Maynard A. Howe, Appellant, vs. Fredrikson & Byron, P.A., Respondent, Fredrikson & Byron, P.A., Third Party Plaintiff, vs. Roger Howe, Third Party Defendant.

Maynard A. Howe, Appellant, vs. Fredrikson & Byron, P.A., Respondent, Fredrikson & Byron, P.A., Third Party Plaintiff, vs. Roger Howe, Third Party Defendant. A07-0021, Court of Appeals Unpublished Decision, December 11, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A07-0021

 

Maynard A. Howe,
Appellant,
 
vs.
 
Fredrikson & Byron, P.A.,
Respondent,
Fredrikson & Byron, P.A.,
Third Party Plaintiff,
 
vs.
 
Roger Howe,
Third Party Defendant.

 

 

Filed December 11, 2007

Affirmed

Stoneburner, Judge

Concurring specially, Minge, Judge

 

Hennepin County District Court

File No. 27-CV-06-7275

 

Thomas C. Atmore, Kerry A. Trapp, Leonard, O'Brien, Spencer, Gale & Sayre, Ltd., Suite 2500, 100 South Fifth Street, Minneapolis, MN 55402 (for appellant)
 
Terrence J. Fleming, Christopher A. Grgurich, Lindquist & Vennum P.L.L.P., 4200 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for respondent)

 

            Considered and decided by Halbrooks, Presiding Judge; Stoneburner, Judge; and Minge, Judge.

U N P U B L I S H E D   O P I N I O N

STONEBURNER, Judge

In this legal-malpractice action, appellant challenges the grant of summary judgment to respondent based on the district court's conclusion that the action is barred by the statute of limitations.  Respondent seeks review of the district court's determination that questions of fact precluded summary judgment for failure to establish causation.  Because the district court did not err in holding that the action is barred by the statute of limitations, we affirm without reaching the issue of causation.

FACTS

Appellant Maynard Howe, his brother Roger Howe, and Dee Gaeddert were shareholders in Quality Institute International, Inc. (QII), a closely held corporation.  In late 1997, QII retained Simon Root, an attorney with respondent Fredrikson & Byron, P.A. (Fredrikson), to assist QII in a contemplated sale of the corporation to Personnel Decisions International Corporation (PDI).  The parties dispute whether Root represented the interests of the individual shareholders as well as the corporation, but for purposes of summary judgment, appellant's assertion that Root represented him is presumed to be true.

            To meet requirements for a tax-free reorganization, Root structured the transaction as a merger between QII and PDI.  Under the agreement, Roger Howe was to become a member of PDI's board of directors and Gaeddert was to become a PDI employee; appellant would have no role in PDI.  All three QII shareholders would receive shares in PDI, but Roger Howe and Gaeddert  could "put" (require PDI to buy) their shares three years after the merger; appellant could not exercise the same option until four years after the merger.  PDI was to pay the appraised value of the stock as of December 31 of the year preceding the purchase, except that under circumstances defined in the agreement, the price for the purchase of Roger Howe's and Gaeddert's shares was fixed at the December 31, 1997 appraised value, creating a "floor" for the value of their shares.  Because all of the parties involved in the negotiations contemplated that PDI stock value would rise, this "floor" price was thought to be a penalty provision.  On February 23, 1998, appellant, Roger Howe, and Gaeddert executed the agreement and the merger closing occurred on the same day.  Accordingly, the former QII shareholders became PDI shareholders, Roger Howe became a member of PDI's board of directors, and Gaeddert became a PDI employee. 

Roger Howe and Gaeddert exercised their rights to require PDI to purchase their stock in 2002, and the provisions for the "floor" price applied.  Because PDI stock value had declined significantly, the "floor" price was greater than the value of the stock at that time, and Roger Howe and Gaeddert benefited from the provision. When appellant later exercised his right to require PDI to purchase his stock, its appraised value was still depressed, and PDI took the position, not disputed in this appeal, that the "floor" price provision did not and was never intended to apply to the repurchase of appellant's stock.  Appellant received substantially less for his PDI stock than he would have received if the "floor" price applied and substantially less than the amount Roger Howe and Gaeddert had received for their PDI stock. 

On February 22, 2006, appellant initiated this action against Fredrikson, asserting that it committed legal malpractice because Root failed to ensure that a "floor" price applied to the exercise of his put option.  Alternatively, appellant asserted that he was a substantial and intended beneficiary of an agreement between QII and Fredrikson to protect the financial interests of QII shareholders.  Appellant argued that Root had a duty to see that the three QII shareholders were treated equally.  Appellant also asserted a claim for negligent misrepresentation, asserting that Root made material misrepresentations to him about the terms of the agreement.  Fredrikson moved for summary judgment based on (a) the statute of limitations, (b) lack of an attorney-client relationship between appellant and Fredrickson, and (c) failure to make a prima facie case on causation. 

