Court Opinion

ID: 3021180
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:24:16.867011+00
Date Added: 2024-06-11T11:47:26.664027
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 97-3057
                                   ___________

Joyce Witzman,                         *
                                       *
             Appellant,                *
                                       *     Appeal from the United States
      v.                               *     District Court for the
                                       *     District of Minnesota.
Bert M. Gross; Phillips & Gross, P.A., *
formerly known as Phillips, Gross &    *
Aaron, P.A.,                           *
                                       *
             Appellees.                *
                                  ___________

                              Submitted: March 13, 1998

                                   Filed: July 7, 1998
                                   ___________

Before WOLLMAN and HANSEN, Circuit Judges, and GOLDBERG,1 Judge.
                         ___________

WOLLMAN, Circuit Judge.

      Joyce Witzman appeals from the district court’s2 grant of summary judgment in
favor of Bert Gross, and Phillips & Gross, P.A. (appellees) and the dismissal of her

      1
        The HONORABLE RICHARD W. GOLDBERG, Judge, United States Court
of International Trade, sitting by designation.
      2
      The Honorable David S. Doty, United States District Judge for the District of
Minnesota.
claims with prejudice. Witzman also appeals from the district court’s denial of her
motion to voluntarily dismiss without prejudice. We affirm.

                                           I.

       Witzman and Blair Wolfson, her brother, are beneficiaries of several trusts
established by their parents. Wolfson also served as trustee of the various trusts and
has administered them throughout their existence. During most of that time period, the
appellees served as Wolfson’s counsel in his capacity as trustee.

        In 1993, Witzman filed three separate petitions in Minnesota state court, which
alleged that Wolfson had breached his fiduciary duty as trustee. She specifically
alleged that Wolfson had failed to prepare and file annual accounts of the trusts as
required by Minnesota law, took excessive fees, engaged in self-dealing, and made
imprudent investments with trust assets. In late 1994, Witzman and Wolfson reached
a settlement. The agreement provided, among other things, that: (1) Witzman would
receive a substantial amount of property; (2) Witzman’s claims against the appellees
were expressly preserved; and (3) Wolfson was obligated to cooperate with Witzman
in any action against the appellees. As part of the settlement agreement, Witzman
provided Wolfson with a comprehensive release from any claims arising out of the trust
litigation.

        Witzman and Wolfson’s cooperative relationship eventually deteriorated. After
Witzman unsuccessfully challenged portions of the settlement agreement and
Wolfson’s performance under those provisions, she commenced this action against the
appellees in Minnesota state court. Her complaint included allegations of breach of
trust, aiding and abetting a breach of trust, negligent misrepresentation, and violations
of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§
1961-1968.

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       In January of 1997, after removing the action, the appellees filed a motion for
summary judgment. Witzman then filed a motion to amend her complaint, which the
magistrate judge denied after finding that the complaint failed to comply with the
brevity and specificity requirements of Rules 8 and 9(b) of the Federal Rules of Civil
Procedure. A second attempt by Witzman to amend her complaint was denied, her
counsel was sanctioned, and she was granted leave to submit a new motion to amend,
subject to the court’s consideration of the pending motion for summary judgment.3
Witzman subsequently moved the court to dismiss her case without prejudice pursuant
to Fed. R. Civ. P. 41(a)(2). After a hearing, the district court issued an order granting
the appellees’s motion for summary judgment, dismissed the action with prejudice and,
in effect, denied Witzman’s motion to dismiss without prejudice.

                                            II.

       We first consider Witzman’s argument that the district court erroneously applied
Minnesota law when it granted the appellees summary judgment and dismissed her
claim with prejudice. The thrust of her argument is that the district court improperly
concluded that she was unable to state a cause of action for either breach of trust or
aiding and abetting a breach of trust against Wolfson’s attorneys. When considering
Witzman’s supplemental state-law claims, we are bound by Minnesota law. See
United Mine Workers of America v. Gibbs, 383 U.S. 715, 726 (1966); Mangold v.
California Public Util. Comm’n, 67 F.3d 1470, 1478 (9th Cir. 1995) (“The Erie
principles apply equally in the context of pendent jurisdiction.”). “Where state law
supplies the rule of decision, it is the duty of federal courts to ascertain and apply that
law.” Kizzier Chevrolet, Co. v. General Motors Corp., 705 F.2d 322, 329 (8th Cir.
1983) (citing Stoner v. New York Life Ins. Co., 311 U.S. 464 (1940)). We review de

      3
        In view of our disposition of the appeal, we need not rule on the appellees’
motion to dismiss that portion of the appeal that challenges the magistrate judge’s
rulings on the motion to amend the complaint.

