In This Issue:

"But For” Causation and Judgmental Immunity

Failure to Record Homestead Exemption Claim Belongs to Debtor
Jerry's Enterprises, Inc. v. Larkin, Hoffman, Daly & Lindgren, Ltd., 691 N.W.2d 484 (Minn.App.2005), review granted (April 19, 2005). A Minnesota client, a purchaser of real property, sued a law firm because the purchase option agreement allowed the seller to repurchase the property if plaintiff did not develop it within two years. The lawyer did not warn the plaintiff of uncertainty in the law about whether the repurchase provision, which was not included in the deed, would remain enforceable after delivery of the deed under an exception to the merger doctrine.

Bankruptcy

Colorado Lawyers Liable to Bankruptcy Trustee on Behalf of "Fictitious" Creditor But Not on Behalf of Debtor for Aiding and Abetting a Fiduciary Breach
Anstine v. Alexander, ____ P.3d ____, 2005 WL 913503 (Colo.App.2005). The president of BHW sold warranties for newly constructed homes, which were backed by insurance obtained through two purported agents. BWH learned, however, that the policies were fraudulent. The attorneys advised that BWH either could (1) "warehouse" the money it received in escrow and use the funds to purchase replacement coverage; or (2) file for bankruptcy. The president chose the first approach, but a competitor sued in federal court for deceptive practices.

First Circuit Directs Entry of Judgment Against Estate's Lawyers for Pre-Filing Sheltering of Partners' Assets
In re R & R Associates of Hampton, 402 F.3d 257 (1st Cir.2005). The First Circuit reversed a judgment for New Hampshire lawyers and directed the bankruptcy court to enter judgment against them for $412,000, the amount of the deficit, for wrongs in representing the estate, arising from pre-petition representation of the debtors' two general partners. Earlier, the two partners hired the lawyers to transfer substantial personal assets into several family limited partnerships ("FLPs") to protect those assets from creditors. Some months later, the lawyers filed for bankruptcy protection for the partnership, whose major asset was one commercial property.

Damages

Cause of Action Allowed for Partial Loss of Child Custody
Collins v. Missouri Bar Plan, 157 S.W.3d 726 (Mo.App.2004). In anticipation of their son Joseph's birth, the plaintiffs asked attorney Krigel to handle his adoption to the Standens, a Pennsylvania couple. Krigel advised they could withdraw their consent to the adoption any time before it became final. They also retained attorney Anderson, who gave the same advice. Two days after Joseph was born, the plaintiffs, the Standens and Anderson appeared in a Missouri circuit court and executed consent to the adoption. A week later, the plaintiffs decided to withdraw their consent.

Evidence

Out-of-State Expert Witness Excluded as Duplicative and Not Qualified
Glaser v. Pullman and Comley, LLC., ____ Conn.App.____, A.2d ____, 2005 WL 911426 (2005). The purchaser of a commercial building sued its lawyer for failing to adequately investigate and disclose the existence of lead contamination problems. Consequently, the plaintiff contended that it lost its financing and the ability to purchase the property. The plaintiff disclosed two expert witnesses to testify on these issues. The trial court, however, excluded the second witness because (1) his testimony was duplicative; and (2) some issues involved aspects of Connecticut law on which he was not qualified.

Bankruptcy

Estate's Legal Malpractice Claim That Could Not Impliedly Be Abandoned to a Creditor
Industrial Clearinghouse, Inc. v. Jackson Walker, L.L.P., ____ S.W.3d ____, 2005 WL 880106 (Tex.App.2005). A creditor foreclosed on the debtor-in-possession, acquiring several of the debtor's assets including the "Browning" claim, a cause of action against a supplier. The creditor successfully prosecuted the claim to judgment, but the Fifth Circuit reversed, holding that the creditor did not have standing to pursue the claim, which the debtor did not disclose in its schedules or in the stipulation to foreclose. The creditor sued the debtor's lawyers.

Evidence

Office Sharing Arrangement Could Constitute a De Facto Partnership
Andrews v. Elwell, ____ F.Supp.2d ____, 2005 WL 775428 (D.Mass.2005). The plaintiff, an indigent mother, sued her court-appointed lawyer, Elwell, and his "law firm" for allowing her to waive her parental rights. Although the plaintiff only met with Elwell, she contended that he held himself out in various pleadings as being affiliated with "Pappas, Carlson & Elwell." The lawyers admitted that they shared office expenses, but that they did not share income or clients, and were sole proprietors. A liability policy, however, listed Pappas, Carlson, Elwell & Colicchio as the insured, with Pappas identified as the sole agent.

Statute of Limitations

Minnesota Statute of Limitations Runs From Damages Not Injury
Antone v. Mirviss, ____ N.W.2d ____, 2005 WL 832164 (Minn.App.2005). A recurring issue regarding the statute of limitations is whether a statute will run from the fact of "injury" or whether there must be liquidated monetary damages. That was the issue, which commenced in 1986, when Antone, the client, signed an antenuptial agreement, which provided for spousal maintenance in the event of marital dissolution. Twelve years later, in the dissolution proceeding, he alleged that he discovered that the agreement did not protect his assets from his spouse.

This newsletter has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.