Brown-Wilbert, Inc. v. Copeland Buhl & Co.

• Decision Date: 31 May 2007
• Docket Number: No. A05-1952.,No. A05-340.,A05-340.,A05-1952.
• Citation: Brown-Wilbert, Inc. v. Copeland Buhl & Co., 732 N.W.2d 209 (Minn. 2007)
• Parties: BROWN-WILBERT, INC., et al., Appellants (A05-340), Respondents (A05-1952), v. COPELAND BUHL & CO., P.L.L.P., et al., Respondents (A05-340), Appellants (A05-1952).
• Court: Minnesota Supreme Court

732 N.W.2d 209

BROWN-WILBERT, INC., et al., Appellants (A05-340), Respondents (A05-1952), v.COPELAND BUHL & CO., P.L.L.P., et al., Respondents (A05-340), Appellants (A05-1952).

No. A05-340.

No. A05-1952.

Supreme Court of Minnesota.

May 31, 2007.

Kay Nord Hunt, Lommen, Nelson, Cole & Stageberg, P.A.; George E. Antrim, III, George E. Antrim, III, PLLC, Minneapolis, MN, for Appellants(A05-340), Respondents(A05-1952).

Peter A. Koller, Thomas J. Shroyer, Moss & Barnett, P.A., Minneapolis, MN, for Respondents(A05-340), Appellants(A05-1952).

Heard, considered, and decided by the court en banc.

OPINION

HANSON, Justice.

These appeals arise out of two civil actions brought by Chris Brown and Brown-Wilbert, Inc.(collectively Brown-Wilbert), against Copeland Buhl & Company and Lee Harren(collectively Accountants).The first complaint was served in March 2004 and contained four counts: (1) breach of contract, (2) breach of fiduciary duty, (3) accounting malpractice, and (4) restitution (BW-I).The district court granted Accountants' motion to dismiss all counts of BW-I under Minn.Stat. § 544.42(2006), on the grounds that Brown-Wilbert failed to timely serve an affidavit of expert review or an affidavit of expert disclosure.The court of appeals affirmed the dismissal of the accounting malpractice count, holding that Brown-Wilbert failed to timely serve an affidavit of expert review, but reversed the district court's dismissal of the three remaining counts and remanded them for an analysis of whether they are subject to the affidavit requirements of section 544.42.Brown-Wilbert, Inc., v. Copeland Buhl & Co.,No. A05-340, 2005 WL 3111959, at *3-4(Minn.App.Nov. 22, 2005), rev. granted(Minn. Feb. 14, 2006).We affirm the dismissal of the accounting malpractice count, but on different grounds.

While Brown-Wilbert's appeal in BW-I was pending in the court of appeals Brown-Wilbert served a second complaint against Accountants alleging the same facts but adding four new counts: (1) fraud, (2) intentional misrepresentation, (3) negligent misrepresentation, and (4) aiding and abetting (BW-II).The district court dismissed BW-II on res judicata grounds.The court of appeals reversed, holding that the judgment in BW-I was not final because the appellate process had not been exhausted.Brown-Wilbert, Inc. v. Copeland Buhl & Co.,715 N.W.2d 484, 488(Minn.App.2006), rev. granted(Minn. Aug. 23, 2006).We affirm the reinstatement of the complaint in BW-II, but on different grounds.

Brown-Wilbert is a Minnesota burial vault manufacturing company.The company obtained its name in 1995, when Christopher Brown(Chris) and his fatherJerry Brown(Jerry) incorporated Brown, Inc., purchased Chandler-Wilbert, Inc., and merged the two companies into Brown-Wilbert, Inc.This litigation arises out of these 1995 transactions.

Brown-Wilbert alleges that Accountants served as Jerry's personal accountant, as accountants for Brown, Inc., and later Brown-Wilbert, Inc. Brown-Wilbert alleges that Accountants: (1) advocated on Jerry's behalf and failed to advise Chris of the conflicts of interest between Chris and Jerry; (2) proposed that Chris should own 80% of the equity in Brown, Inc., but Jerry should have 51% of the voting shares; and (3) misrepresented that Chandler-Wilbert, Inc., had insisted on this ownership and control arrangement as a condition for the loan it gave to Brown, Inc., to help finance the purchase.Brown-Wilbert also alleges that Accountants: (1) attempted to squeeze Chris out of Brown-Wilbert, Inc., by pressuring Chris to sell his majority interest to Jerry; (2) were not independent; and (3) acted contrary to Chris's interests.

Chris filed a shareholder's action against Jerry, which resulted in Chris buying all of Jerry's shares in Brown-Wilbert.Brown-Wilbert then commenced BW-I against Accountants.In connection with that action, Brown-Wilbert was required to serve, with the pleadings, an affidavit of expert review, certifying that counsel had reviewed the facts of the case with an expert who reached the opinion that Accountants had deviated from the applicable standard of care, causing injury to Brown-Wilbert.Minn.Stat. § 544.42, subds. 2(1), 3(1)(2006).In addition, Brown-Wilbert was required to serve, within 180 days after service of the complaint, an affidavit of expert disclosure, signed by counsel, naming the experts that counsel expected to call at trial and providing "the substance of the facts and opinions to which the expert is expected to testify, and a summary of the grounds for each opinion."Minn.Stat. § 544.42, subds. 2(2), 4(2006).

