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					capitol transactions

A (very) close call for Minnesota’s statute of limitations
by Thomas J. Shroyer


                                         Even though Minnesota has one             favor Mrs. Antone.) In September
                                         of the most generous statute of           of 2003, Mr. Antone brought his
                                         limitations in the United States,         action against Mr. Mirviss for
                                         the trial lawyers want to make it         alleged malpractice in drafting the
                                         virtually limitless. Our state’s six-     antenuptial agreement.
                                         year tort statute of limitations in
                                                                                   Thus, the defendant lawyer was faced
                                         (Minn. Stat. § 541.05, subd. 1(5)) does
                                                                                   with a malpractice claim 13 years
                                         not specify when it begins to run.
                                                                                   after he had allegedly committed the
                                         Minnesota courts have always held
                                                                                   malpractice. The lawyer had been
                                         that the period of limitations begins
                                                                                   retired for several years and was
                                         to run when some act of negligence
                                                                                   completely uninsured when the suit
                                           produces at least some measurable
                                                                                   was brought against him.
                                             harm, even if all of the harm has
                                                not occurred, and even if it       In the malpractice lawsuit, Mr.
                                                cannot be determined. They         Antone argued that he could
                                                    have reasoned that six         not have known of or brought a
                                                      years is sufficient time      malpractice claim against his former
                                                       to allow discovery and      lawyer any earlier because (a) he
                                                        that longer delays         did not know if his marriage would
                                                          will make it too         be dissolved, (b) he did not know
                                                          difficult to gather       how the courts would interpret
                                                          accurate evidence        the allegedly deficient antenuptial
                                                          – as memories fade,      agreement and (c) he did not know
                                                          witnesses move or        the amount he would end up losing
                                                          die, and documents       until after the final court decision.
                                                         are lost over time.       The Minnesota Court of Appeals
                                                                                   agreed and held that the malpractice
                                                       The Minnesota Supreme
                                                                                   lawsuit could proceed against the
                                                     Court handed down its
                                                                                   lawyer – and he appealed to the
                                                  decision on August 17, 2006,
                                                                                   Supreme Court.
                                               in Antone v. Mirviss, 2006 WL
In a recent decision, the                2372161 (Minn.). In a razor-thin,         The announcement of that decision
                                         five–three decision, the court rejected    caused a tremendous outcry by
Minnesota Supreme Court                  the Minnesota Court of Appeals’           malpractice defense lawyers,
upheld the long-standing rule            earlier adoption of the “discovery        professional organizations and
                                         rule” when it considered the case.        professional liability insurance
that the clock for Minnesota’s           In December 1986, Richard Antone          companies. My law firm, Moss &
statute of limitations on tort           asked his attorney, Israel Mirviss,       Barnett, volunteered to prepare
                                         to draft an antenuptial agreement         a “friend of the court” brief for
claims starts ticking when a             in anticipation of his marriage.          the Minnesota Society of CPAs
mistake is made and produces             Mr. Antone would ultimately               (MNCPA) – at no cost – to urge
                                         claim that his lawyer tricked him         the Minnesota Supreme Court to
some (though not necessarily             into signing the agreement after it       reject the use of the “discovery
all possible) damage.                    was secretly changed to favor his         rule.” Similar briefs were also filed
                                         prospective spouse. In the meantime,      on behalf of a legal malpractice
In doing so, it rejected the adoption
                                         and following their 1986 marriage,        insurance company and the
of the “discovery rule” by the                                                     Minnesota State Bar Association, all
                                         Mr. Antone petitioned for divorce
Minnesota Court of Appeals, which                                                  urging reversal.
                                         in 1998. The interpretation of the
postpones the running of the statute
                                         antenuptial agreement was pivotal         In rejecting the “discovery rule,” the
until professional malpractice is – or
                                         for the divorce litigation, which         Antone court noted that such a rule
should be – discovered by the client.
                                         ensued until 2003, after appeals          provides “open-ended liability.” It
Although gratifying, the margin of
                                         all the way through the Minnesota         further reasoned that Minnesota’s
victory in the case was narrow, and
                                         Supreme Court (which construed            rule is a “middle ground” between
the trial lawyers will relentlessly
                                         the antenuptial agreement to
continue to press this legal battle.


