Tag Archives: attorney

Matt Drewes Quoted in Three New Articles at National Community Association Forum

5 Sep

Matt Drewes recently contributed quotes for the following articles published at www.hoaleader.com, a national web-based publication focused on homeowners association and condominium board members and association management professionals:

  • 7 Tips to Keep HOA Legal Fees in Check; published August, 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.
  • HOA Owners and Security Cameras: OK or No Way?; published August, 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.
  • Smart Rules for your HOA Meetings Open Forum; published August, 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.

Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance. He has been included in the annual list of Minnesota’s Rising Stars for several years, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, HOALeader.com, and elsewhere on issues involving construction litigation, community associations and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Minnesota Federal District Court clears up confusion regarding accountant malpractice claims in North American Specialty Insurance Company v. WIPfli, LLC, et al.

5 Aug

On July 26, 2013, the Federal District Court for the District of Minnesota issued an order reconciling almost 40 years of ambiguous rulings concerning the claims available to a third party non-client seeking to sue an accountant. The case is North American Specialty Insurance Company v. WIPfli, LLC, et al. A copy of the Order, which denied WIPfli, LLC’s (“WIPfli”) motion to dismiss the complaint for failure to state claims against it, can be read here.

The case involved North American Specialty Insurance Company (“NAS”), which provided statutory performance and payment bonds on projects performed by general contractor Crowley Company, Inc. (“Crowley”). The purpose of these bonds is to guaranty for the project owner or developer that, in the event Crowley were to fail to perform its obligations under its contract, which might involve failure to complete the work (performance bonds) or failure to make full payment to all of its subcontractors and suppliers (payment bonds), NAS would act as “surety”, and would pay to ensure those obligations were met.

According to the Court’s Order, NAS alleged that WIPfli performed accounting and auditing services for Crowley. Thus, NAS was not WIPfli’s client. However, WIPfli prepared two “Independent Auditor’s Reports” regarding Crowley’s financial statements and condition, on which NAS claims it relied in providing $8 million in bonds on Crowley’s projects. Ultimately, according to NAS, Crowley began defaulting on its obligations to several parties because it was in poorer financial condition than Crowley’s financial statements suggested, and NAS alleges it ultimately was obligated to pay on approximately $2 million in claims.

NAS apparently alleged several items contained in WIPfli’s reports were inaccurate and were not based on generally accepted accounting standards despite a statement within the reports that WIPfli had done so. Importantly, NAS also alleged that WIPfli was aware that NAS would rely on the WIPfli reports. Therefore, in addition to suing Crowley to recover the amounts it claims it had to pay because it relied on the contractor’s misleading financial statements, NAS sued WIPfli alleging it failed to catch certain manipulated and inaccurate figures in those financial statements when preparing its “Independent Auditor’s Reports.”

WIPfli argued that NAS’s complaint should be dismissed because: 1) Minnesota does not recognize a claim for negligence against accountants by parties who were not clients of that accountant; and 2) failed to state with the required specificity a claim for negligent misrepresentation. The Court analyzed whether Minnesota law recognizes a claim for negligence (otherwise known as malpractice when referring to a professional such as a doctor or accountant) by a party in NAS’s position against an accountant providing services for another party (in this case, Crowley). Although noting that several cases issued by Minnesota’s appellate courts have allowed claims to proceed against accountants on claims that were referred to as based on “negligence”, this Court observed that a close reading of those cases demonstrates that Minnesota Courts had never held “negligence” was the appropriate cause of action. Rather, the claims at issue were permitted to proceed because they satisfied the standard for negligent misrepresentation.

The Court suspected the apparently confusing holdings in prior cases was due to the similarity between claims for negligence and claims for negligent misrepresentation. Ordinary negligence requires, among other things, that a defendant, who owes a duty to the plaintiff, breaches that duty (generally by failing to exercise the appropriate degree of care or competence). Negligent misrepresentation contains several additional elements, including the nature of the defendant’s role in the applicable transaction, but also includes a failure “to exercise reasonable care or competence in obtaining the information or communicating . . . information” to the plaintiff. A failure to exercise reasonable care is required under both claims, but the Court determined that a party in NAS’s position has been recognized as having a cause of action against another party’s accountant for negligent misrepresentation; not for negligence/malpractice.

