Opinion
No. A04-1407.
Filed April 5, 2005.
Appeal from the Hennepin County District Court, File No. Mp 03-8087.
John F. Bonner, III, Thomas F. DeVincke, Bonner Borhart, Llp, (for appellant)
Timothy D. Kelly, George O. Ludcke, Sarah E. Bushnell, Kelly Berens, P.A., (for respondents)
Considered and decided by Kalitowski, Presiding Judge, Peterson, Judge, and Crippen, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellant Joyce Witzman brought this legal malpractice action against her former attorneys, respondents Duane W. Krohnke and Faegre Benson, LLP, alleging that Krohnke negligently represented her interests by failing to investigate her claims and provide her with material information, wrongfully causing her to enter into a settlement in the underlying trust litigation, and that Faegre Benson was vicariously liable for Krohnke's actions. The district court granted summary judgment to respondents, concluding that an action for legal malpractice could not be proved because respondents had used reasonable care in exercising their professional judgment on behalf of appellant. On appeal, appellant argues that the court erred because there is no evidence as a matter of law that respondents exercised reasonable care in rendering advice that led to the settlement. Because the record supports the district court's conclusions, we affirm.
FACTS
Appellant and her brother, Blair Wolfson, were the beneficiaries of three trusts from the estates of their deceased parents, Wilfred and Elizabeth Wolfson. Blair Wolfson acted as trustee from the establishment of the trusts in 1978 until they were ultimately disbursed in 1994.
Appellant had received very little information regarding the trusts because Wolfson failed to file annual accountings. In 1992, appellant hired Faegre Benson to represent her interests in the trusts; Krohnke, an experienced litigator, eventually became appellant's counsel. It became apparent that Wolfson had committed some dubious acts during his trusteeship; respondents identified various claims against him, but were also aware that Wolfson had defenses to some of these claims that had some merit.
In 1993, respondents obtained a $1 million distribution from the trust for appellant, as co-beneficiary, and Wolfson received the same. Also in 1993, respondents filed three petitions in the probate court, alleging improper actions by Wolfson as trustee. They demanded trust account records, hired a neutral accounting firm to review the records and a private investigator to look into Wolfson's activities, filed a petition for interim relief blocking any further transfer of trust assets and limiting fees, conducted discovery, and sought information about replacing Wolfson with a professional trustee.
In October 1994, appellant and Wolfson entered into a settlement agreement. Appellant received a total of $4.8 million, representing her one-half share of the liquidation of the trusts' assets and an additional amount based on appellant's claims against Wolfson. Her pre-settlement demands had been higher, calling for an additional payment of approximately $2 million based on other claims. Appellant brought this action against respondents, asserting damages equal to some or all of these unrecovered claims.
Appellant has been involved in extensive post-settlement litigation. In 1995, the probate court dismissed her suit against Wolfson based on title problems associated with certain trust real estate. In 1997, appellant sued Wolfson, alleging fraudulent misrepresentation; Wolfson was ultimately granted summary judgment in 2002. Witzman v. Wolfson, 2002 WL 338155, No. C9-01-1405 (Minn.App. Mar. 5, 2002). Appellant sued Wolfson's accountant, Harvey Flom; the Minnesota Supreme Court affirmed the district court's grant of summary judgment to Flom in 1999. Witzman v. Lehrman, Lehrman Flom, 601 N.W.2d 179 (Minn. 1999). Appellant sued Wolfson's attorney, Bert Gross, in a matter that was removed to federal court; the district court granted summary judgment to Gross, and this decision was affirmed by the Eighth Circuit. Witzman v. Gross, 148 F.3d 988 (8th Cir. 1998). In 1999, the district court granted appellant's petition to remove Wolfson and appoint appellant as trustee; this court reversed, noting that the trust had been terminated. In re Marital Trust of Wilfred Wolfson, 2000 WL 976723, No. C7-00-131 (Minn.App. July 18, 2000), review denied (Minn. Sept. 26, 2000).
Both appellant and respondents moved for summary judgment. The district court made extensive findings of fact, which are essentially undisputed; these findings confirm the nature and volume of the work respondents performed on appellant's behalf. This appeal is based on appellant's dissatisfaction with the district court's resulting conclusion that because respondents used reasonable care in the exercise of their professional judgment, appellant's claims against them are barred by the professional judgment rule. In particular, appellant argues that the district court erred by concluding that designated parts of respondents' advice were matters of professional judgment free of a claim of legal malpractice, in particular citing advice on (1) the possibility of bias based on her religious affiliation; (2) the potential difficulty of collecting from Wolfson in the event of a bankruptcy; and (3) the chance of prevailing on an undue influence claim.
DECISION
1. Standard of Review
Summary judgment is appropriate when the pleadings, discovery, affidavits, and depositions show there is no genuine issue of material fact and one party is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.03. There is no genuine issue of material fact when the record as a whole would not lead a rational trier of fact to find for the other party. DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997). The party resisting summary judgment must do more than rest on "mere averments," because a genuine issue for trial must be based on substantial evidence. Id. at 69-70. The reviewing court must view the evidence in the light most favorable to the nonmoving party. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).
