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Minnesota Attorney Malpractice; Summary Judgment Reversed

Schmidt v. Harlan, A13-0654, January 21, 2014, concerned a claim for legal malpractice asserted against the attorney Harlan due to his defense of Schmidt in a suit brought by Jorgenson alleging fraud, negligent misrepresentation and unjust enrichment. Harlan obtained a partial summary judgment, winning dismissal of the Jorgenson fraud claim.

When Schmidt filed for personal bankruptcy before dismissal of Jorgenson’s fraud claim had become final, Jorgenson reasserted his fraud claim in the Schmidt bankruptcy matter as an adversary proceeding. Jorgenson’s fraud claim was ultimately exempted from Schmidt’s bankruptcy discharge, resulting in Schmidt’s personal liability to Jorgenson for $168,000.

Schmidt then sued Harlan for malpractice, claiming that he had filed bankruptcy based on Harlan’s advice that he could discharge Jorgenson’s remaining claim for unjust enrichment in bankruptcy.  In Schmidt’s malpractice suit against Harlan, his expert opined that Schmidt sustained damages due to Harlan’s failure to determine that the partial summary judgment order would not be binding, and Harlan’s failure to recommend delay of any bankruptcy pending finality of the fraud claim’s dismissal.  The trial court granted summary judgment to Harlan, dismissing Schmidt’s legal malpractice action.

The trial court found that Schmidt’s claim to have relied on Harlan’s advice to file bankruptcy was not credible.  In Schmidt’s deposition he testified that Harlan had advised bankruptcy in October of 2007, although the partial summary judgment order was not issued until November of 2007. The trial court  found Schmidt’s supplemental affidavit stating that he had been in error on the date to be a self-serving attempt to contradict his earlier damaging testimony.

The Minnesota Court of Appeals reversed the trial court, holding that Schmidt’s claim to have received the negligent advice from Harlan was consistent with other evidence that Harlan had been in contact with Schmidt’s bankruptcy attorney. The appellate court held that while Schmidt had been mistaken in his deposition about the date of Harlan’s advice, such mistake did not negate Schmidt’s claim that he had obtained the negligent legal advice from Harlan.  The appellate court found the affidavit to be explanatory as opposed to contradictory of the deposition testimony.

On appeal Harlan also claimed that even assuming he had given the alleged bankruptcy advice, Schmidt could not show that the bankruptcy filing had caused him any damages. The Court of Appeals disagreed.  It noted that had Jorgenson continued to trial on his unjust enrichment claim, it was likely that the Jorgenson fraud dismissal would have become final due to the improbability of obtaining any reconsideration of the fraud dismissal ruling and the difficulty of overturning any jury verdict that would have resulted from the trial on the unjust enrichment claim.