United States Court of Appeals
For the First Circuit
No. 03-1758
ROSEN CONSTRUCTION VENTURES, INC., a Florida corporation, and
ACROPOLIS VENTURES, INC., a Florida corporation,
Plaintiff, Appellants,
v.
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY and POPEO, P.C.,
a Massachusetts corporation,
STEPHEN M. LEONARD, individually, and
STEPHEN T. LANGER, individually,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Reginald C. Lindsay, U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge, and
Lipez, Circuit Judge.
Alan J. Kluger, with whom Steve I. Silverman and Kluger,
Peretz, Kaplan & Berlin, P.L., were on brief, for appellants.
Robert S. Frank, Jr., with whom John R. Baraniak, Jr.,
Kathleen A. Burdette, and Choate, Hall and Stewart, were on brief,
for appellees.
April 16, 2004
LIPEZ, Circuit Judge. Plaintiffs Rosen Construction
Ventures, Inc. and Acropolis Ventures, Inc., owned by Clifford
Rosen, (collectively, "Rosen") filed a legal malpractice action
against Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., and
two members of that firm, Stephen Leonard and Stephen Langer
(collectively, "Mintz Levin"). Rosen alleges that Mintz Levin was
negligent in drafting a contract between Rosen and O'Donnell Sand
& Gravel, owned by Mary O'Donnell (collectively, "O'Donnell" or
"ODSG"), and in failing to properly advise Rosen about certain
easements it required on the O'Donnell property.
Mintz Levin moved for summary judgment in August 2000,
arguing that Rosen's claims were barred by the three-year statute
of limitations for legal malpractice actions. Mass. G. L. ch. 260,
§ 4 (2003). In March 2001, the district court denied that motion,
holding that there was a disputed issue of fact about the duration
of Mintz Levin's representation of Rosen. One year later, while
discovery was ongoing, the Massachusetts Supreme Judicial Court
decided Lyons v. Nutt, 436 Mass. 244 (2002), a case that clarified
the continuing representation doctrine applicable to legal
malpractice actions.
In February 2002, Mintz Levin again moved for summary
judgment, citing the Lyons decision and evidence procured during
discovery. In response, the district court held that "[t]he issue
is not . . . when Rosen thought that it might have a malpractice
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claim against Mintz Levin, but rather when it knew it was harmed as
a result of Mintz Levin's conduct." The district court then
granted Mintz Levin's second summary judgment motion, holding that
Rosen actually knew that its harm was the result of Mintz Levin's
conduct more than three years before it filed its malpractice
action against Mintz Levin.
In evaluating Rosen's appeal from this summary judgment
ruling, we must determine whether there is a genuine issue of fact
regarding when Rosen's malpractice claim accrued -- that is, when
Rosen knew, or should have known, that Mintz Levin's alleged
malpractice was the source of Rosen's injuries. After reviewing
the summary judgment record, we affirm in part and vacate in part
the district court's decision.
I.
We set forth the background facts here, reserving some of
the details until the discussion of the issues on appeal. In
August of 1994, Rosen Associates, a non-party to this case and a
separate entity controlled by Clifford Rosen, the owner of Rosen
Construction Ventures, Inc., agreed to purchase a parcel of land in
Everett, Massachusetts from Monsanto Chemical Company and another
related entity. Rosen intended to build a shopping center on this
site, referenced by the parties as the "Development Site." The
Development Site was contaminated, and the remediation plan called
for a six-foot deep layer of clean fill to be spread over the
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property. Because Rosen contracted for this remediation
responsibility, it needed to obtain and store clean fill until it
could be used on the Development Site.
O'Donnell, who had access to significant quantities of
clean fill, owned land close to the Development Site. It had
purchased this property from Boston Edison Co. (the "Edison Site")
for $100,000 in cash and a $1.9 million note (the "Edison Note").
In early 1995, Rosen and O'Donnell negotiated an agreement relating
to both the fill and certain aspects of the Edison Site. Rosen
retained Mintz Levin to draft a contract that memorialized the
arrangement between Rosen and O'Donnell. That written contract,
which came to be known as the Fill Agreement, was dated April 19,
1995.
