Western Thrift and Loan Corp. v. Rucci

Filing 42

ORDER : IT IS ORDERED THAT: 1.Plaintiffs Motion for Declaration that Minn. Stat. § 544.42 Does not Apply or, Alternatively, Waiver by the Court of Certification of Expert Review [Docket No. 2] is DENIED.2.Defendants Corrected Motion to Dismiss [Docket No. 35] is DENIED.3.Plaintiff has 60 days after entry of this Order to comply with Minn. Stat. § 544.42, subd. 2, cl. (1) and 180 days after entry of this Order to comply with Minn. Stat. § 544.42, subd. 2, cl.(2).(Written Opinion). Signed by Judge Joan N. Ericksen on July 31, 2012. (slf)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Western Thrift and Loan Corp.,
Plaintiff,
v.

No. 11-cv-3644 (JNE/TNL)
ORDER

Sebastian Rucci,
Defendant.

Western Thrift sued Rucci, its former attorney, alleging negligence/malpractice and
breach of contract. Rucci moved to dismiss for lack of personal jurisdiction, and the Court
denied the motion. W. Thrift & Loan Corp. v. Rucci, No. 11-3644 JNE/TNL, 2012 WL 1021681
(D. Minn. Mar. 27, 2012). At the same time that Western Thrift filed its Complaint, it also
brought a Motion for Declaration that Minn. Stat. § 544.42 Does not Apply or, Alternatively,
Waiver by the Court of Certification of Expert Review. On June 26, 2012, Rucci filed a
Corrected Motion to Dismiss for Non-Compliance with Minn. Stat. § 544.42. Western Thrift’s
Motion and Rucci’s Motion are considered together. Based on the written submissions, the Court
denies both parties’ Motions.
I.

BACKGROUND

In a previous legal proceeding (the “R&D Litigation”), various Minnesota residents
brought suit against Western Thrift and other defendants, including Homeowners Lending
Corporation (“HLC”), in the United States District Court, District of Minnesota (Civil File No.
07-4306 DSD/JJG). According to Western Thrift, the R&D Litigation related to the Minnesota
plaintiffs’ relationship with HLC, not with Western Thrift. Western Thrift and HLC were parties

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to a Service Agreement, under which HLC was required to defend, indemnify and hold Western
Thrift harmless with respect to the R&D Litigation. Pursuant to this agreement, Western Thrift
tendered the defense of the R&D Litigation to HLC, and HLC agreed to defend the lawsuit.
Initially, HLC retained another law firm (the “Patterson firm”) to represent the
defendants in the R&D Litigation, but HLC discharged the Patterson firm and retained Rucci to
represent the defendants—this included representation of Western Thrift. Rucci was not admitted
to practice law in Minnesota. On March 24, 2009,1 he filed an application for admission pro hac
vice to represent the defendants in the R&D Litigation. In his application, he “request[ed]
permission to appear and participate as an attorney at law on behalf of defendants” and “agree[d]
to participate in the preparation and the presentation of the case . . . and accept service of all
papers served.” Because he was not associated with local counsel, his application was denied on
March 26. On April 2, 2009, the Court granted the Patterson firm’s motion to withdraw, ordering
the firm to send a letter to all defendants advising them of the withdrawal. The Court also
ordered that the defendants obtain new counsel before May 1, 2009. On April 3, 2009, the
Patterson firm notified Western Thrift that it was withdrawing as counsel, and that it had been
informed that Rucci would be taking over the case. On May 5, 2009, Rucci emailed an informal
request to the magistrate judge, seeking an extension of time to associate with local counsel. In
that letter, Rucci explained that he had “contacted four local attorneys, but ha[d] not been able to
find one willing to act as local counsel, at the cost offered by the Defendant.” The magistrate
judge denied the motion on May 12, 2009.
On May 26, 2009, the plaintiffs in the R&D Litigation moved for entry of default against
the defendants—their motion against Western Thrift was based on Western Thrift’s failure to

