“Broad POA Form” + Theft by Agent = Potential Liability for Lawyer? Maybe…
We have written often recently (see here and here) about problems with Powers of Attorney (POAs), and a pending case in Minnesota appears at first to be another sad tale of an agent’s alleged self-dealing. The Minnesota Court of Appeals set up the fact pattern as follows:
“The attorney is asked to draft a power of attorney for his elderly client. The document is drafted by a secretary. The lawyer never meets the client. Neither the lawyer nor the secretary ever discusses the ramifications of signing the document with the client. The document allows the attorney-in-fact to transfer all of the client’s assets to himself. Days after the [elderly uncle] signs the document, that is precisely what happens.”
The nephew used the POA to drain the uncle’s accounts of more than $227,000.
Was the nephew liable for conversion? By the time that question was answered by the courts in the affirmative, the nephew was in bankruptcy — and the money was apparently gone.
The uncle’s estate looked for deeper pockets, and focused on the law firm that provided the broadly worded POA “form.” The Minnesota Court of Appeal’s split decision — focusing on whether summary judgment for the defendant law firm was proper — outlines several points that should be considered by any law firm that has drafted a POA, including whether such “forms” should ever be provided to individuals without accompanying legal advice.
As part of the law firm’s role on the day the POA was signed, the lawyer first met with the nephew and the nephew’s mother at the law firm, to discuss a similar POA for the mother. On the same day, according to the lawsuit, the lawyer’s secretary took the second POA to the mother’s home, where the 91 year old uncle was “recovering from a recent fall that fractured his neck.” The uncle signed the POA and the secretary notarized his signature. The law firm generated a bill for the two transactions, and was later paid.
The lawyer did not meet the uncle, and according to testimony cited in the opinion, the lawyer did not recall reviewing the uncle’s POA, asking the secretary to draft it, nor talking with the uncle. The nephew used the uncle’s POA to withdraw the money from his uncle’s accounts before the uncle died, less than a month after the POA was signed.
After the uncle passed away, his estate learned of the nephew’s transactions, eventually suing the nephew for conversion — but by then the money was long gone and the nephew was in bankruptcy court. The estate then sued the lawyer (and his secretary) for legal malpractice.
The legal issues on appeal? Whether there was an attorney-client relationship between the lawyer and the uncle, whether the lawyer could be liable for negligence for “failure to advise” the uncle on the scope of authorization provided by the law firm’s POA, and whether the answers to these threshold questions of legal malpractice required “expert witness testimony.”
The Court of Appeals concluded that under Minnesota law, “expert-witness testimony is required to establish the elements of negligence and proximate causation but is not required to establish the elements of attorney-client relationship and but-for causation.” Further, the Court of Appeals concluded that an affidavit and answers to interrogatories, supporting the plaintiff’s theory of negligence through an expert opinion by a “Certified Elder Law Attorney (CELA),” satisfied the pre-trial disclosure requirements. The Court of Appeals overturned the summary judgment granted by the lower court for the defendant.
For the full “unpublished” opinion, including a dissent, see Guzick v. Kimball, Case No. A14-0429, Minnesota Court of Appeals, decided October 6, 2014. On December 30, 2014, the Minnesota Supreme Court granted a petition for further review. This seems like a case to keep an eye on.