Among other things, the Fill Agreement provided that (1)
O'Donnell would grant Rosen a three year 51% interest in the Edison
Site as tenants in common, (2) Rosen could convert that temporary
51% interest into a maximum 50% permanent partial interest,
depending on the extent to which Rosen negotiated a reduction in
the principal of the Edison Note, and (3) O'Donnell would grant to
Rosen, upon Rosen's request, a perpetual easement on the Edison
Site to allow Rosen to construct road access to the Development
Site. The portion of the Fill Agreement relevant to Rosen's rights
to secure a permanent interest in the Edison Site -- Section 6(b)
-- reads as follows:
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[I]f Rosen, in its sole discretion, is able to
negotiate with Edison a forgiveness of, or a
reduction in, the principal amount due in order
to obtain a discharge of the Edison Mortgage,
below $1,900,000, then Rosen may retain, and
shall not be required to reconvey to
[O'Donnell], that undivided percentage interest
(not to exceed 50%) in the Edison Site which is
equal to (x) the amount of such principal
forgiveness or reduction, divided by (y) Two
Million Dollars ($2,000,000). For example, if
Rosen were to negotiate a principal reduction
of $250,000, then Rosen would be able to retain
a 12.5% undivided interest, and if Rosen were
to negotiate a principal reduction of
$1,250,000, then Rosen would be entitled to
retain a 50% undivided interest.
After signing the Fill Agreement in April, Rosen began
negotiating with Boston Edison for a reduction in the principal
amount of the Edison Note. At that time, the principal payment
schedule for the Edison Note called for $100,000 monthly payments
from May to September 1995, $200,000 payments in December 1995 and
March and June 1996, and a final $800,000 payment in March 1998.
Rosen attempted to secure at least partial forgiveness of the
Edison Note in exchange for agreeing to purchase the electricity
for the planned shopping center on the Development Site from Boston
Edison. At one point, Boston Edison offered a $640,000 reduction
in the Edison Note, which Rosen did not accept. In the end, Rosen
and Boston Edison never finalized a reduction in the outstanding
Edison Note balance.
On April 2, 1996, almost one year after the Fill
Agreement was signed, O'Donnell paid off the outstanding balance of
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the Edison Note and obtained a discharge of the mortgage on the
Edison Site. The next day, O'Donnell verbally informed Rosen of
its actions. During the following week, O'Donnell advised Rosen
that, in its view, the full payment of the note terminated Rosen's
right to acquire a permanent interest in the Edison Site under the
Fill Agreement.
Rosen disagreed with O'Donnell's interpretation of the
Fill Agreement, claiming that its right to obtain a permanent
interest in the Edison Site had not been terminated and that
O'Donnell's prepayment of the note and its position on the issue
were "calculated to interfere with a right [Rosen] had bargained
for in good faith." O'Donnell responded that Rosen's position was
"preposterous" and that O'Donnell's decision to satisfy its
obligations on the Edison Note at that time was permitted by the
Fill Agreement. O'Donnell also wrote that "[n]owhere is it stated
that O'Donnell is prohibited from early satisfaction of our
financial obligations." During April and June of 1996, Rosen and
O'Donnell exchanged increasingly heated letters setting forth their
respective positions, and eventually they reached an impasse.
In June 1996, Rosen asked Mintz Levin to draft a
complaint for use in an impending civil action against O'Donnell,
and Mintz Levin complied. When Mintz Levin would not agree to
handle the case on a contingency fee basis, Rosen consulted with
Boston attorney Albert Farrah, who agreed to take the case on
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contingency. Rosen filed suit in Massachusetts state court in
November 1996, alleging that O'Donnell's pre-payment of the Edison
Note breached the Fill Agreement. In April 1998, the state court
granted O'Donnell's motion for summary judgment. Two months later,
the Massachusetts Appeals Court affirmed the summary judgment
ruling.
Following this adverse decision in its suit against
O'Donnell, Rosen claimed that Mintz Levin had been negligent (1) in
failing to draft the Fill Agreement to protect Rosen's right to
secure a permanent interest in the Edison Site and (2) in failing
to timely secure an easement for Rosen and perform sufficient due
diligence regarding the status of an existing easement on the
property. On October 14, 1999, Rosen and Mintz Levin entered into
a "tolling and standstill" agreement that tolled the statute of
limitations for any claim of Rosen's against Mintz Levin that
accrued after September 2, 1996. If Rosen's claims accrued prior
to that date, they would be barred by the applicable Massachusetts
statute of limitations.
