798 N.W.2d 557
Minn. Ct. App.2011Background
- Ames & Fischer sued Larsen (accounting) and McDonald (legal counsel) for malpractice over failing to make Section 754 elections for 2000 and 2001.
- Six-year Minnesota statute of limitations for legal/accounting malpractice at Minn. Stat. § 541.05, subd. 1(5).
- Damages claimed: overpayment of taxes, increased future taxes, and costs to correct filings after the alleged failures.
- District court certified a question on accrual: whether accrual begins at tax return filing without the election or at the end of the automatic extension period.
- Court held accrual begins when the tax returns are filed without the §754 elections; damages are cognizable at that time.
- Decision affirms the certified question result and discusses related issues about continuous representation and accrual timing
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When does the malpractice accrual start for §754 failure? | Ames & Fischer | McDonald/Larsen | accrual at filing without election |
| Is the certified question properly before the court? | Ames & Fischer | — | yes, question properly before court |
| Should continuous-representation tolling apply to accrual? | Ames & Fischer | — | not necessary to decide; not before court |
| Is Larsen's accrual theory (at 2000/2001 return preparation) viable? | Ames & Fischer | Larsen | no; accrual at 2000/2001 returns due to immediate damage |
| Do damages prevent tolling after discovery or later extensions? | Ames & Fischer | — | damages accrue at filing; extension period does not toll |
Key Cases Cited
- Antone v. Mirviss, 720 N.W.2d 331 (Minn. 2006) (damages accrual rule; accrual when damages occur; discovery not required)
- Herrmann v. McMenomy & Severson, 590 N.W.2d 641 (Minn. 1999) (accrual tied to immediate tax-liability event)
- Noske v. Friedberg, 670 N.W.2d 740 (Minn. 2003) (damage accrual; minimal showing to survive dismissal)
- Goulding v. Solomon, 123 Misc.2d 954, 475 N.Y.S.2d 723 (N.Y. Civ. Ct. 1984) (criticizes end-of-extension accrual theory for malpractice)
- Leon Jones Feed & Grain, Inc. v. Gen. Bus. Servs., Inc., 333 S.E.2d 861 (Ga. Ct. App. 1985) (accrual when tax is overpaid; damages from immediate loss of funds)