North Dakota Rejects Third Party Beneficiary Liability In Legal Malpractice Claim

A legal malpractice action brought by a divorce client alleging loss of a property due to attorney negligence led to a remand by the North Dakota Supreme Court, which affirmed the rejection of a claim brought by the client's sons based on a third-party beneficiary theory of liability.

Parties and property

Fred Mitzel and Sharon Mitzel were married and had two sons together—Alan Mitzel and Eric Mitzel. In 2004, Fred Mitzel and Sharon Mitzel formed the Fred Mitzel Family LLLP (“LLLP”). In March 2005, Fred Mitzel and Sharon Mitzel executed a quit claim deed conveying their interests in a large portion of their farm, including their interests in Section 19, along with other property to the LLLP.

Malpractice action

In September 2020, Sharon Mitzel, Alan Mitzel, and Eric Mitzel brought this legal malpractice action against Vogel, seeking damages for alleged negligence in the divorce action and causing them to “lose” Section 19 in settling the divorce action. Before trial, the district court granted partial summary judgment to Vogel dismissing Alan and Eric Mitzel’s claims holding they lacked standing as non-clients to assert legal malpractice claims against Vogel. The court denied Vogel’s summary judgment motion seeking dismissal of Sharon Mitzel’s claims.

In September 2023, the district court held a trial on Sharon Mitzel’s claims. After Sharon Mitzel rested her case, the court granted Vogel’s motion for a directed verdict. The court held Sharon Mitzel failed to present any evidence that she “gave up” any amount of the marital estate, to which she was otherwise entitled, in return for Fred Mitzel’s promise to convey Section 19 to Alan and Eric Mitzel upon his death. The court held no evidence supported the conclusion  she was damaged as a result of Vogel’s alleged malpractice.

The appeal of the children

In North Dakota, the existence of an attorney-client relationship is a required element of a legal malpractice action...

“The existence of an attorney-client relationship is ordinarily a question of fact.” Moen, 2001 ND 110, ¶ 13. However, Alan and Eric Mitzel do not contend they had an attorney-client relationship with Vogel. Thus, based on current case law, the district court correctly dismissed Alan and Eric Mitzel’s legal malpractice claims on the basis they lacked standing.

They argued for liability under a third party beneficiary theory

The threshold inquiry in third-party beneficiary cases is “whether the plaintiff is an intended beneficiary of the transaction; if not, no further inquiry need be made.”

No basis here

even if this Court were to recognize an expansion or exception to the privity requirement, as requested by Alan and Eric Mitzel, Vogel’s legal services for Sharon Mitzel in this case involved securing a divorce and division of Fred Mitzel and Sharon Mitzel’s marital estate; the “sole purpose” or “central purpose” of Vogel’s legal services was not to benefit Alan and Eric Mitzel. Alan and Eric Mitzel did not present evidence that Sharon Mitzel retained Vogel’s legal services for the sole or primary purpose of directly benefitting Alan and Eric Mitzel. Thus, under the facts of this case, we decline Alan and Eric Mitzel’s invitation to expand the privity requirement for legal malpractice claims.

The client's damages appeal

We conclude the district court did not err by measuring Sharon Mitzel’s damages based on what she “gave up” to secure Fred Mitzel’s conveyance of Section 19 to her sons upon his death.

A jury question necessitates remand

Based on the record, a reasonable jury had a legally sufficient evidentiary basis to find Sharon Mitzel incurred corrective fees due to Vogel’s alleged negligence. We therefore conclude the district court erred in granting judgment as a matter of law on Sharon Mitzel’s claim she incurred corrective attorney’s fees and costs due to Vogel’s alleged legal malpractice.

(Mike Frisch)