The district court found that material fact questions existed as to representation and causation precluding summary judgment, but found that because the applicable six-year statute of limitations on the legal-malpractice and negligent-misrepresentation claims began to run when the agreement was executed, appellant's claim was time-barred, and granted summary judgment to Fredrikson on that basis.  This appeal followed.

D E C I S I O N

On appeal from summary judgment, this court determines "whether there are any genuine issues of material fact and whether the district court erred in its application of the law."  Antone v. Mirviss, 720 N.W.2d 331, 334 (Minn. 2006).  If no material facts surrounding a statute-of-limitations question are in dispute, we ask only whether the district court erred in determining the accrual of the action and the running of the statute of limitations.  Herrmann v. McMenomy & Severson, 590 N.W.2d 641, 643 (Minn. 1999).   This inquiry involves questions of law, which we review de novo.  Antone, 720 N.W.2d at 334.

      The statute of limitations for a legal-malpractice claim is six years.  Minn. Stat. § 541.05, subd. 1(5) (2006).[1]   Appellate courts in Minnesota have consistently held that the six-year statute of limitations for legal malpractice begins to run when the cause of action accrues, and the cause of action accrues "when the plaintiff can allege sufficient facts to survive a motion to dismiss for failure to state a claim upon which relief can be granted."[2]  Antone,720 N.W.2dat 335.   In an action for legal malpractice arising out of representation in transactional matters, a plaintiff 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 the defendant's conduct, the plaintiff would have obtained a more favorable result in the underlying transaction than the result obtained.  Jerry's Enters., Inc. v. Larkin, Hoffman, Daly & Lindgren, Ltd., 711 N.W.2d 811, 816, 819 (Minn. 2006).         

In this case, appellant argues that the statute of limitations did not begin to run until 2002, the earliest date that he could exercise his put option, because he could not know that he would be damaged by the absence of a "floor" price for his shares before that date.   Appellant's argument is similar to the plaintiff's argument in Antone. Antone's malpractice claim arose out of his attorney's failure to include a provision in an antenuptial agreement to protect his interest in any marital appreciation to his premarital property.  Antone, 720 N.W.2d at 332-33.  Antone argued that his cause of action did not accrue until the dissolution decree was entered, awarding a portion of the marital appreciation of his premarital property to his ex-wife.  Id. at 336.  But the supreme court held that a cause of action accrues, and "the statute of limitations begins to run, on the occurrence of any compensable damage, whether specifically identified in the complaint or not."  Id. (emphasis added). Because Antone lacked the property protections he sought through the antenuptial agreement at the moment he married, the supreme court concluded that his legal-malpractice action accrued on that date.  Id. at 337.  Antone's inability to calculate the precise damage at the time of the marriage did not preclude the running of the statute of limitations.  Id. at 338.

A finding that a party has suffered any compensable damage is supported by testimony that a party would not have entered into a transaction if he had known the agreement did not adequately protect his interests.  Id. at 336-37.  In this case, as soon as the merger agreement was executed and the merger was completed on February 23, 1998, appellant was bound by an agreement that did not provide a floor price for his PDI shares.  Appellant argues that he would not have closed on the transaction if he had known he was subject to a risk of loss not shared by the other two shareholders.  We therefore conclude that appellant suffered compensable damage and his cause of action for legal-malpractice began to run on the date the transaction closed.  Because appellant did not bring his legal malpractice action until more than six years after February 23, 1998, the action is barred by the statute of limitations and the district court did not err in granting summary judgment to Fredrikson.

            Because we affirm summary judgment based on the statute of limitations, we do not reach the issue raised by Fredrikson of whether the district court erred in failing to grant summary judgment on other bases.

            Affirmed.

 

MINGE, Judge (concurring specially)

            I join in the opinion.  The holding in Antone governs the result here.  However, I share the concerns of the dissent in Antone that the rule stated in that case is not practical.

 

[1]The statue of limitations for negligent misrepresentation is also six years.  Minn. Stat. § 541.05, subd. 1(6) (2006).  Appellant has not asserted that his cause of action for negligent misrepresentation accrued later than his legal-malpractice cause of action accrued and has briefed the appeal in terms of when the legal-malpractice action accrued.

[2] The running of the statute is not tolled by a party's failure to discover the cause of action.  Herrmann, 590 N.W.2d at 643.  Appellant appears to argue in a footnote in his brief that PDI's failure until 2003 to take the position that appellant had no "floor" price should be considered in determining when the statute of limitations began to run.  Since a party's failure to discover the cause of action does not toll the statute of limitations, PDI's position on the issue is irrelevant.