IN SUPREME COURT
Court of Appeals
Anderson, G. Barry, J.
Took no part, Gildea, J.
Jerry’s Enterprises, Inc.,
Filed: April 6, 2006
Office of Appellate Courts
Larkin, Hoffman, Daly & Lindgren, Ltd., et al.,
S Y L L A B U S
1. In a legal malpractice action, where a plaintiff presented expert testimony that the defendant’s representation fell below the standard of care and defendant failed to research or warn client about an open question in the law as established by the court of last resort, a fact question for the jury exists regarding whether the defendant breached the standard of care.
2. For a defendant to be protected by the
immunity rule in Meagher v. Kavli,
3. When a fact question for the jury exists regarding whether a defendant exercised reasonable care in forming an opinion and advising a client about a matter of unsettled law, a fact question for the jury exists regarding whether the defendant’s representation met the standard of care.
4. A successful claim of legal malpractice arising out of representation in a transactional matter requires sufficient evidence to establish four elements: (1) the existence of an attorney-client relationship; (2) acts constituting negligence or breach of contract; (3) that such acts were the proximate cause of the plaintiff’s damages; and (4) but for defendant’s conduct, the plaintiff would have obtained a more favorable result in the underlying transaction than the result obtained.
5. Given evidence that the plaintiff would have extinguished a buy-back option had the defendant informed the plaintiff of the possibility of the survival of the option and evidence that plaintiff incurred damages as a result of the assertion of the buy-back option, a question of fact exists regarding whether defendant’s conduct was the “but for” cause of plaintiff’s damages.
6. The district court’s decision to admit evidence of the state of the law at the time of the alleged malpractice was not a clear abuse of discretion.
Affirmed as modified.
Heard, considered, and decided by the court en banc.
O P I N I O N
ANDERSON, G. Barry, Justice.
Enterprises, Inc. (Jerry’s) brought this action for legal malpractice against
the law firm of Larkin, Hoffman, Daly & Lindgren, Ltd. and two of its
shareholders, Thomas Stoltman and Gary Renneke (collectively, Larkin). Jerry’s had previously retained Larkin to
represent Jerry’s in the purchase of undeveloped land in
In 1993, Robert
Shadduck, the president of Jerry’s, became interested in purchasing undeveloped
During the next two
years, Jerry’s proceeded in its efforts to develop the property. Larkin represented Jerry’s in these efforts
and drafted purchase agreements for the sale of portions of the property. These purchase agreements stated that there
were no existing options to purchase the property. Just over two years after Jerry’s purchased
the Bruggeman parcel, Bruggeman informed Shadduck that he intended to exercise his
buy-back option. Shadduck immediately
contacted Stoltman, who told Shadduck that Bruggeman’s option had been merged
into the deed and was thereby extinguished.
When Jerry’s refused to sell the property to Bruggeman, Bruggeman filed
suit against Jerry’s. Larkin represented
Jerry’s in the litigation with Bruggeman.
The district court granted Jerry’s summary judgment, but on appeal we held
that since the buy-back option could not be performed prior to closing, it did
not merge into the deed at closing. Bruggeman v. Jerry’s Enters., Inc., 591
N.W.2d 705, 706, 710 (
Jerry’s filed suit against Larkin, alleging Larkin committed legal malpractice because throughout the months prior to and the two years after Jerry’s purchase of the property, Larkin neither warned Jerry’s of the possible survival of the buy-back option after closing nor took any steps to extinguish the buy-back option. After Larkin’s motion for summary judgment was denied, a jury trial was held. At trial, Jerry’s case included the testimony of Shadduck, Stoltman, and Renneke. In addition, Jerry’s presented the expert testimony of attorney Theodore Meyer, who opined that Larkin’s conduct fell below the applicable standard of care and constituted malpractice. At the close of Jerry’s case, the district court granted Larkin’s motion for a directed verdict. On appeal, the court of appeals reversed and remanded, holding that sufficient evidence of malpractice had been presented to create a question of fact for a jury. Jerry’s Enters., Inc., 691 N.W.2d at 495. Larkin petitioned for further review by this court, and Jerry’s cross-appealed. We are presented with the following issues on this appeal:
1. Whether Larkin is entitled to a directed verdict because Larkin’s behavior, as a matter of law, did not fall below the standard of care.