1

Rucci’s application is dated March 9, 2009, but was filed on March 24, 2009.
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timely obtain new counsel. On June 9, 2009, Rucci, on behalf of HLC, filed in this Court a notice
of filing bankruptcy, which stayed the R&D Litigation. In October 2009, the stay was lifted. A
pretrial conference was held on November 30, 2009. No attorney appeared on behalf of Western
Thrift. Although Rucci had been receiving copies of all the notices and submissions in the R&D
Litigation, he did not participate in any manner after filing the bankruptcy notice. On January 21,
2010, the plaintiffs in the R&D Litigation again filed a motion for entry of default judgment
against the defendants. The Court granted the motion on May 10, 2010, stating that “Rucci did
not take the steps necessary to be admitted to practice before this court, nor did he secure
substitute counsel as required by the magistrate judge’s April 1, 2009, order. The court imputes
Rucci’s failure to defend this case to Western Thrift, and default judgment is warranted on this
basis.” R & D Fin. Solutions, Inc. v. W. Thrift & Loan Corp., No. 07-4306 (DSD/JJG), 2010 WL
1875516, at *2 (D. Minn. May 10, 2010). Western Thrift subsequently entered into a settlement
agreement with the R&D plaintiffs.
Western Thrift filed the current action against Rucci based on Rucci’s unsuccessful
attempts to associate with local counsel, failure to obtain proper admittance to the court, and
failure to respond to or file any documents in the R&D Litigation, resulting in the entry of
default judgment against Western Thrift. Western Thrift contends that it did not know that Rucci
failed to be admitted to represent Western Thrift, and so it did not know that it was unrepresented
until it was too late. Accordingly, Western Thrift asserts that Rucci was negligent and breached
his agreement to adequately represent Western Thrift in the R&D Litigation.

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II.

DISCUSSION

A. Minnesota Statutes § 554.42 applies
Minnesota Statutes § 544.42 requires a plaintiff bringing a malpractice claim, where expert
testimony is necessary to prove a prima facie case, to consult with an expert and submit specified
affidavits in the earliest stages of the litigation. Section 544.42 provides in part:
Subd. 2. Requirement. In an action against a professional alleging
negligence or malpractice in rendering a professional service
where expert testimony is to be used by a party to establish a prima
facie case, the party must:
(1) unless otherwise provided in subdivision 3, paragraph (a),
clause (2) or (3), serve upon the opponent with the pleadings an
affidavit as provided in subdivision 3; and
(2) serve upon the opponent within 180 days an affidavit as
provided in subdivision 4.
Subd. 3. Affidavit of expert review. (a) The affidavit required by
subdivision 2, clause (1), must be drafted by the party’s attorney
and state that:
(1) the facts of the case have been reviewed by the party’s attorney
with an expert whose qualifications provide a reasonable
expectation that the expert’s opinions could be admissible at trial
and that, in the opinion of this expert, the defendant deviated from
the applicable standard of care and by that action caused injury to
the plaintiff; . . .

