Schreier v. Drealan Kvilhaug Hoefker & Co. P.A.

Background

Allan M. Schreier sued Drealan Kvilhaug Hoefker & Co. P.A. (DKH) and Hedeen Hughes and Wetering (HHW). The dispute arose from the administration of family trusts holding farmland, estate-tax returns, and disagreements about rents paid for that farmland. Schreier alleged that DKH committed accounting malpractice by failing to claim a Minnesota farm-property tax deduction on John Schreier’s estate-tax return. He alleged that HHW committed legal malpractice by giving faulty advice related to that return and, less clearly, by giving poor advice about farmland rents. He also asserted a civil Racketeer Influenced and Corrupt Organizations Act claim and claims that DKH and HHW aided and abetted a trustee’s alleged breach of fiduciary duty.

The parties filed competing summary-judgment motions. Summary judgment is a decision entered without a trial when the record shows no genuine dispute about a fact important to the result and the moving party is entitled to judgment under the law. DKH and HHW sought judgment on Schreier’s claims. Schreier sought partial summary judgment concerning the trustee’s alleged breach, an additional expert witness, and market rents for specified years.

Legal Malpractice Claim Against HHW

Minnesota law required Schreier to provide an expert-review affidavit and an expert-identification affidavit describing the alleged professional violation and explaining how it caused his damages. The court held that Schreier’s expert, Steven Franta, did not identify specific conduct by HHW or attorney Bill Wetering. Franta did not establish that HHW advised, counseled, or collaborated with the estate’s tax preparers, or even that HHW provided legal services concerning the tax returns. His opinions were also too general to establish a specific duty, breach, and resulting damages.

The court further held that the claim failed on its merits. The record did not show that HHW acted as legal counsel for Schreier, the estate, or the trusts concerning the tax returns or rental rates. Schreier acknowledged that he did not ask Wetering for advice about preparing the returns and had no information that Wetering directly helped prepare them. Schreier also acknowledged that Wetering was not involved in negotiating, drafting, or setting the farmland rents. The court therefore granted summary judgment to HHW on the legal-malpractice claim.

Accounting Malpractice Claim Against DKH

Schreier relied on expert Christopher Wittich, who stated that DKH should have claimed the farm-property deduction on John Schreier’s estate-tax return or waited for a legislative change. The court rejected that position. Under the law in effect when the return was filed, the property had to be continuously owned by the deceased person for the required period. The farmland was owned by a revocable trust, not titled in John Schreier’s name. The Minnesota Legislature later amended the law to include property owned by a person or entity, which the court viewed as changing the prior rule rather than merely clarifying it.

The court concluded that the deduction did not apply to John Schreier’s return under the law then in effect, so Penning was not professionally negligent for failing to claim it. The court also held that Penning was not negligent for failing to wait for the amendment because the relevant portion of the amendment was not added until months after she filed the return. The court granted summary judgment to DKH on the accounting-malpractice claim.

Civil RICO Claim

The court held that Schreier’s civil RICO claim was barred by the four-year statute of limitations. The claim concerned allegedly below-market rents, an issue about which Schreier had complained as early as 2010. Because he knew or should have known of the claimed injury before the relevant limitations period, the court ruled that the claim was untimely.

The court also held that the claim failed on the merits. Schreier did not provide evidence of a RICO enterprise involving DKH, HHW, and Carl. His belief that the firms worked together was based largely on their knowing one another and being located in the same small town. The court found no evidence of a common purpose, continuing organization, coordinated functioning, or ascertainable structure. Schreier also failed to show the required intent to defraud or a qualifying pattern of racketeering activity. The court therefore ruled that the RICO claim failed as a matter of law.

Aiding-and-Abetting Claim

The court held that Schreier had not shown that DKH or HHW substantially assisted or encouraged any breach of fiduciary duty concerning the farmland rents. DKH provided routine professional services, which the court said were insufficient by themselves to establish substantial assistance. The record also did not show that HHW provided relevant professional services. The court granted summary judgment on this claim as well.

Schreier’s Partial Summary-Judgment Motion

The court denied Schreier’s request for an order finding that Carl breached fiduciary duties because Carl was not a party and the issue was not necessary to decide the professional-liability claims against DKH and HHW. The court also declined to allow another expert witness, noting that it had already denied that request several times. Finally, the court declined to declare specific market rents because disputed facts are not resolved on summary judgment; if the rental rates had been material and disputed, a jury rather than the court would decide them.

Disposition

The court granted defendants’ motions for summary judgment, denied Schreier’s motion for partial summary judgment, and dismissed the case with prejudice. The order directed that judgment be entered accordingly.