Friday, January 07, 2011
Woman may sue ex-husband's lawyer separately
Woman may sue ex-husband's lawyer separately
By Leigh Jones, National Law Journal
The Minnesota Supreme Court has allowed a woman who sued her ex-husband for fraud in their divorce action to move forward in a separate fraud case with virtually identical claims against his attorney.
The state's high court found on Jan. 5 that even though K atherine Rucker had won a $4.2 million judgment against her ex-husband for fraud in 2006, she was not barred from asserting fraud claims against his counsel in a separate action. The court found that the issues against the attorney, although essentially the same, were not resolved in the case against the husband. The court determined that the case could proceed because privity did not exist between the client and his counsel.
"We recognize that a number of courts from other jurisdictions have concluded that when an attorney is sued based upon his or her actions in representing a client, the attorney and client are in privity," the court wrote. The court declined to adopt a generalized rule to apply in other cases, but held that in this case Rucker was not barred from suing the attorney.
After winning the judgment against her ex-husband, Rucker agreed to a $2.6 million settlement and retained a right to sue attorney Stephen Schmidt and his former firm, Rider Bennett in a separate action. Rider Bennett, a 90-attorney Minneapolis law firm, dissolved in 2007.
Rucker's lawsuit against Schmidt and the firm alleged that Schmidt helped her ex-husband Robert Rucker create two sets of books pertaining to business projections for his tile shop, and that the books with the smaller projections led to an undervaluing of the shop in the divorce action. Schmidt and Robert Rucker denied the allegations.
The decision, which upheld a court of appeals ruling that reversed the trial court, called on the trial court to analyze whether barring Rucker's claim would "work an injustice" against her.
The central question in determining if the case could go ahead was whether the attorney and the firm were "so identified with Robert Rucker that they represent[ed] the same legal right," the decision said. The court reasoned that something more than the "common objective" of obtaining a favorable outcome to the fraud allegations was required to establish privity. Although Robert Rucker and the law firm have such an objective in the ex-wife's fraud suit against him, it was not a mutuality of interests, "the kind of estate, blood, or legal interest that would give rise to privity for purposes of the fraud action," the court concluded.
The court also determined that privity was not present under agency theory. Under that theory, a judgment in favor of either the agent or the principal is considered effective to both. The agency-principal relationship in this case also demonstrated a lack of a mutuality of interests, the court found Schmidt's attorney, Joseph Anthony, said that the Minnesota Supreme Court "set itself apart from every other jurisdiction" that has ruled in similar cases.
" We are not saying lawyers can't be sued," Anthony said. "The question is, 'When must you sue them?' " He added that requiring an attorney to defend a separate case could compromise the attorney's ethical obligations to the client. Anthony plans to file a petition for a rehearing. Representing Katherine Rucker was Skolnick & Shiff in Minneapolis. Representing Rider Bennett was Bassford Remele, also in Minneapolis.
Reprinted with permission from the January 2011 edition of the Fulton County Daily Report© 2011 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.
The state's high court found on Jan. 5 that even though K atherine Rucker had won a $4.2 million judgment against her ex-husband for fraud in 2006, she was not barred from asserting fraud claims against his counsel in a separate action. The court found that the issues against the attorney, although essentially the same, were not resolved in the case against the husband. The court determined that the case could proceed because privity did not exist between the client and his counsel.
"We recognize that a number of courts from other jurisdictions have concluded that when an attorney is sued based upon his or her actions in representing a client, the attorney and client are in privity," the court wrote. The court declined to adopt a generalized rule to apply in other cases, but held that in this case Rucker was not barred from suing the attorney.
After winning the judgment against her ex-husband, Rucker agreed to a $2.6 million settlement and retained a right to sue attorney Stephen Schmidt and his former firm, Rider Bennett in a separate action. Rider Bennett, a 90-attorney Minneapolis law firm, dissolved in 2007.
Rucker's lawsuit against Schmidt and the firm alleged that Schmidt helped her ex-husband Robert Rucker create two sets of books pertaining to business projections for his tile shop, and that the books with the smaller projections led to an undervaluing of the shop in the divorce action. Schmidt and Robert Rucker denied the allegations.
The decision, which upheld a court of appeals ruling that reversed the trial court, called on the trial court to analyze whether barring Rucker's claim would "work an injustice" against her.
The central question in determining if the case could go ahead was whether the attorney and the firm were "so identified with Robert Rucker that they represent[ed] the same legal right," the decision said. The court reasoned that something more than the "common objective" of obtaining a favorable outcome to the fraud allegations was required to establish privity. Although Robert Rucker and the law firm have such an objective in the ex-wife's fraud suit against him, it was not a mutuality of interests, "the kind of estate, blood, or legal interest that would give rise to privity for purposes of the fraud action," the court concluded.
The court also determined that privity was not present under agency theory. Under that theory, a judgment in favor of either the agent or the principal is considered effective to both. The agency-principal relationship in this case also demonstrated a lack of a mutuality of interests, the court found Schmidt's attorney, Joseph Anthony, said that the Minnesota Supreme Court "set itself apart from every other jurisdiction" that has ruled in similar cases.
" We are not saying lawyers can't be sued," Anthony said. "The question is, 'When must you sue them?' " He added that requiring an attorney to defend a separate case could compromise the attorney's ethical obligations to the client. Anthony plans to file a petition for a rehearing. Representing Katherine Rucker was Skolnick & Shiff in Minneapolis. Representing Rider Bennett was Bassford Remele, also in Minneapolis.
Reprinted with permission from the January 2011 edition of the Fulton County Daily Report© 2011 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.
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