The failure to serve an affidavit of expert review "within 60 days after demand for the affidavit results, upon motion, in mandatory dismissal of each cause of action with prejudice as to which expert testimony is necessary to establish a prima facie case."Minn.Stat. § 544.42, subd. 6(a)(2006).And the failure to serve an affidavit of expert disclosure also

results, upon motion, in mandatory dismissal of each action with prejudice as to which expert testimony is necessary to establish a prima facie case, provided that an initial motion to dismiss an action * * * based upon claimed deficiencies of the affidavit or answers to interrogatories shall not be granted unless, after notice by the court, the nonmoving party is given 60 days to satisfy the disclosure requirements in subdivision 4.

Section 544.42, subdivision 6(c).

Brown-Wilbert did not include an affidavit of expert review when it served its complaint in BW-I.Accountants did not make a separate demand for an affidavit of expert review but, on or about May 18, 2004, Accountants served expert interrogatories on Brown-Wilbert.On June 18, 2004, Brown-Wilbert filed answers to those interrogatories, stating that it expected to call two expert witnesses, Rob Tautges and William R. Legier.In response to an interrogatory asking for the subject matter, the substance of the facts and opinions and the grounds for each opinion to which these witnesses were expected to testify, the answers stated:

Both experts have been recently retained.Mr. Tautges' firm, Tautges Redpath, Ltd., serves as the current Certified Public Accountant for Brown-Wilbert, Inc.Both experts are expected to testify as to the conclusions set forth in the Complaint, based upon the facts alleged in the Complaint.Plaintiffs will supplement this Answer as necessary.Discovery is continuing.

On September 21, 2004, more than 180 days after the commencement of BW-I, Accountants moved to dismiss all four counts of the complaint, arguing that Brown-Wilbert's answers to the interrogatories did not satisfy the requirements of either of the necessary expert affidavits.On October 15, 2004, Brown-Wilbert filed a response to that motion that included an affidavit of counsel purporting to contain both an affidavit of expert review and an affidavit of expert disclosure.

The district court granted Accountants' motion and dismissed all four counts of the complaint in BW-I with prejudice.As to the affidavit of expert review, the court concluded that Accountants' service of the expert interrogatories constituted a "demand" under subdivision 6(a) and that Brown-Wilbert's October 15, 2004, affidavit of counsel was served more than 60 days after the demand and was untimely.As to the affidavit of expert disclosure, the court concluded that Brown-Wilbert's "[a]nswers to [i]nterrogatories fail to identify the experts, state their opinions, and state the basis of these opinions as required by statute, and therefore fail to resemble the second affidavit."As a result, the court held that Brown-Wilbert did not serve an affidavit of expert disclosure within 180 days after commencement of the action.

The court of appeals agreed with the district court's conclusion that the interrogatories served by Accountants were a sufficient "demand" for an affidavit of expert review and that the affidavit of October 15, 2004, was untimely because it was served more than 60 days after that demand.BW-I,2005 WL 3111959, at *2-3.The court of appeals did not address the requirements for a valid affidavit of expert disclosure.

While BW-I was pending before the court of appeals, Brown-Wilbert served on Accountants the complaint in BW-II.Accountants moved the district court to dismiss BW-II, arguing that the judgment of dismissal in BW-I had res judicata effects and barred the second action.The district court concluded that BW-II was precluded by res judicata because the judgment in BW-I was final, even though the appeal was pending, and it was on the merits because it dismissed all counts, not just the accounting malpractice count.The court of appeals reversed the dismissal of BW-II, holding that the judgment in BW-I was not final until the appellate process was exhausted.BW-II,715 N.W.2d at 488.The court of appeals also rejected Accountants' alternative argument that BW-II should be dismissed on grounds of claim splitting, holding that claim splitting is not an independent defense but is simply "inextricably linked to res judicata."Id. at 489.

I.

In BW-I, the only issue before us is the appropriateness of the dismissal with prejudice of the accounting malpractice count.Accountants did not seek review of the court of appeals' reversal of the judgment as to the counts for breach of contract, breach of fiduciary duty, or restitution.We review a district court's dismissal of an action for procedural irregularities under an abuse of discretion standard.SeeTeffeteller v. Univ. of Minn.,645 N.W.2d 420, 426(Minn.2002)(reviewing a district court's dismissal of a claim pursuant to Minn.Stat. § 145.682(2006)).But where a question of law is present, such as statutory construction, we apply a de novo review.Id.

A.Affidavit of Expert Review

The district court and the court of appeals each concluded that Accountants' interrogatories constituted a demand that...