On January 25, 2000, Rosen filed this legal malpractice
action against Mintz Levin. In granting Mintz Levin's summary
judgment motion, the district court found that O'Donnell's letters
to Rosen in April and June of 1996 "were sufficient to apprise
Rosen, an experienced real estate developer, that conduct of Mintz
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Levin had caused Rosen harm." Further, the district court found
that
quite apart from Mary O'Donnell's April and
June 1996 letters, and at least by September
20, 1995[,] Rosen was aware that the O'Donnell
interests could pay the balance of the Edison
Note at any time. . . . The [letters] were
merely a reminder to Rosen of what it actually
knew on September 20, 1995: Rosen did not have
an exclusive option to acquire a 50% interest
in the Edison Site, because the Fill Agreement
did not grant Rosen the exclusive right to pay
the balance of the Edison Note.
Finally, the district court also held that even though "neither
party devoted much argument to the easement question," "[t]o the
extent that there was appreciable harm as a result of the easement
problems, the record demonstrates that Rosen had actual knowledge
of that harm prior to September 2, 1996."
Rosen now appeals the district court's grant of summary
judgment for Mintz Levin. In Rosen's view, the summary judgment
record does not compel a finding that it knew or should have known
that Mintz Levin's drafting of the Fill Agreement was the cause of
its harm until at least the Massachusetts state court rejected its
lawsuit against O'Donnell.
II.
We review the grant of summary judgment de novo. LeBlanc
v. Great Am. Ins. Co., 6 F.3d 836, 841 (1st Cir. 1993). Summary
judgment is proper when the record shows that "the pleadings,
depositions, answers to interrogatories and admissions on file
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together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to judgment as matter of law." Fed. R. Civ. P. 56(c). An issue is
"genuine" if "the evidence is such that a reasonable [factfinder]
could return a verdict for the nonmoving party," and "material
facts" are those that "might affect the outcome of the suit under
governing law." Hayes v. Douglas Dynamics, Inc., 8 F.3d 88, 90
(1st Cir. 1993)(quoting Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986)). In assessing the summary judgment record, the
facts, as well as the reasonable inferences that may be drawn from
them, must be viewed in the light most favorable to the non-moving
party. See, e.g., Cooperman v. Individual, Inc., 171 F.3d 43, 46
(1st Cir. 1999).
Rosen, the non-moving party here, pressed two legal
malpractice claims against Mintz Levin. First, Rosen claims that
Mintz Levin negligently failed to draft the Fill Agreement to
protect Rosen's right to secure a permanent interest in the Edison
Site. Second, Rosen urges that Mintz Levin negligently advised
Rosen regarding its desire to obtain an easement on the Edison Site
from O'Donnell. The parties agree correctly that the substantive
law of Massachusetts provides the rules of decision in this
diversity case, Pitts v. Aerolite SPE Corp., 673 F.Supp. 1123, 1127
(D. Mass. 1987), and that Massachusetts specifies a three-year
statute of limitations for legal malpractice claims. Mass. Gen. L.
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ch. 260, § 4. Under Massachusetts law, the limitations period
begins to run "[o]nce a client or former client knows or reasonably
should know that he or she has sustained appreciable harm as a
result of the lawyer's conduct . . . ." Williams v. Ely, 423 Mass.
467, 473 (1996). "[A] plaintiff [must] have (1) knowledge or
sufficient notice that she was harmed, and (2) knowledge or
sufficient notice of what the cause of the harm was." Bowen v. Eli
Lilly Co., 408 Mass. 204, 208 (1990)(cited with approval in
Williams, 423 Mass. at 473).
A. Rosen's Malpractice Allegation Regarding Its Right
to Secure a Permanent Interest in the Edison Site
1. The Continuing Representation Doctrine
At least by March 1996, when Mintz Levin sent a letter to
O'Donnell's counsel asserting that Rosen's option to secure a
permanent interest in the Edison Site survived O'Donnell's
prepayment of the Edison Note, Rosen began spending time and money
disputing O'Donnell's interpretation of the Fill Agreement. Rosen
continued expending time and money to defend its claim under
Section 6(b), which it now alleges was negligently drafted by Mintz
Levin, throughout the summer and fall of 1996. More letters were
sent from counsel to O'Donnell, and Rosen and its attorneys
prepared to sue O'Donnell in state court.