The Court went on to determine that NAS had sufficiently pled facts necessary to continue with its negligent misrepresentation claim against the accounting firm. More importantly, however, based on its incisive analysis, the Court dismissed NAS’s claim for negligence against WIPfli after concluding that Minnesota courts had never intended to recognize such a claim despite certain cases that may at first have suggested otherwise.

Matt Drewes contributed this article. Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law, and insurance. He has been included in the annual list of Minnesota’s Rising Stars for several years, and has been quoted in print publications such as the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, HOALeader.com, and elsewhere on issues involving construction litigation, community associations, and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Contracting Diseases: Mishaps in contract drafting, limitation of liability edition

1 Aug

One of the problems I regularly encounter with new clients is that they have come to me too late to do the most good. This frequently happens in the area of drafting contracts relating to their business or project. Many people say they want a “simple” contract, or they think they know what they’re signing, or that they trust the other party to the deal, so they don’t need to overthink what they’re doing. A recent decision by a Federal Court in Indiana demonstrates how costly this kind of “penny-wise” thinking can be.

SAMS Hotel Group, LLC set out to build a new hotel. Unfortunately, the architecture firm the company retained to provide the design work for the project apparently did not employ or even consult with a registered professional structural engineer for the project. The county building officials later found structural design defects, which resulted in the condemnation of the structure and its ultimate demolition before the hotel ever opened its doors to the public.

SAMS sued its architect, Environs, Inc. The trial court held that Environs breached the applicable standard of care by failing to involve a structural engineer and for failing to timely inspect the project during construction. SAMS proved damages in the amount of $4.2 million.

Now the story turns truly tragic for the developer. Environs incorporated a clause in its contract with SAMS that sought to limit its liability:

The Owner [SAMS] agrees that to the fullest extent permitted by law, Environs/Architects/Planners, Inc. total liability to [SAMS] shall not exceed the amount of the total lump sum fee due to negligence, errors, omissions, strict liability, breach of contract, or breach of warranty.

SAMS, as the “Owner” under the applicable contract, paid Environs a lump sum fee of $70,000. The court enforced this limitation of liability provision and held that SAMS could recover only $70,000 of its $4.2 million loss, even though the source of Environs’ liability arose out of negligence rather than a breach of the parties’ contract. The United States Court of Appeals for the Seventh Circuit affirmed the trial court’s ruling. It noted, under Indiana law, that sophisticated parties aren’t entitled to protection from even the apparently unfair terms of the contracts they sign:

[T]he general rule of freedom of contract includes the freedom to make a bad bargain.

Parties are free to enter into any kind of contract they like, but just know that if you assume you are sophisticated enough not to need a lawyer’s assistance with your contract, the court just might agree with you and hold you to what you signed.

The complete order of the Federal District Court for the Southern District of Indiana can be read here.

The complete opinion of the Seventh Circuit Court of Appeals can be read here.

Matt Drewes contributed this article. Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law, and insurance. He has been included in the annual list of Minnesota’s Rising Stars for several years, and has been quoted in print publications such as the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, HOALeader.com, and elsewhere on issues involving construction litigation, community associations, and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Matt Drewes Quoted in Recent Article at HOALeader.com: Does Your Architectural Committee Have the Right or Responsibility to Enforce Local Laws?

6 Jun

Matt Drewes recently contributed quotes for the following articles published at www.hoaleader.com, a national web-based publication focused on homeowners association and condominium board members and association management professionals:

  • Does Your HOA’s ARC Have to Enforce Local Laws? Discussion Forum Follow-up; published April, 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.

Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance. He has been included in the annual list of Minnesota’s Rising Stars for several years, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, and elsewhere on issues involving construction litigation, community associations and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Matt Drewes Quoted in Several Articles at HOALeader.com: Dealing with renters; Associations issuing speeding tickets?; Getting an inactive association back on track

23 May

Matt Drewes recently contributed quotes for the following articles published at www.hoaleader.com, a national web-based publication focused on homeowners association and condominium board members and association management professionals:

  • “Smart HOAs Get Tenants on Their Side”; published March 8, 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now

 

  •  “Restarting Your HOA? Where to Begin”; published March 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now
  • “Court Says HOA Can Issue Speeding Tickets; What’s next, Undercover Ops?”; published March 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now
  • “Getting Tenants Invested in Your HOA”; published March 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now

Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance. He has been included in the annual list of Minnesota’s Rising Stars for several years, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, Yahoo!Finance.com, Bankrate.com, MSN.com, HOALeader.com, and elsewhere on issues involving construction litigation, community associations and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Minnesota Supreme Court Reverses Court of Appeals; Gives Advice On How to Preserve Claims and Avoid Spoliation (An Update on Miller v. Lankow)

4 Aug

On February 25, 2010, I first wrote about the case of Miller v. Lankow.  At the time, I explained why the Minnesota Court of Court of Appeals’ decision that upheld the district court’s dismissal of the plaintiff’s case seemed extreme and inconsistent with existing law.  (Read that post here).  The Minnesota Supreme Court apparently agreed, and on August 3, 2011 it reversed the dismissal and sent the case back to the district court for further proceedings.  (Read the Minnesota Supreme Court’s Opinion here).

Without going into too much detail, the facts of the case involve a property owner who discovered water intrusion problems, which the seller claimed to have fixed, were still causing problems and resulted in mold and other damage.  The buyer provided notice to the seller and the contractors who were involved that he had discovered these defects and that he would pursue legal action if the parties did not reach a resolution.  Several parties attended an inspection at the property where they had the opportunity to view some of the damage.   The contractors and former owners knew they might be sued, but they did not request the ability to conduct further investigation into the cause or extent of the damage.  The owner later repaired the damage without telling the defendants exactly when he planned to start.

After the owner sued the property sellers and contractors for construction defects, water intrusion, fraud and a seller’s failure to disclose defects, the defendants claimed they were not given a sufficient opportunity to inspect the cause and extent of the damage.  They asked the district court to exclude the evidence the plaintiff gathered because they claimed they did not have a similar opportunity to review the same evidence before it was removed and destroyed.  The district court agreed, ordering that the plaintiff may not use any evidence of the defects and damage that the defendants did not see, which was a sanction for “spoliation” (i.e., destroying evidence).  Without this evidence, the plaintiff had no case, and the district court concluded that the case must be dismissed.  The plaintiff appealed to the Minnesota Court of Appeals, which held that the district court had not abused its discretion by sanctioning the plaintiff and dismissing the case.

The concern the Court of Appeals’ decision raised for me was the notion that, even if the defendants have notice of the claim of damage and the potential for litigation, the plaintiff might still have to wait to make repairs to his home while the defendants seemed to be in no particular hurry to investigate the claims against them.  Sometimes, particularly where water intrusion is at issue, prompt repairs are necessary to avoid further property damage and even personal injury.

The Minnesota Supreme Court agreed that legitimate concerns about destroying evidence before others have had a chance to inspect it must be weighed against the reasonableness of asking the party in control of the evidence to maintain it.  The Supreme Court held that, as has always been the case, the party with custody of evidence has a “duty” to preserve relevant evidence to permit other parties to inspect the evidence for use in litigation.  It also remains true that  party who breaches this duty may be sanctioned for spoliation, whether or not the breach was committed intentionally or in bad faith.

But a custodial party’s duty to preserve evidence is not boundless.

*     *     *

[T]he duty to preserve evidence must be tempered by allowing custodial parties to dispose of or remediate evidence when the situation reasonably requires it.

