Jerry's Enterprises v. Larkin & Lindgren

• Decision Date: 06 April 2006
• Docket Number: No. A04-0188.,A04-0188.
• Citation: 711 N.W.2d 811
• Court: Minnesota Supreme Court
• Parties: JERRY'S ENTERPRISES, INC., Respondent, v. LARKIN, HOFFMAN, DALY & LINDGREN, LTD., et al., Appellant.

711 N.W.2d 811

JERRY'S ENTERPRISES, INC., Respondent, v. LARKIN, HOFFMAN, DALY & LINDGREN, LTD., et al., Appellant.

No. A04-0188.

Supreme Court of Minnesota.

April 6, 2006.

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Lindsay G. Arthur, Jr., Robert W. Kettering, Kirsten J. Hansen, Arthur Chapman Kettering Smetak & Pikala, P.A., Minneapolis, MN, for Appellant.

James P. McCarthy, Christopher L. Lynch, Lindquist & Vennum, P.L.L.P., Minneapolis, MN, for Respondent.

Charles E. Lundberg, Bassford Remele, A Professional Association, Minneapolis, MN, for Amici Curaie, Minnesota Lawyers Mutual Insurance Company.

Thomas H. Boyd, Winthrop & Weinstine, P.A., Minneapolis, MN, for Amici Curaie, Minnesota State Bar Association.

William Lawrence Davidson, Lind, Jensen, Sullivan & Peterson, P.A., Minneapolis, MN, for Amici Curaie, Minnesota Defense Lawyers Association.

William M. Hart, Meagher & Geer P.L.L.P., Minneapolis, MN, for Amici Curaie, American Insurance Association.

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

OPINION

ANDERSON, G. BARRY, Justice.

Jerry's 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 Woodbury, Minnesota. Jerry's alleges that Larkin's representation fell below the standard of care and caused Jerry's to suffer monetary damages in the form of legal fees and settlement costs incurred in the process of clearing title to the property. At the close of Jerry's case, the district court granted Larkin's motion for a directed verdict. The court of appeals reversed and remanded for trial. See Jerry's Enters., Inc. v. Larkin, Hoffman, Daly & Lindgren, 691 N.W.2d 484, 495 (Minn.App.2005). In this appeal from that decision, we hold that questions of fact exist regarding whether Larkin's representation fell below the standard of care and whether Larkin's allegedly negligent conduct was the "but for" cause of Jerry's alleged injuries. We therefore affirm.

In 1993, Robert Shadduck, the president of Jerry's, became interested in purchasing undeveloped land in Woodbury, Minnesota (the property). Larkin entered into a retainer agreement with Jerry's, and Larkin agreed to represent Jerry's in its efforts to purchase the property. No limitation was placed on the scope of Larkin's representation of Jerry's. At that time, the property was divided into two separate parcels. One parcel was owned by William L. Bruggeman; the other was owned by Hardy W. Morningstar. Jerry's subsequently entered into an agreement with Bruggeman and a separate agreement with Morningstar which gave Jerry's the option to purchase both parcels. Included in the agreement between Jerry's and Bruggeman was a buy-back option, drafted by Larkin, that gave Bruggeman the option to purchase the entire property if Jerry's had not begun construction of improvements on the Bruggeman parcel within two years of Jerry's purchase. As Jerry's prepared to exercise its purchase option for the Bruggeman parcel, Stoltman and Renneke reviewed closing documents drafted by Bruggeman's attorneys. The closing documents did not include the buy-back option. Larkin admits that, at the time of closing and during the two years following, it neither discussed the survival of the buy-back option with Jerry's nor conducted any research to determine whether the buy-back option survived closing. Jerry's eventually closed on both the Bruggeman and Morningstar parcels and became owner of the entire property.

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 (Minn.1999). Although Jerry's had purchased a title insurance policy on the property, Jerry's had to pay Larkin for its representation in the litigation with Bruggeman, allegedly because Larkin had neglected to send a copy of the buy-back option to the title insurance company. On remand, the district court ordered Jerry's to sell the property to Bruggeman for $3.1 million, a figure arrived at through a formula included in the buy-back option. Jerry's and Bruggeman subsequently entered a settlement in which Jerry's paid Bruggeman $4.2 million to retain ownership of the property.

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.

I.

At the close of the evidence offered by an opponent, a party may seek a directed verdict. Minn. R. Civ. P. 50.01. "If the evidence is sufficient to sustain a verdict for the [nonmoving party], the motion shall not be granted." Id. A directed verdict should be granted:

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 Minn. 334, 336, 231 N.W.2d 87, 89 (1975). Viewing the evidence in a light most favorable to the nonmoving party, this court makes an independent determination of whether there is sufficient evidence to present an issue of fact for the jury. Wall v. Fairview Hosp. & Healthcare Servs., 584 N.W.2d 395, 406 (Minn.1998).

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 (Minn.1983). If the plaintiff does not provide sufficient evidence to meet all of these elements, the claim fails. Noske v. Friedberg, 670 N.W.2d 740, 743 (Minn. 2003). Larkin challenges the sufficiency of the evidence for one of the elements — Larkin argues that the court of appeals erred by finding that a fact question exists concerning whether Larkin breached its duty to Jerry's.

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 (Minn.1979); Sjobeck v. Leach, 213 Minn. 360, 365, 6 N.W.2d 819, 822 (1942). Expert testimony is generally required to establish the "standard of care applicable to an attorney whose conduct is alleged to have been negligent, and further to establish whether the conduct deviated from that standard." Admiral Merchs. Motor Freight, Inc. v. O'Connor & Hannan, 494 N.W.2d 261, 266 (Minn.1993).

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....