For purposes of accrual of a legal malpractice claim,
"harm" occurs when a client expends "additional legal fees to
ameliorate the harm caused by [his original attorney's] error."
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Levin v. Berley, 728 F.2d 551, 554 (1st Cir. 1984)(interpreting
Mass. G. L. c. 260, § 4). See also Cantu v. St. Paul Cos., 401
Mass. 53, 57 (1987); Massachusetts Elec. Co. v. Fletcher, Tilton &
Whipple, 394 Mass. 265, 268-269 (1985). On these facts, there is
no question that Rosen suffered harm related to its rights under
Section 6(b) prior to September 2, 1996, the cutoff date under the
"tolling and standstill" agreement. Accordingly, we turn now to
the causation component of the accrual analysis.
The critical inquiry here is when Rosen knew, or
reasonably should have known, that Mintz Levin's alleged
malpractice, and not O'Donnell's purported breach, was the cause of
Rosen's harm. Williams, 423 Mass. at 473. Rosen claims that it
should not reasonably have known at any time outside the three-year
statute of limitations period that Mintz Levin caused the harm
because, in part, Mintz Levin itself led Rosen to believe that it
would prevail in its suit against O'Donnell. As evidence of this
claim, Rosen points to a letter Mintz Levin drafted in July 1996 to
send to O'Donnell's counsel, which included the following passage:
Our client feels very strongly that he
negotiated a valid agreement and that he
deserves to reap the benefits of that
negotiation. If need be, we are prepared to
initiate and prosecute an action against
O'Donnell . . . for breach of the [Fill
Agreement] and other related claims. We are
confident that we will obtain the following
preliminary and permanent relief: . . .
Rosen's right to continued ownership, up to an
undivided 50% interest, in the Boston Edison
Site, with all attendant rights,
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notwithstanding O'Donnell's payoff of the
Edison Mortgage. . . .
Even though this letter ultimately was not sent to O'Donnell, it is
probative of Mintz Levin's representations to Rosen regarding the
strength of its case against O'Donnell. Mintz Levin supported
Rosen's interpretation that O'Donnell had breached the Fill
Agreement and Rosen's belief that O'Donnell, not Mintz Levin, was
the source of its harm.
Furthermore, defendant Leonard, one of Rosen's primary
lawyers at Mintz Levin, testified during his deposition that
although the firm did not represent Rosen in the litigation
commenced against O'Donnell in state court in November 1996, "[w]e
worked both with that other counsel [Farrah] and with Mr. Rosen
directly in trying to resolve [the dispute with O'Donnell]."
Leonard further testified that during the fall of 1996, Mintz Levin
attorneys "were [Rosen's] lawyers for the purpose of seeing whether
we could memorialize a resolution of [his dispute with O'Donnell]."
These facts implicate the doctrine of continuing
representation, which tolls the statute of limitations "while the
defendant attorney continues to represent the plaintiff . . . ."
Cantu, 401 Mass. at 58. The continuing representation doctrine
"recognizes that a person seeking professional assistance has a
right to repose confidence in the professional's ability and good
faith, and realistically cannot be expected to question and assess
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the techniques employed or the manner in which the services are
rendered." Murphy v. Smith, 411 Mass. 133, 137 (1991). Thus
explained, the continuing representation doctrine affirms the
relevance of ongoing legal representation to the critical cause of
action accrual question--whether Rosen should have known that Mintz
Levin's alleged malpractice, and not O'Donnell's purported breach,
was the cause of Rosen's harm. Mintz Levin's assurances that Rosen
would prevail in its suit against O'Donnell, and Mintz Levin's
participation in the preparation for that suit, are consistent with
the innocent reliance that the continuing representation doctrine
protects.
The factually apposite case of Eck v. Kellem, 51 Mass.