                                           -3-
novo the district court’s interpretation of Minnesota law. See Salve Regina College v.
Russell, 499 U.S. 225, 231 (1991).

        It is a well established rule in Minnesota that an attorney is liable for professional
malpractice “only to a person with whom the attorney has an attorney-client
relationship.” Goldberger v. Kaplan, Strangis & Kaplan, P.A., 534 N.W.2d 734, 738
(Minn. Ct. App. 1995) (review denied) (citing Marker v. Greenberg, 313 N.W.2d 4,
5 (Minn. 1981) (en banc)). Like many jurisdictions, Minnesota recognizes exceptions
to this strict privity requirement. See Marker, 313 N.W.2d at 5. A non-client may sue
an attorney for professional malpractice when the non-client is a direct, intended
beneficiary of the attorney’s services. See Goldberger, 534 N.W.2d at 738. Witzman,
however, can establish neither that she had an attorney-client relationship with the
appellees, nor that she is a direct, intended beneficiary of their services. The appellees
were hired by Wolfson to counsel him in his capacity as trustee for the Wolfson family
trusts. The appellees’ duty and loyalty lie with serving the best interests of the trusts
and do not run to Witzman. See id. at 739 (citing Spinner v. Nutt, 631 N.E.2d 542, 546
(Mass. 1994)).

      Moreover, as a general rule of trust law, a beneficiary cannot bring an action at
law in a trust’s stead against a third party for torts or other wrongs. See Uselman v.
Uselman, 464 N.W.2d 130, 137 (Minn. 1990) (en banc); Ricke v. Armco, Inc., 92 F.3d
720, 724 (8th Cir. 1996). In Minnesota, this principle extends to beneficiaries who
attempt to sue a trustee’s attorneys for legal malpractice. See Goldberger, 534 N.W.2d
at 739; Anoka Orthopaedic Assocs., P.A. v. Mutschler, 773 F. Supp. 158, 168 (D.
Minn. 1991). The rationale for this restriction is three-fold. First, as related above,
beneficiaries are not direct recipients of the attorney’s services. Second, such a
restriction does not completely preclude all malpractice actions against the trustee’s
attorney. “If a third person commits a tort against trust property, the trustee has a duty
to take reasonable steps to compel the tortfeasor to redress the injury.” Uselman, 464
N.W.2d at 137. This contingency provides an incentive for the trustee to bring an

                                             -4-
action against a wrongdoing attorney. See Goldberger, 534 N.W.2d at 739. Finally,
permitting a beneficiary to sue a trustee’s attorney could create an impermissible
conflict of interest. See id.; Spinner, 631 N.E.2d at 553-54. Under Minnesota law, the
mere potential for a conflict makes a direct action by the beneficiary inappropriate. See
Goldberger, 534 N.W.2d at 739. Absent an applicable exception to this principle,
Witzman cannot sustain a professional malpractice action against the attorneys.

         Witzman contends that Uselman, 464 N.W.2d at 137-38, provides her with an
exception to the general rule that beneficiaries cannot sue trustee’s attorneys on behalf
of a trust. The court in that case recognized that “[w]hen the trustee fails to bring suit
against a third party tortfeasor, the beneficiaries may properly bring an action against
the trustees and third parties as co-defendants.” Uselman, 464 N.W.2d at 137-38; see
also Anoka Orthopaedics, 773 F. Supp. at 168. Witzman, who originally named the
appellees as defendants, sought to join Wolfson as a defendant in her motions for leave
to amend her complaint. She now asserts that by joining Wolfson as a defendant, she
can continue with her claims against the attorneys. We do not agree, for to accept
Witzman’s argument would extend Uselman beyond its facts. The Uselman court, in
the process of determining a purely procedural issue regarding a party’s right to a jury
trial, recognized that a beneficiary may join the trustee and tortfeasor as co-defendants
if the trustee’s protection of the trust is not forthcoming. Thus, the court described, at
most, a mechanism for holding both trustees and third parties responsible when trustees
fail to carry out their fiduciary duties. The court neither described nor attempted to
create any third party duties to a trust beneficiary.