The Court identified a three-factor test for evaluating a case of spoliation:

“(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.”

(citing Schmid v. Milwaukee Electric Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994)).  “[S]anctions are not appropriate when the custodial party has a legitimate need to destroy evidence, and it appears from the totality of the circumstances that noncustodial parties have received sufficient notice to protect themselves by taking steps to inspect or preserve the evidence and nevertheless do nothing.”

The Court went on to offer recommendations to avoid a sanction for spoliation.  Ideally, an owner will call a meeting or send a letter “indicating the time and nature of any action likely to lead to destruction of the evidence, and offering a full and fair opportunity to inspect.”  Obviously, any notice of the meeting or of an offer to inspect should be in writing.

People might be amazed to realize that this issue is just one hurdle to sustaining a successful case for construction defects.  There also are notice requirements under certain statutory warranties (as well as other requirements to satisfy prior to commencing suit), as well as statutes of limitation which differ from claim to claim and the little-known statute of repose.  There also are agreements by which a party may have reduced the time during which it has to raise a claim for construction defects.  To help navigate the issues that exist, parties should consult with an attorney knowledgeable in the area of construction and construction defects.  At Thomsen Nybeck, we know these issues, and we can help.  Find out more at www.tn-law.com or call us at 952.835.7000.

Entry by Matt Drewes.  Matt Drewes is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and co-leads the firm’s construction litigation group.  Matt practices in the areas of business and real estate litigation, construction litigation, community association law, debtor/creditor law, insurance and employment.  He has been quoted in articles appearing in the Minneapolis StarTribune, Minnesota Lawyer, and on websites such as Yahoo!Finance.com, Bankrate.com and HOALeader.com, and has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years.  He can be reached at mdrewes@tn-law.com.

Minnesota Court of Appeals Holds Buyer Was Earnest About Real Estate Purchase Even Though It Didn’t Pay the Earnest Money Due Under the Purchase Agreement

7 Apr

In the case BOB Acres, LLC v. Schumacher Farms, LLC, decided on April 5, 2011, the Minnesota Court of Appeals held that, as long as the parties to a real estate purchase agreement clearly express the intent to buy and sell real property, the fact that the buyer did not provide the earnest money stated in the contract did not render the contract invalid.  Read it here.  It may at first seem remarkable that the Court of Appeals would hold that a party that did not provide the earnest money specified in the purchase agreement might still be able to enforce the agreement, but there were several factors involved.

The earnest money was a fairly nominal amount ($500 earnest money on a $70,000 contract for the purchase of 25 acres of undeveloped land).  This suggests that the earnest money was not a significant factor in the seller’s decision to sell the property to the buyer, but rather earnest money is provided simply to show the buyer’s good-faith intentions.

The Court also noted that the failure of a party to perform a material provision of the agreement could be a breach that permits the non-breaching party to discontinue performance, but the seller did not raise any objection to buyer’s failure to tender the earnest money until it had already announced that it no longer wished to be bound by the purchase agreement.  This resulted in a waiver by the seller of any right to object to certain breaches of the agreement by buyer, which might have allowed it not to go through with the sale if it hadn’t waived its rights.  The Court of Appeals explained that there is a difference between the issue of contract formation and contract performance.  As far as contract formation is concerned, the Court cited to a treatise on contract law (but apparently found no prior Minnesota case law on point) to hold that a promise is sufficient consideration for a promise.  In other words:  the buyer’s promise to buy the property (presumably for the purchase price stated in the agreement) was sufficient consideration for the seller’s promise to sell the property; the modest earnest money payment was simply incidental to the agreement.

Thomsen Nybeck represents both buyers and sellers, as well as lenders and other parties involved in real estate transactions of all types and sizes.  If you have a question about your next deal, contact one of our attorneys for advice about how to ensure you get the deal you intend.

Matt Drewes contributed to this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group. and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!Finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

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