COLUMBUS, Ohio - Attorneys for majority owners of close corporations -- ones allowed by law to act more informally than a normal corporation -- may be sued for malpractice by minority owners, the Ohio Supreme Court recently decided.
The appeal in the case LeRoy, et al. v. Allen, Yurasek & Merklin asked the Court to decide if plaintiffs outside the attorney-client relationship can make a valid malpractice claim against the attorney. In a unanimous decision delivered Wednesday, the Court decided that a bad faith or collusion charge is appropriate.
However, the Court decided that minority owners could not proceed on the basis of being in privity with the majority owner -- having virtually the same legal interests.
The plaintiffs -- Julie Behrens LeRoy, Mary Miller and Dan Behrens -- are the three surviving children of the late Mary Elizabeth Behrens, former majority owner of Marysville Newspapers Inc. In the final months of her life, she planned her estate with Allen, Yurasek & Merklin.
In Nov. 2001, a member of the firm prepared documents amending her previous will, which left equal shares of her stock to each of her children. The new will left a majority of the shares to Dan.
In Dec. 2001, the firm prepared documents transferring ownership of all her shares to her grandson, Dan's son Kevin. LeRoy and Miller were not told of this development until after their mother passed away six months later, and they filed a malpractice suit against the firm.
They claimed the firm colluded with Dan and Kevin Behrens and did not offer sound advice to Mary.
The trial court dismissed their claims, saying they had no standing to sue because the will change and stock transfer were private transactions executed by the firm at the request of Mary Behrens.
A court of appeals said the plaintiffs had standing, even on the privity issue. The Supreme Court reversed that holding, affirmed the other and remanded the case.
"We need not address this alternate argument in light of our holding that the privity exception does not apply because the legal activities in this case were inherently not 'matters to which the fiduciary duty relates'," Justice Maureen O'Connor wrote. "Based on our recognition of that fundamental point, the court of appeals should not have reached this issue, its discussion of the issue has no effect, and resolution of the issue by this court must await another day."
The defendant argues that the proper party to bring a complaint against it is the estate of Mary Behrens.
"Defendants' arguments in this regard may have some validity, as the gist of LeRoy and Miller's complaint could be construed as asserting that defendants' alleged legal malpractice caused assets that should have been in Mary Elizabeth Behrens's estate not to be in her estate at the time of her death," O'Connor wrote.
"Regardless of the defendants' arguments, these considerations do not affect our overall analysis, which must focus more narrowly on whether LeRoy and Miller's complaint is sufficient to overcome a motion to dismiss for failure to state a claim upon which relief can be granted regarding malice.
"We therefore agree with the conclusion reached by the court of appeals that LeRoy and Miller have satisfied the standards..."