2. Whether a plaintiff must show “but for” causation in actions alleging legal malpractice in a transactional matter.
3. Whether the district court abused its discretion by allowing Larkin to introduce evidence relating to the scope of the merger doctrine prior to our statement on the issue in Bruggeman.
the close of the evidence offered by an opponent, a party may seek a directed
only in those unequivocal cases where (1) in the light of the evidence as a whole, it would clearly be the duty of the trial court to set aside a contrary verdict as being manifestly against the entire evidence, or where (2) it would be contrary to the law applicable to the case.
J.N. Sullivan & Assocs., Inc. v. F.D.
Chapman Constr. Co., 304
To bring a
successful claim of legal malpractice, a plaintiff traditionally must show four
elements: “(1) the existence of an attorney-client relationship; (2) acts
constituting negligence or breach of contract; (3) that such acts were the
proximate cause of the plaintiff’s damages; [and] (4) that but for defendant’s
conduct, the plaintiff would have been successful in the prosecution or defense
of the action.” Blue Water Corp. v. O’Toole, 336 N.W.2d 279, 281 (
Attorneys have a duty “to exercise that degree of care and
skill that is reasonable under the circumstances, considering the nature of the
undertaking.” Prawer v. Essling, 282 N.W.2d 493, 495 (
At trial, Jerry’s presented the expert testimony of Theodore Meyer, a practicing real estate attorney. Meyer testified that, in his opinion, Larkin failed to meet the required standard of care in its representation of Jerry’s by failing to advise Jerry’s about the potential cloud on its title so Jerry’s could take steps to address the issue. In light of this testimony and Larkin’s admission that it did not research the issue of merger until after Bruggeman’s attempt to exercise the buy-back option, the court of appeals held that Jerry’s had presented sufficient evidence on the element of breach of duty to survive Larkin’s motion for directed verdict. Jerry’s Enters., Inc., 691 N.W.2d at 493.
Larkin claims that the court of appeals erred in its
analysis of this issue in two ways.
First, Larkin argues that, as a matter of law, Larkin did not breach its
duty of care to Jerry’s by failing to warn Jerry’s about the potential cloud on
the title or to research merger law before Bruggeman attempted to exercise his
buy-back option. Larkin argues that this
could not constitute breach of duty because at the time of closing, the
doctrine of merger in
Larkin states that, because the law of merger was well
settled, or at least apparently well settled, before our decision in Bruggeman,it was, as a matter of law, not a breach of the standard of care
to fail to research the issue or advise Jerry’s of the issue. While a case may arise in which an attorney’s
failure to consider or revisit settled law is, as a matter of law, not a breach
of the attorney’s duty to the client, this is not such a case. First, Jerry’s presented expert testimony at
trial stating that Larkin’s actions fell below the standard of care, and we must
view the evidence in a light most favorable to Jerry’s. Second, Larkin has cited no
In the alternative, Larkin argues that even if we
determine the law of merger to have been unsettled
before Bruggeman, Larkin is protected
from liability under the rule in Meagher
v. Kavli. In Meagher, we held that a lawyer could not be held liable for
malpractice for failure to object to an exhibit where that failure was later,
by a divided court, held to constitute waiver.
It is well settled that: “An attorney who acts in good faith and in an honest belief that his advice and acts are well founded and in the best interest of his client is not answerable for a mere error in judgment or for a mistake in a point of law which has not been settled by the court of last resort in his State and on which reasonable doubt may be entertained by well-informed lawyers.”
In light of the evidence that Larkin did not research or raise the issue of merger with Jerry’s before Bruggeman’s attempt to buy back the property and the expert testimony presented by Jerry’s, we hold that a fact question exists regarding whether Larkin breached its duty to Jerry’s sufficient to defeat Larkin’s motion for a directed verdict.
