916 N.W.2d 491
Minn.2018Background
- In 2009 Larkin drafted a will and a revocable trust for Gordon P. Savoie that directed a distribution to a beneficiary more than 37.5 years younger than Savoie, creating a generation-skipping transfer tax liability of about $1.654 million upon distribution.
- After Savoie died, Security Bank was appointed trustee and personal representative and sued Larkin for legal malpractice, alleging Larkin failed to advise Savoie about the generation-skipping transfer tax or tax-reduction options.
- Larkin moved for judgment on the pleadings arguing Security Bank lacked standing both as personal representative (because no cause of action accrued during Savoie’s life) and as trustee (no attorney-client relationship and no pleading that Security Bank was a direct and intended beneficiary).
- The district court granted judgment on the pleadings, applying Minnesota’s "damage rule" (a cause of action accrues only when "some damage" has occurred) and holding no malpractice claim accrued before Savoie’s death; it also held Security Bank failed to plead the third-party-beneficiary exception to privity for trustee standing.
- The court of appeals reversed, finding "some damage" occurred when Savoie executed the instruments because he relied on the allegedly negligent advice; the Minnesota Supreme Court granted review and reversed the court of appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a personal representative may pursue a malpractice claim that did not accrue before the client’s death | Security Bank: §524.3-703 gives personal representatives the same standing as decedent, so the representative may sue even if claim accrued only after death | Larkin: §524.3-703 means the personal representative has the same standing the decedent had immediately before death, so the claim must have accrued during decedent’s life | Held: Claim must have accrued during the decedent’s life; no accrual before Savoie’s death, so no survival to personal representative |
| When does a legal-malpractice cause of action accrue for estate-planning/transactional malpractice | Security Bank/court of appeals: "some damage" includes reliance at execution (so accrual when instruments executed) | Larkin/district court: "some damage" requires concrete harm during life; here harm (tax liability) occurred only after death | Held: Under Minnesota "damage rule," "some damage" requires concrete injury during life; mere continued reliance is insufficient; accrual occurred post-death, so no surviving claim |
| Whether Security Bank, as trustee, had privity or qualifies as a direct and intended third-party beneficiary of the attorney’s services | Security Bank: trustee acts as grantor after death and thus is a direct client/beneficiary and can sue | Larkin: No attorney-client relationship with trustee and complaint fails to plead intent to benefit trustee; trustee not a direct intended beneficiary | Held: Trust is not itself a direct intended beneficiary and Security Bank failed to plead that Larkin was aware Savoie intended to benefit the trustee; trustee standing fails |
| Whether the third-party-beneficiary exception to privity applies for a trustee to sue for drafting errors | Security Bank: trustee paid taxes and thus was directly affected; trustee is entitled to sue to protect trust property | Larkin: Plaintiff failed threshold pleading that trustee was a direct and intended beneficiary; therefore Lucas factors need not be reached | Held: Threshold not met; court did not apply Lucas factors and dismissed trustee-based malpractice claim |
Key Cases Cited
- Herrmann v. McMenomy & Severson, 590 N.W.2d 641 (Minn. 1999) (adopted "some damage" accrual rule; accrual when compensable damage first occurs)
- Antone v. Mirviss, 720 N.W.2d 331 (Minn. 2006) (interprets "some damage" for accrual in legal malpractice; damage can occur when consequences become immediate and irremediable)
- Frederick v. Wallerich, 907 N.W.2d 167 (Minn. 2018) (applied damage rule to successive negligent acts and clarified accrual where later act causes loss of mitigation opportunity)
- McIntosh County Bank v. Dorsey & Whitney, LLP, 745 N.W.2d 538 (Minn. 2008) (sets out third-party "direct and intended beneficiary" threshold and Lucas-factor analysis for malpractice by non-clients)
- Marker v. Greenberg, 313 N.W.2d 4 (Minn. 1981) (recognizes narrow third-party beneficiary exception in estate-planning malpractice)
- Lucas v. Hamm, 56 Cal.2d 583 (Cal. 1961) (origin of factors used to balance liability to third-party beneficiaries in drafting contexts)