20 MNCPA Footnote October 2006
                                                                                              capitol transactions
the extremes of not requiring any             complex and entail the unraveling of       specifically know that the accountant
damage and the “discovery rule”               audit trails and the translation of work   had breached his professional
and that it avoids “illogical results.”       papers, including myriad spreadsheets      duties. In other words, there is often
                                              containing a blizzard of financial data,    virtually no statute of limitations
The court then went on to hold that           difficult tasks at best that are rendered   under the “discovery rule.”
the allegedly defective antenuptial           virtually impossible after the passage
                                                                                         Although the Minnesota Supreme
agreement caused some harm when               of extended intervals.
                                                                                         Court was in the end steadfast
the parties were married because at          It is truly fortunate that a majority       in rejecting the “discovery rule,”
that precise moment Mr. Antone:              of the Minnesota Supreme Court              the outcome was far too close
                                             held the line against the continuing        for comfort. Of the six appellate
 [P]assed a point of no return with          efforts of the trial bar to adopt the       judges who ruled in the case, six
 respect to the laws of marital and          “discovery rule” in Minnesota. A            voted to reject the “discovery rule”
 nonmarital property and he did so           case in point is provided by the            (five on the Minnesota Supreme
 without the legal shield he retained        decision under the “discovery rule”         Court and one Minnesota Court
 [the lawyer] to provide . . . Each          against a CPA in McCormick v.               of Appeals judge), while five
 property-related step [he] took after the   Brevig, 980 P.2d 603 (Mont. 1999). In       voted (three Minnesota Supreme
 date of his marriage was, unbeknownst       that case, an accountant prepared tax       Court justices and two Minnesota
 to him, unprotected. While this reality     returns and rendered rudimentary            Court of Appeals judges) in favor
 needs no additional amplification, it        accounting services to a seemingly          of adoption. The continuing
 is supported by Mr. Antone’s own            close-knit family (father, daughter         rejection of the “discovery rule”
 testimony that he would not have            and son) that jointly worked a              in Minnesota is of paramount
 entered into the marriage if he had         cattle ranch. In 1982, the ranch was        importance to all professionals, but
 known the antenuptial agreement did         entirely owned by the father, but the       especially accountants. It is critically
 not adequately protect his property         accountant was told by the daughter         important for the profession to
 interest.                                   that he was going to place the ranch        remain actively engaged in the tort
                                             into a living trust for the sole benefit     reform movement, electoral politics,
The MNCPA amicus brief urged the             of his son. After the accountant            the legislative process and in the
Minnesota Supreme Court to reach this        questioned the tax impact of the            selection of a fair and balanced
result on these public policy grounds:       transaction, the father and daughter        judiciary.
                                             decided against the trust. The CPA
 Accountants (like lawyers and many                                                                       Tom Shroyer is the
                                             did nothing further with regard to
 other professionals) provide services                                                                    managing partner
                                             the matter, but continued to perform
 that are                                                                                                 of Moss & Barnett,
                                             services for the family.
 a) inherently complex,                                                                                   a 70-lawyer firm in
 b) subject to the exercise of much          By the time of his death, the father                         Minneapolis. Certified as
     discretion and professional             had prepared a will that passed                              a Civil Trial Specialist by
     judgment and                            equal ownership of the ranch to                              the Minnesota State Bar,
 c) frequently adversely affected            his son and daughter. In 1995, after        he has represented CPAs throughout
     by unforeseeable subsequent             operating the ranch as partners for         the United States on claims defense, loss
     events.                                 more than a decade, the daughter            prevention and professional regulatory
                                             sued the brother to dissolve                matters since 1980. He is also the author
 It is manifestly unfair to subject          their partnership. The brother              of the treatise “Accountants Liability”
 accountants to liability exposure for       subpoenaed the accountant’s records         (Wiley & Sons, 1992).
 claims commenced more than six years        and discovered notes concerning the
 after their alleged negligence combines     discussion of the trust for his benefit
 to produce some legally cognizable          in 1982. He sued the CPA for not
 damage. For example, a tax return           telling him (recall that the son was a
 preparer who negligently advises a          tax return client) in time to talk his
 client to pay an incorrect amount of        father back into using the trust, prior
 tax faces virtually unending exposure       to the father’s death. Even though
 to being sued on a stale claim . . .        more than 13 years had passed
 [because] the plaintiff would contend       since that discussion, the Montana            Visit the MNCPA Government
 that no damage was suffered until
 the client was actually forced to pay
                                             Supreme Court allowed the claim               Relations section of the
                                             to proceed in the face of Montana’s
 interest imposed by the IRS . . . Claims    two-year statute of limitations, citing       Web site for legislative news,
 arising out of allegedly “failed audits”
 are even more difficult to litigate with
                                             the “discovery rule” and interpreting         events and session updates.
                                             that rule to mean that the statute
 the passage of time. Audits of financial     of limitations did not begin to run           www.mncpa.org/gr
 statements are often stunningly             until the son actually had a reason to


                                                                                                  MNCPA Footnote October 2006 21