As noted above,
the fourth element in a legal malpractice action has, in the past, been
formulated as “but for defendant’s conduct the plaintiff would have been
successful in the prosecution or defense of the action.” Blue
Water Corp., 336 N.W.2d at 281. We
have traditionally applied the fourth element in cases in which the alleged
injury was damage to or loss of a cause of action belonging to the
plaintiff. See, e.g., Togstad, 291
N.W.2d at 692, 694 (stating plaintiff must produce sufficient evidence that
plaintiff would have been successful in medical malpractice action before
plaintiff is entitled to damages for attorney’s negligent failure to warn about
statute of limitations). In this case,
the court of appeals held that the fourth element was “inapplicable” because
Jerry’s alleged malpractice during a transactional matter—not malpractice in
the course of litigation. Jerry’s Enters., Inc., 691 N.W.2d at
491-92. Larkin and amici appeal this
modification of the four-element test for legal malpractice, arguing that Jerry’s
should not be relieved from making a “but for” causational showing between
Larkin’s alleged negligence and Jerry’s injury. This issue involves a pure question of law,
and we review it de novo. See
legal malpractice cases not involving damage to or loss of a cause of action, we
have previously indicated that a plaintiff must demonstrate “but for” causation
between defendant’s negligence and plaintiff’s injury in order to show
proximate causation. See Ross v. Briggs & Morgan, 540
N.W.2d 843, 847 (
this case, viewing the evidence in a light most favorable to Jerry’s, Jerry’s
has provided sufficient evidence to create a fact question for the jury
regarding whether, “but for” Larkin’s alleged negligence, Jerry’s would have
obtained a more favorable result in
the Bruggeman transaction than the result obtained. Jerry’s argues that if Larkin had informed Jerry’s of the possible cloud on its title to the property, it would have begun construction within the two-year time period and prevented Bruggeman from exercising his buy-back option. At trial, Shadduck, the president of Jerry’s, testified that had he known of the possible survival of the buy-back option, Jerry’s would have ensured that the option was extinguished, either by beginning construction or otherwise. During adverse direct examination, Stoltman testified that had he told Jerry’s about the potential survival of the buy-back option, Jerry’s could have begun construction within two years of closing and extinguished the option. After Bruggeman’s exercise of the buy-back option, Jerry’s paid Larkin over $170,000 in legal fees to defend its title. Eventually Jerry’s paid Bruggeman $4.2 million to keep the property. In light of this evidence, a question of fact exists regarding whether Larkin’s conduct was the “but for” cause of Jerry’s damages.
The final issue we
consider is whether the district court erred by ruling that Larkin could
introduce evidence regarding the state of the merger doctrine at the time of
the alleged malpractice. The court of
appeals upheld the district court’s ruling, holding that such evidence was
relevant in determining the standard of care.
Jerry’s Enters., Inc., 691
N.W.2d at 494. Jerry’s seeks to reverse
the district court’s ruling, arguing that the ruling impermissibly allows
jurors to decide a question of law. A
district court has wide discretion in determining the relevancy of evidence,
and its decision to admit evidence under Minn. R. Evid. 403 will only be
reversed for clear abuse of discretion. State v. Schulz, 691 N.W.2d 474, 477 (
relevant * * * when it, in some degree, advances the inquiry.”
Affirmed as modified.
GILDEA, J., not having been a member of this court at the time of the argument and submission, took no part in the consideration or decision of this case.
 Larkin argues that attorneys need not conduct legal research to exercise judgment. While this may be true, it clouds the real issue, as identified in Wartnick and Togstad, of whether Larkin exercised reasonable care in forming that judgment. In addition, the record is not clear on whether Stoltman even considered the issue of merger before Bruggeman’s attempt to exercise his buy-back option. Larkin argues that Stoltman’s testimony demonstrates that he thought the Bruggeman option had merged and was no longer enforceable. In portions of his testimony, Stoltman indicated, however, that he had not considered the issue of merger at all prior to Bruggeman’s attempt to exercise the option. While Stoltman did at times state that he did not look into the issue of merger because “the law was well-settled on that point and there was no need to do so,” viewing Stoltman’s testimony in a light most favorable to Jerry’s, a fact issue exists about whether Stoltman considered the merger issue, as well as whether any consideration he did give the issue met the standard of care.
 A careful reading of the decision of the court of appeals, however, indicates that the court of appeals likely did not intend to do away with this requirement. While the court stated that “more traditional concepts of proximate cause, rather than ‘but for’ causation, are used” in malpractice suits stemming from representation in transactional matters, in its discussion of proximate cause the court also held that “there is sufficient record evidence to create a fact question for the jury regarding whether Jerry’s suffered damages as a result of [Larkin’s] acts.” Jerry’s Enters., Inc., 691 N.W.2d at 491, 493. It appears likely that the court of appeals did not eliminate “but for” causation from Jerry’s burden, but merged its “but for” inquiry into the “proximate cause” element of legal malpractice.
 A similar approach has been adopted
by the California Supreme Court. See Viner v. Sweet, 70 P.3d 1046, 1054 (