Minn. Stat. § 544.42 (2010). Section 544.42 was enacted to eliminate frivolous malpractice
lawsuits. See Meyer v. Dygert, 156 F. Supp. 2d 1081, 1090 (D. Minn. 2001).
Western Thrift argues that expert testimony is not necessary to establish a prima facie
case and thus, Minnesota Statutes § 544.42 does not apply. A prima facie case of
negligence/malpractice requires showing: “(1) the existence of an attorney-client relationship; (2)
acts constituting negligence or breach of contract; (3) that such acts were the proximate cause of
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the plaintiff’s damages; [and] (4) that but for defendant’s conduct, the plaintiff would have been
successful in the prosecution or defense of the action.” Jerry’s Enters., Inc. v. Larkin, Hoffman,
Daly & Lindgren, Ltd., 711 N.W.2d 811, 816 (Minn. 2006) (quoting Blue Water Corp. v.
O’Toole, 336 N.W.2d 279, 281 (Minn. 1983)). “Expert testimony is generally required to
establish the ‘standard of care applicable to an attorney whose conduct is alleged to have been
negligent, and further to establish whether the conduct deviated from that standard.’” Id. at 817
(quoting Admiral Merchs. Motor Freight, Inc. v. O’Connor & Hannan, 494 N.W.2d 261, 266
(Minn. 1992)). But in straightforward cases such as “an obviously missed deadline or a clear
case of stealing client funds,” an expert is not necessary for a finding of malpractice. Meyer, 156
F. Supp. 2d at 1091. This exception, however, “is for the ‘rare’ and ‘exceptional’ case.” Fontaine
v. Steen, 759 N.W.2d 672, 677 (Minn. Ct. App. 2009) (quoting Sorenson v. St. Paul Ramsey
Med. Ctr., 457 N.W.2d 188, 191 (Minn. 1990)).
Western Thrift argues that it is under no obligation to provide an affidavit because this is
a simple case of a missed deadline. But Western Thrift does not cite a single case where a court
has found—for reasons of the simplicity of the alleged malpractice or otherwise—that the
statute does not apply. It cites Meyer v. Dygert for the proposition that straightforward
malpractice cases do not require an expert. The court in Meyer, however, ultimately found that
an expert was required to prove malpractice involving investment advice. Meyer, 156 F. Supp.
2d at 1089. Here, the issue is not simply whether Rucci missed a filing deadline. Instead, it is
alleged that he “failed to adequately and completely represent Western Thrift in the Underlying
Lawsuit, by failing to obtain proper admittance to the Court, failing to associate with local
counsel, and failing to respond or file any further documents in the Underlying Lawsuit on behalf
of Western Thrift, his client.” (Compl. 52, ECF No. 1). These allegations necessarily require an

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understanding of the scope of an attorney’s professional duties when representing a client in a
lawsuit. For example, Rucci attempted to gain admission to this Court, and his timely motion
was denied. Whether he had a duty to make continued attempts or discuss the problem with his
client is more complicated than a simple missed deadline. Additionally, the decision to file or not
file certain documents can be a matter of strategy rather than a duty. Further, this case presents
questions as to whether an attorney-client relationship even existed between the parties. The
alleged attorney-client relationship was formed through Western Thrift’s debtor, HLC. A
bankruptcy petition, filed by HLC while the R&D Litigation was pending, created a potential
conflict of interest for Rucci. Rucci’s involvement with HLC’s bankruptcy proceedings, where
Western Thrift was the largest creditor, creates questions as to Rucci’s duties in his ongoing
representation of Western Thrift in the R&D Litigation. Finally, causation is not completely clear
in this case. Western Thrift asserts that because Rucci did not attend the default judgment
hearing, judgment was entered against it. But the record indicates that Western Thrift may bear
some responsibility for the default judgment, and thus Rucci’s inaction may not have been the
“but for” cause of the judgment against Western Thrift. See R & D Fin. Solutions, 2010 WL
1875516, at *2 (“Western Thrift’s willful neglect of this case contributed to Defendants’ failure
to defend over a two-and-one-half year period and default judgment is also warranted on this
basis.”). This case presents more complicated issues of client representation than merely missing
a deadline. An expert is necessary in determining whether an attorney-client relationship existed,
whether Rucci breached his duties, and if Rucci’s breach was the but for cause of Western
Thrift’s unsuccessful defense in the R&D litigation. Thus Minnesota Statutes § 544.42 applies in
this case.2

2

Rucci makes much of the fact that, in the parties’ Joint Rule 26(f) Report, Western Thrift
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B. Western Thrift complied with Minnesota Statutes § 544.42
Rucci argues that because § 544.42 applies and Western Thrift has not filed the required
affidavits, the case must be dismissed with prejudice. Rucci is correct that the penalty for
noncompliance with the expert certification requirements is harsh: “Failure to comply with
subdivision 2, clause (1), within 60 days after demand for the affidavit results, upon motion, in
mandatory dismissal of each cause of action with prejudice as to which expert testimony is
necessary to establish a prima facie case.” Minn. Stat. § 544.42, subd. 6(a). But § 544.42
provides a procedure for plaintiffs to obtain a waiver of the expert certification requirement.
The certification of expert review required under this section may
be waived or modified if the court where the matter will be venued
determines, upon an application served with commencement of
the action, that good cause exists for not requiring the certification.
Good cause includes, but is not limited to, a showing that the
action requires discovery to provide a reasonable basis for the
expert's opinion or the unavailability, after a good faith effort, of a
qualified expert at reasonable cost. If the court waives or modifies
the expert review requirements, the court shall establish a
scheduling order for compliance or discovery. If the court denies a
request for a waiver under this subdivision, the plaintiff must
serve on the defendant the affidavit required under subdivision 2,
clause (1), within 60 days, and the affidavit required under
subdivision 2, clause (2), within 180 days.
Minn. Stat. § 544.42, subd. 3(c) (emphasis added). Western Thrift filed an affidavit, signed by its
attorney, and this motion on the same day it filed its Complaint. (ECF Nos. 2 and 4). The
affidavit stated:
This Affidavit is submitted pursuant to Minnesota Statute § 544.42,
subd. 3(a)(3), . . . Western Thrift does not believe expert testimony
is necessary to establish a prima facie case against Rucci; however,

