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Keywords

plaintiffdefendantattorneynegligenceliabilitymotionsummary judgmentmalpracticewillpartnership

plaintiffdefendantattorneyliabilitymotionmalpracticewillpartnershiplegal counselmotion to dismiss

Related Cases

Hackett v. Village Court Associates, 602 F.Supp. 856, Fed. Sec. L. Rep. P 92,054

Facts

The case arose from a securities fraud action initiated by limited partners of Village Court Associates, a limited partnership formed to manage a commercial property in Elm Grove, Wisconsin. The defendants included the partnership, its general partners, several securities firms acting as brokers, and the law firm Gibbs, Roper, Loots & Williams. The limited partners alleged various claims against these defendants, including negligent misrepresentation and aiding and abetting violations of federal securities law. The court had previously entered default judgment against some defendants and granted summary judgment against the plaintiffs on other claims.

The defendants include Village Court Associates, two of the general partners, several securities firms who acted as brokers for the limited partnership offerings, and Gibbs, Roper, Loots & Williams, legal counsel to Village Court Associates.

Issue

The main legal issues were whether the limited partners could maintain claims for negligent misrepresentation and malpractice against the law firm, and whether they could pursue aiding and abetting claims against the law firm and brokers under section 12 of the Securities Act of 1933.

Two issues remain for decision: (1) whether the plaintiffs can maintain against the law firm defendant the claim sounding in negligent misrepresentation and malpractice; and (2) whether plaintiffs' claims against the law firm defendant and the broker/dealer defendants under section 12 of the 1933 Act must be dismissed.

Rule

Under Wisconsin law, attorneys are generally not liable to third parties for negligence or malpractice unless an exception applies, such as fraudulent misrepresentation. Additionally, aiding and abetting liability under section 12(2) of the Securities Act of 1933 is not clearly established in this circuit.

Under Wisconsin law a long-standing rule has existed that an attorney is not liable to third parties for acts committed in the exercise of his duties.

Analysis

The court analyzed the claims against the law firm and determined that Wisconsin law does not permit third parties, such as the limited partners, to maintain negligence or malpractice actions against attorneys who represent a partnership. The court also found that the aiding and abetting claims were not viable under the current legal framework, as the necessary conditions for such claims were not met. The court concluded that pursuing both section 10(b) and section 12(2) claims against the same defendants would be redundant and unproductive.

The holding in Timm and the statement of the issues indicate that the court is concerned with accountants only. Nevertheless, in arriving at the result, the court relies on its decision in Auric, supra: In this state, although the liability of accountants to third parties not in privity has not been examined, the liability of an attorney to one not in privity was recently examined in Auric.

Conclusion

The court granted the motions to dismiss the claims against the law firm and brokers for negligent misrepresentation, malpractice, and aiding and abetting violations of federal securities law. The claims under section 12(2) were dismissed, while the court reserved judgment on the claims against the brokers as principals pending further development.

The motion to dismiss the claim is granted.

Who won?

The defendants, including the law firm and brokers, prevailed in the case as the court granted their motions to dismiss the claims brought against them by the limited partners.

The motion of Gibbs, Roper, Loots & Williams and the broker/dealers is granted in part and denied in part, as indicated herein.

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