App. Ct. 850 (2001), demonstrates the importance of the continuing
representation doctrine to the outcome here.1 In Eck, plaintiffs
brought a legal malpractice suit against Kellem, the attorney who
prepared the purchase and sale agreement in a real estate
transaction in which the purchaser successfully sued Eck for
misrepresentations regarding the property. Eck had instructed
1
Mintz Levin attempts to distinguish Eck by claiming that the
facts are "significantly different from those of the case at bar"
and that the Eck court "was careful to limit its holding to the
specific facts of that case[.]" We do not think that the language
from Eck cited by Mintz Levin--"[w]e conclude that on this record
the statute of limitations did not begin to run upon the
commencement of the [third party's] suit . . ."--means that the
case only has precedential value on identical facts. Eck, 51 Mass.
App. Ct. at 856 (emphasis added). Also, as we explain, we find the
facts of Eck sufficiently similar to the case at bar to be
persuasive on the accrual issue.
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Kellem to draft the purchase and sale agreement to protect Eck from
future claims by the purchaser for liability for hazardous waste
contamination on the property. However, the purchaser did sue Eck
for the contamination, and Eck chose another attorney to represent
him because Kellem would be a witness in the litigation. Kellem,
however, reassured both Eck and his new attorney that Eck would
prevail at trial. This prediction did not prove prescient--Eck
lost at trial and then sued Kellem for legal malpractice. Kellem
moved for summary judgment, arguing Eck's malpractice claim against
him was time barred.
The Massachusetts Appeals Court noted that "[t]hese facts
bring the case close to the doctrine of continuing representation."
Eck, 51 Mass. App. Ct. at 855. It framed the question as "whether
it was the commencement of the [purchaser's] suit, or the judgment
therein, that was the first event reasonably likely to put Eck on
notice that Kellem's sale agreement may have caused his injury . .
. ." Id. at 853. In finding that the statute of limitations began
to run from the time of judgment, the Eck court relied on Kellem's
reassurances to Eck that the purchase and sale agreement would
protect him and that "[w]hether, in fact, Kellem was negligent in
the preparation of the sale agreement had to await the outcome of
the [purchaser's] suit . . . ." Id. at 855. Accord Spilios v.
Cohen, 38 Mass. App. Ct. 338, 339-40 (1995)(holding that since it
was only possible to determine whether there was legal malpractice
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after a verdict on the underlying dispute was rendered, the statute
of limitations did not begin to run until that time).
Rosen's situation is similar to Eck's. Mintz Levin
continued to assure Rosen that it would prevail in its action
against O'Donnell and that the Fill Agreement protected Rosen's
rights. Furthermore, Rosen engaged another attorney, as did Eck,
for reasons unrelated to any dissatisfaction with Mintz Levin.
Until the Massachusetts state court ruled that O'Donnell did not
breach the Fill Agreement, Rosen reasonably believed that
O'Donnell, not Mintz Levin, was the cause of its harm.2
To start the statute of limitations running, "[t]here
must be notice of a causal relationship between the harmful event
attributed to the defendant . . . and the harm suffered by the
plaintiff." Eck, 51 Mass. App. Ct. at 853 (internal citations
omitted)(emphasis added). See also Int'l Mobiles Corp. v. Corroon
& Black/Fairfield & Ellis, Inc., 29 Mass. App. Ct. 215, 218 (1990)
2
The Massachusetts Superior Court wrote that
[t]here is no evidence in the summary judgment
record to show or support the plaintiff's
claims of an exclusive right to acquire an
ownership interest in the [Edison Site], or to
preclude the defendants from paying off that
mortgage and securing title to that property
free and clear of any permanent interest or
ownership right in the plaintiffs.
Rosen Constr. Ventures v. O'Donnell Sand and Gravel, Inc., No. 96-
6583E, Order of Court, (Suffolk Superior Court, April 29,
1998)(emphasis in original).
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("Notice here refers . . . to discovery of the plaintiff's injury
as causally connected to the defendant's negligence.") (emphasis
added). The judgment of the Massachusetts court provided Rosen
with notice of that causal relationship between Mintz Levin's
drafting of the Fill Agreement and the harm Rosen suffered when
O'Donnell prepaid the Edison Note.
2. Knowledge of Actual Harm
Mintz Levin argues that Rosen is not protected by the
continuing representation doctrine because Rosen actually knew that
it suffered appreciable harm because of Mintz Levin's conduct.