agreed that “[t]he parties expect to call no more than 1 expert witness each.” (Report, ECF No.
20). The Court does not see how this bears on whether the statute applies and whether Western
Thrift complied with § 544.42. As Western Thrift explains, the agreement in the discovery plan
covered a situation where the Court found the statute to apply and denied Western Thrift’s
request for waiver. In such a situation, Western Thrift agreed to call no more than one expert.
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out of an abundance of caution, Western Thrift has served an
application for a waiver by the court of the certification of expert
review required under Minn. Stat. § 544.42, subd. 2,
contemporaneous with the commencement of this action in
accordance with Minn. Stat. § 5644.42, subd. 3(c).

(Liesinger Aff. 2-4, ECF No. 4). This is precisely what § 544.42, subd. 3(c) requires when a
party desires a waiver of the expert certification requirement. See Fontaine, 759 N.W.2d at 677
(“To minimize [the] risk [of dismissal with prejudice], the statute . . . provides that the party
bringing the action may apply for a waiver or modification of the affidavit requirements at the
time the action is commenced and that the district court may determine that ‘good cause exists
for not requiring the certification.’” (quoting Minn. Stat. § 544.42, subd. 3(c))). The Court finds
that Western Thrift complied with § 544.42.
Rucci cites numerous cases where courts found dismissal mandatory. But none of his
cited cases involved a situation where the plaintiff actually filed the required application for
waiver at the commencement of the suit. Rucci also suggests that the statute mandates that the
second required affidavit—that of expert disclosure—must be filed 180 days after the complaint
even if the Court has not yet ruled on a plaintiff’s outstanding motion to waive the expert
certification requirement. Such an interpretation of § 544.42, subd. 3(c) would render the waiver
procedure therein unusable. See United States v. Days Inns of Am., Inc., 151 F.3d 822, 825 (8th
Cir. 1998) (“Courts should interpret statutory language in a manner that gives effect to all terms
so as to avoid rendering terms useless.” (citing Moskal v. United States, 498 U.S. 103, 109-10
(1990))). The statute provides that where a court denies the waiver, the plaintiff then has 60 and
180 days respectively to serve the defendant with the required affidavits.
For the same reasons as § 544.42 applies, the Court does not find good cause to waive the
expert certification requirement. The Court denies Western Thrift’s properly submitted request
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for waiver of the expert certification requirement. Western Thrift has 60 days from the date of
this order to serve on Rucci the affidavit required under § 544.42, subd. 2, cl. (1). Further,
Western Thrift must serve the affidavit required under § 544.42, subd. 2, cl.(2) within 180 days.
III.

CONCLUSION

Based on the files and records, and for the reasons stated above, IT IS ORDERED
THAT:
1. Plaintiff’s Motion for Declaration that Minn. Stat. § 544.42 Does not Apply or,
Alternatively, Waiver by the Court of Certification of Expert Review [Docket No. 2]
is DENIED.
2. Defendant’s Corrected Motion to Dismiss [Docket No. 35] is DENIED.
3. Plaintiff has 60 days after entry of this Order to comply with Minn. Stat. § 544.42,
subd. 2, cl. (1) and 180 days after entry of this Order to comply with Minn. Stat.
§ 544.42, subd. 2, cl.(2).
Dated: July 31, 2012
s/ Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge

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