely to result in injury. Lavine argues that because this is not a "case-within-a-case" malpractice action, it is not required to demonstrate that a viable claim existed in order to avoid summary judgment.
Lavine correctly argues that because this is not a "case-within-a-case" malpractice action, he does not have to prove the fourth element that is involved in such malpractice actions, i.e., that but for the attorney's negligence, the client had a meritorious cause of action originally. See Fiedler, 466 N.W.2d at 42 ("[T]his `case-within-a-case' element describes the proximate cause element unique to malpractice cases alleging destruction of the client's cause of action."). However, that does not mean that absolutely no inquiry may be made into whether the buyers' group had a valid fraudulent conveyance claim. The test to be applied--whether Dorsey should have anticipated that failure to advise Lavine on the subject of fraudulent conveyances would be likely to result in injury--requires a kind of foreseeability-like analysis.
We agree with the district court that a reasonable attorney would not have anticipated that failure to discuss the fraudulent conveyance risks would be likely to expose Lavine to injury through a fraudulent conveyance claim (or the threat of a claim) brought by the buyers' group--i.e., the very parties who participated in the purchase of the newspaper corporations. See Kath v. Kath, 238 Minn. 120, 126-27, 55 N.W.2d 691, 695 (1952) ("[A] transfer which is voidable as to defrauded creditors * * * but which, aside from the element of fraud as to creditors, is valid in other respects is binding and enforceable between the transferor and the transferee, and neither of them may assert the fraud as a bar to, or as a basis for, legal or equitable relief against the other.").
It is important to note that in this case no creditor claimed a fraudulent conveyance. Even a creditor may waive or be estopped from pursuing a fraudulent conveyance claim if it consents to the terms of the conveyance.
It is the buyer's group which structured and participated in the original transaction and subsequently renegotiated its terms and who clearly waives and/or was estopped from challenging the transaction as a fraudulent conveyance. It is interesting to note that despite a total lack of merit to the buyer's group's claim, they entered into a settlement for $1,987,000 almost the exact amount that they were obligated to pay under the noncompetition agreement.
Because we determine that Lavine has failed to establish a prima facie case of negligence because the element of proximate causing is lacking, we need not reach the other issues he raises.
KLAPHAKE, Judge (Dissenting)
I dissent because I believe that summary judgment was improvidently granted in this case. Dorsey conceded for purposes of summary judgment that Lavine met the first two elements of establishing a prima facie case of negligent legal advice: Dorsey and Lavine had an attorney-client relationship that gave rise to a duty; Dorsey negligently advised Lavine and Lavine detrimentally relied upon that advice. The third element, proximate cause, was a legal basis upon which the district court granted summary judgment. Proximate cause, however, is a fact question for the jury. Wartnick v. Moss & Barnett, 490 N.W.2d 108, 115 (Minn. 1992); Vanderweyst v. Langford, 303 Minn. 575, 576, 228 N.W.2d 271, 272 (1975); Fiedler v. Adams, 466 N.W.2d 39, 43 (Minn. App. 1991), review denied (Minn. Apr. 29, 1991). Lavine offered a detailed affidavit from law Professor Edward Adams of the University of Minnesota who specializes in areas including bankruptcy, creditor's remedies, and secure transactions. Professor Adams stated:
Dorsey's breaches of the applicable standard of care and its representation of Mr. Lavine were a substantial factor in bringing about his subsequent damages--including his agreement to forgo payments due and owing to him and all reasonable attorney's fees and costs he incurred in relation to the fraudulent conveyance litigation.
This evidence was sufficient to create a material fact issue on proximate cause and submit the issue to a jury.
Further, while the majority acknowledges that the "but for" test does not apply in a case where the attorney's negligent advice does not involve loss of the client's cause of action, the majority nevertheless applies a "foreseeability-like analysis" to hold that Lavine failed to establish a prima facie case. As traditionally defined, proximate cause includes all "[c]onsequences which follow in unbroken sequence" from a negligent act, even where the tortfeasor "could not have foreseen the particular results which did follow." Christianson v. Chicago, St. P., M. & O. Ry. Co., 67 Minn. 94, 97, 69 N.W. 640, 641 (1896). The majority blurs the distinction between duty, which includes foreseeability, and proximate cause, which does not. See id., 67 Minn. at 96-97, 69 N.W. at 641. Foreseeability should not have been considered in determining whether Lavine established the proximate cause element necessary for a prima facie case of negligence.
[ ]* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.