Friday, March 7, 2008

Privity Rule

The Minnesota Supreme Court reversed a lower court decision that had allowed a malpractice suit against Dorsey & Whitney on a theory that a non-client of the firm in a complex loan transaction was a third-party beneficiary of the firm's services. The court concluded that the rule that requires a lawyer-client relationship as a predicate to a malpractice claim has a limited extension of privity to third-party beneficiaries. The purported beneficiary must establish that the representation has as a "central purpose an effect on the third party and the effect is intended as a purpose of the transaction." Further, the lawyer must be aware of the intended benefit. The standard was not met here and the malpractice claims were dismissed. (Mike Frisch)

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