       Goldberger, on the other hand, unequivocally states that a beneficiary cannot
proceed directly against a trustee’s attorney for professional malpractice. See 534
N.W.2d at 739. Witzman is not a direct recipient of the appellees’ services.
Moreover, she is not without alternative methods of pursuing her claims. As the
Goldberger court suggested, a trustee who fails to bring an action against a wrongdoing
attorney may be liable for a fiduciary breach. See 534 N.W.2d at 739. Enabling

                                           -5-
Witzman to sue Wolfson’s attorneys would create the possibility of an impermissible
conflict of interest. We cannot assume that the Minnesota courts would be willing to
impose third party duties on a trustee’s attorney. A federal court “should proceed with
great caution when the effect of its ruling would be to broaden the law beyond the point
where any other court has yet ventured.” W.A. Wright v. KDI Sylvan Pools, Inc., 746
F.2d 215, 218 (3rd Cir. 1984); see also Afram Export Corp. v. Metallurgiki Halyps,
S.A., 772 F.2d 1358, 1370 (7th Cir. 1985) (“Federal judges are disinclined to make
bold departures in areas of law that we have no responsibility for developing.”).

       Witzman contends that the district court erred in holding that a cause of action
for aiding and abetting a breach of trust does not exist in Minnesota. Citing D.W. v.
Radisson Plaza Hotel Rochester, 958 F. Supp. 1368, 1380 (D. Minn. 1997), the court
concluded that Minnesota did not recognize such an action. Witzman cites two
Minnesota Supreme Court cases for the proposition that aiding and abetting a breach
of trust is actionable. See Greenwood v. Evergreen Mines Co, 19 N.W.2d 726, 733
(Minn. 1945); D.E. Virtue v. Creamery Package Mfg. Co., 142 N.W. 930, 939 (Minn.
1919). Because we conclude that her allegations that the appellees aided and abetted
a breach of trust are precluded by Goldberger, we need not consider this argument.
Her aiding and abetting claim against the attorneys creates the same concerns raised by
her breach of trust allegations, and she cannot circumvent the holding in Goldberger by
restating her claim as an action for aiding and abetting tortious conduct. Once again,
we believe that the prudent course is to hold that Witzman must proceed against
Wolfson in order to seek redress for any alleged misconduct by his attorneys.

                                          III.

      Witzman contends that the district court abused its discretion when it denied her
motion for voluntary dismissal without prejudice. “[A]n action shall not be dismissed
at the plaintiff’s instance save upon order of the court and upon such terms and
conditions as the court deems proper. . . . Unless otherwise specified in the order, a

                                          -6-
dismissal under this paragraph is without prejudice.” Fed.R.Civ.P. 41(a)(2). “Motions
to dismiss without prejudice are addressed to the sound discretion of the district
courts.” Kern v. TXO Prod. Corp., 738 F.2d 968, 970 (8th Cir. 1984). We consider
the following factors when determining whether a district court abused its discretion
in denying a Rule 41(a)(2) motion:

      (1) the defendant’s effort and the expense involved in preparing for trial,
      (2) excessive delay and lack of diligence on the part of the plaintiff in
      prosecuting the action, (3) insufficient explanation of the need to take a
      dismissal, and (4) the fact that a motion for summary judgment has been
      filed by the defendant.

See Paulucci v. City of Duluth, 826 F.2d 780, 783 (8th Cir. 1987).

       The appellees have expended considerable effort and money defending against
Witzman’s action. Witzman has been lacking in diligence in prosecuting this action.
Rather than submitting a rebuttal to the appellees’ motion for summary judgment, she
responded by offering amended complaints that were inconsistent with the Federal
Rules and by then seeking voluntary dismissal. “Reasons of judicial economy alone
would appear to dictate that one full and fair attempt to prove this claim is enough.”
Wakefield v. Northern Telecom, Inc., 769 F.2d 109, 114 (2d Cir. 1985). Moreover,
we are not persuaded that Witzman has stated a sufficient explanation for her proposed
dismissal. As we held in Part II of this decision, Witzman’s claims are precluded by
Minnesota law. Although she argues that Wolfson’s failure to assist her in an action
against his attorneys was a violation of their settlement agreement and, as a result,
constituted a changed circumstance requiring dismissal without prejudice, she
nevertheless cannot proceed against his attorneys on her own. Accordingly, the district
court acted within its sound discretion in denying Witzman’s motion to voluntarily
dismiss without prejudice.

      The judgment is affirmed.

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A true copy.

      Attest:

               CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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