Porter v. Berall

• Decision Date: 05 June 2001
• Docket Number: No. 00-1028-CV-W-6.,00-1028-CV-W-6.
• Citation: 142 F.Supp.2d 1145
• Parties: H. Boone PORTER, III, Charlotte M. Porter and Michael T. Porter, Plaintiffs, v. Frank S. BERALL, Mark H. Neikrie, Suzanne Brown Walsh and Copp & Berall, L.L.P., Defendants.
• Court: U.S. District Court — Western District of Missouri

142 F.Supp.2d 1145

H. Boone PORTER, III, Charlotte M. Porter and Michael T. Porter, Plaintiffs, v. Frank S. BERALL, Mark H. Neikrie, Suzanne Brown Walsh and Copp & Berall, L.L.P., Defendants.

No. 00-1028-CV-W-6.

United States District Court, W.D. Missouri, Western Division.

June 5, 2001.

Richmond M. Enochs, Wallace, Saunders, Austin, Brown & Enoch, Overland Park, KS, for defendants.

Gordon D. Gee, Seigfreid, Bingham, Levy, Selzer & Gee, Kansas City, MO, for plaintiffs.

MEMORANDUM AND ORDER

SACHS, District Judge.

This legal malpractice case was brought against Connecticut lawyers by the trustees of a family trust registered in Missouri. It is contended (without dispute) that the late Reverend Porter, the father of the three trustees, and trustee Boone Porter III (a resident of Kansas with law offices in Missouri) sought assistance from defendants in September, 1996, to amend a 1990 trust instrument to assure, among other things, that any tax exposure in Connecticut would be eliminated or minimized. Two months before execution of the trust amendment in February, 1998, the Connecticut appellate court ruled that a trust's undistributed capital gains may constitutionally be taxable in Connecticut when any of the beneficiaries are Connecticut residents. Chase Manhattan Bank v. Comm'r of Revenue Services, 45 Conn. Supp. 368, 716 A.2d 950 (1997). The father, who was himself a beneficiary of a family trust initially established in 1960, and several of his children were residents of Connecticut.

Plaintiffs' basic contention is that defendants neglected to take into account, in estate planning, the recent decision of the Connecticut court, and that costly corrections of the plan were required in late 1999, after the death of the father. Plaintiffs seek over $200,000 in such alleged corrective costs, and also punitive damages for alleged reckless or willful misconduct and breach of fiduciary obligations in allegedly concealing information about the adverse decision until some time after the father's death.¹ Silence regarding any known tax problem in Connecticut was allegedly attributable, at least in part, to a self-serving effort to retain legal business.

Defendants move to dismiss the action for want of personal jurisdiction over them. They contend that certain Missouri aspects of the litigation, such as payment of corrective expenses from funds deposited here, and some activities in Missouri after the death of the father, are insufficient to confer personal jurisdiction, as a matter of constitutional law. After an evidentiary hearing and briefing, I have become satisfied that Eighth Circuit law, governed by rulings of the Supreme Court, requires dismissal.

In seeking to avoid undue complications I assume that both plaintiffs Porter and their father were clients of defendants from 1996 onward. I also assume that the Missouri registration of the trust gives adequate standing to litigate, in the same manner as if the three trustees were Missouri residents. From a reasonable reading of the pleadings I conclude that the principle claim asserted is of professional malpractice in Connecticut prior to execution of the trust amendment in February, 1998, but that there is a subordinate claim under Connecticut law of a continuing fiduciary duty to disclose any malpractice and any tax problems known to counsel. I agree with plaintiffs that any injury asserted relates to trust funds in Missouri that were used to rectify the structuring of the trust.

Although all cases have not reached the same conclusion, because of some variance in facts and approach, the clearly compelling body of law regarding lawyer malpractice confines personal jurisdiction to the situs of the acts and omissions complained of. A federal judge in Maryland has aptly asserted that "case law overflows on the point that providing out-of-state legal representation is not enough to subject an out-of-state lawyer or law firm to the personal jurisdiction of the state in which a client resides." Cape v. von Maur, 932 F.Supp. 124, 128 (D.Md. 1996) (citing, among other cases, the Eighth Circuit decision in Austad Co. v. Pennie & Edmonds, 823 F.2d 223 (8th Cir.1987)). One of the more recent appellate decisions so ruling is Sawtelle v. Farrell, 70 F.3d 1381 (1st Cir.1995), which rejects the controlling effect of what is probably plaintiffs' strongest argument, that the injury from any malpractice predictably occurred in Missouri.² See also FDIC v. Malmo, 939 F.2d 535, 537 (8th Cir.1991), rejecting an "effects of misconduct" argument. The Eighth Circuit ruling in Malmo and the Sawtelle case were quite recently cited for the insufficiency of the locus-of-harm test in a ruling denying personal jurisdiction in Pennsylvania litigation against an accountant for professional malpractice in New York. Poole v. Sasson, 122 F.Supp.2d 556, 559 (E.D.Pa. 2000).

The Eighth Circuit Austad case, which appears to be the leading case (along with Malmo) that is dispositive of the personal jurisdiction question here, was cited and explained by another Eighth Circuit opinion, Dakota Industries, Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1390-1 (8th Cir.1991). Missouri billing (and thus harm) was said not to be controlling in litigation claiming "mere untargeted negligence" as distinguished from "intentional, and allegedly tortious, actions" that are "aimed expressly at the forum state." Austad thus exempts a nonresident service provider from jurisdiction where there is no "intentional tortious wrongdoing" so directed.

Plaintiffs candidly recognize that Austad and Malmo present them with problems, but attempt to distinguish them, and all similar attorney malpractice cases, by saying they deal with "a litigation matter" being conducted in another state. None of the cases, however, makes such a distinction, and no rationale for the distinction is offered or occurs to the court. Without trying to exhaust the subject, Poole seems to deal with accountant services similar to estate planning services and the court used out-of-state litigation cases for controlling principles.

Plaintiffs rely most heavily on a recent Fifth Circuit decision. Streber v. Hunter, 221 F.3d 701 (5th Cir.2000). In that case, however, "much of (counsel's) alleged malpractice occurred during the 1993 mediation, which took place in Houston". 221 F.3d at 718. Plaintiffs do cite an alternate theory expressed in a footnote, that the allegations also relate to "a breach of fiduciary duty based on a failure to disclose material information" in counsel's communications with the forum state. This was described as "purposeful direction of...