This matter is an action for legal malpractice, for which a plaintiff must show four elements: (1) the existence of an attorney/client relationship; (2) acts amounting to negligence or a breach of contract; (3) that such acts were the proximate cause of plaintiff's damages; and (4) but for the malpractice, the plaintiff would have been successful in the action. Rouse v. Dunkley Bennett, P.A., 520 N.W.2d 406, 408 (Minn. 1994). Failure to establish any of these elements defeats the plaintiff's case. Id.
A plaintiff alleging legal malpractice in the case of a settlement must show not that a jury would have awarded him or her more than the settlement, but that the attorney was negligent in advising the settlement or conducting the case. Virsen v. Rosso, Beutel, Johnson, Rosso Ebersold, 356 N.W.2d 333, 336 (Minn.App. 1984). Courts look with disfavor at cases when the plaintiff becomes dissatisfied with the settlement at a later date. See, e.g., Rouse, 520 N.W.2d at 410 n. 6 ("We continue to disapprove of allowing a client who has become dissatisfied with a settlement to recover against an attorney solely on the ground that a jury might have awarded him more than the settlement."); Glenna v. Sullivan, 310 Minn. 162, 170, 245 N.W. 869, 873 (1976) (same). But see Oakes Kanatz v. Schmidt, 391 N.W.2d 51, 53-54 (Minn.App. 1986) (distinguishing dissatisfaction with settlement from case of inadequate representation); Virsen, 356 N.W.2d at 336 (same).
Appellant argues that the district court improperly concluded that respondents were shielded by the professional judgment rule because respondents failed to exercise reasonable care. This so-called "rule" is actually a set of principles that protects an attorney from errors stemming from the honest exercise of professional judgment. Wartnick v. Moss Barnett, 490 N.W.2d 108, 113 (Minn. 1992). The attorney is required to exercise a degree of care and skill that is reasonable under the circumstances. Id. at 112. The attorney must use reasonable care to obtain the information needed to exercise professional judgment; failure to do so would be negligent, even if done in good faith. Id. at 113. Here, the district court properly applied this standard, concluding that there was no showing of a lack of reasonable care.
In particular, appellant asserts that the district court erred by finding reasonable care in Krohnke's speculation about the effect of her religious affiliation, his advice about complications based on a potential Wolfson bankruptcy, and his assessment of her undue influence claim. Certainly, it would be improper if Krohnke made a knowingly false speculation that the probate court would be biased because of appellant's Jewish faith. But an attorney is obliged to consider and appraise the "hazards of a tort action." Meagher v. Kavli, 256 Minn. 54, 58, 97 N.W.2d 370, 374 (1959). These hazards can include matters beyond whether liability exists as a matter of law. See id. at 58-59, 97 N.W.2d at 374. In any event, Krohnke concluded that the probate court would not be biased because of appellant's Jewish faith. There is no appearance that respondents failed to use due care in advising appellant of trial risks.
Respondents researched Florida bankruptcy laws and advised appellant that the more liberal laws of Florida could have an impact on her ability to collect her interest in the trust. Appellant correctly points out that funds held in trust for a beneficiary are not dischargeable in the bankruptcy of a trustee, but Krohnke's advice would be correct if appellant sought to recover funds misappropriated by Wolfson that were no longer a part of the trust res. There is no showing of negligence of respondents.
From the undisputed testimony, respondents undertook an investigation of appellant's claim of Wolfson's undue influence on Elizabeth Wolfson, finding no basis for the claim from unbiased witnesses. That appellant would have to "reincarnate [her] mother" in order to prevail on this issue must be treated as an offhand remark rather than as proof of a failure by respondents to exercise reasonable care. Appellant's allegations do not support a finding of lack of reasonable care; rather, respondents sought to consider fully the challenges of litigation.
Appellant also asserts that respondents failed to exercise reasonable care in their settlement advice regarding reservation of appellant's rights to bring claims against Wolfson's attorney and accountant and in their disclosure of the trust financial statements provided by Wolfson and forwarded to appellant in 1994. As appellant requested, the settlement agreement contained a reservation of rights. There is no evidence in this record that respondents represented to appellant that these would be meritorious claims and, by virtue of the fact that appellant lost both suits, it is evident that these were, in fact, without merit. There is no showing of fault of respondents.
Finally, appellant argues that respondents were negligent in failing to include a cover letter accompanying the financial statements provided by Wolfson and stating that the documents were unaudited and for limited purposes. But the documents forwarded to appellant contained a notation on each page that the statements were unaudited. The omitted cover letter was a pro forma declaration that would accompany an unaudited statement, but has no significance rising to the level of actionable negligence.
Appellant would have us rely on the opinions of her expert witnesses, attorney Jon Hopeman and former trust officer Jean Chaput. Although Hopeman opines that he believes appellant would have prevailed at trial and received a larger judgment than the settlement, he offers no basis for how he reached this conclusion. Chaput details the ways in which Wolfson mishandled his responsibilities as trustee; these allegations were known before settlement, and it is precisely these claims that appellant agreed to compromise when she entered into the settlement agreement.
The record supports the district court's conclusion that appellant's claims are barred by the professional judgment rule because respondents exercised reasonable care in rendering professional advice.