Lyons v. Nutt 436 Mass. 244, 250 (2002)(the "doctrine has no
application . . . where the client actually knows that he suffers
appreciable harm as a result of his attorney's conduct."). The
district court held that Rosen indeed had actual knowledge that
Mintz Levin caused its harm because O'Donnell's letters in April
and June of 1996, setting forth its position regarding the
interpretation of the Fill Agreement, "at the very least called to
Rosen's attention that the exclusivity provision it had desired was
missing from the Fill Agreement" and put Rosen on notice "that the
conduct of Mintz Levin had caused Rosen harm."
The district court further found that Clifford Rosen's
September 20, 1995, memorandum to file, stating that he understood
"that as with most loan[s], she could prepay at anytime," indicates
that Rosen knew that it lacked the exclusive option to acquire a
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50% interest in the Edison Site because it lacked the exclusive
option to reduce the Edison Note. On appeal, Mintz Levin seeks to
bolster the district court's grounds for the summary judgment
ruling in its favor by drawing attention to four other items in the
summary judgment record that, in its view, support the finding that
Rosen had actual knowledge of being harmed as well as of the cause
of that harm.
For the sake of clarity in our explanation, we discuss
these items in a slightly different order than Mintz Levin
presented them. First, according to Mintz Levin, its draft
complaint against O'Donnell did not include a cause of action for
breach of Section 6(b) of the Fill Agreement. Second, Mintz Levin
urges that the plain language of the Fill Agreement itself was
sufficient to put Rosen on notice that it lacked an exclusive
option to secure a reduction in the Edison Note. Third, Donald
Anastasia, Boston Edison's attorney who negotiated with Rosen
regarding the Edison Note, memorialized their May 17, 1995,
conversation in handwritten notes that stated "[Rosen's] concern:
O'D[onnell] pays off note soon, little left to discount." Fourth,
Michael Northrup, Rosen's in-house counsel, stated in his
deposition that he was concerned about ambiguities in the Fill
Agreement and that Mintz Levin's drafting of the Fill Agreement was
"sloppy."
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We assess these four contentions in turn, keeping in mind
our obligation to consider the facts, and their reasonable
inferences, in the light most favorable to Rosen, the non-moving
party. We will then consider the grounds explicitly relied upon by
the district court.
a. The draft complaint
Mintz Levin points to its draft complaint against
O'Donnell, which it discussed with Rosen, and the draft's omission
of a cause of action against O'Donnell for breach of Section 6(b).
Mintz Levin argues that this omission is significant because it
shows that Rosen understood at that time that O'Donnell did not
breach its obligations under Section 6(b). Reading the draft
complaint as a whole, we find Mintz Levin's argument unpersuasive.
Although Count I of the draft complaint, titled "Breach of Contract
and Action for Specific Performance," does not specifically allege
breach of Section 6(b), the draft complaint contains several
passages regarding Section 6(b) that could reasonably lead a client
to believe that his allegations of breach were addressed in the
complaint.
For example, the draft complaint states that "[o]n or
about April 2, 1996, notwithstanding Section 6(b) of the Rosen-ODSG
Fill Agreement, and without any notice to Rosen, ODSG paid off the
outstanding balance due on the ODSG-Edison Note and Mortgage two
years in advance of the scheduled final payment date of March 6,
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1998. . . ." Count II of the draft complaint, alleging breach of
the covenant of good faith and fair dealing, alleges that
ODSG's actions, namely paying down the entire
Note and Mortgage on the Edison Site in May,
1996 rather than March, 1998, as contemplated
by the parties and according to the express
schedule in the Secured Promissory Note, and
without the consent of or notice to Rosen, the
51% owner of the property as a tenant in
common, with knowledge that Rosen was actively
negotiating a reduction or discount in the
outstanding principal due on the mortgage with
Boston Edison, has purportedly eliminated
Rosen's right to retain an ownership interest
in the Edison Site under the Rosen-ODSG Fill
Agreement.
By such conduct, ODSG has breached the
covenant of good faith and fair dealing.
Similarly, Count III of the draft complaint, alleging
intentional interference with advantageous business relations,
characterized O'Donnell's prepayment of the Edison Note as
interfering with Rosen's right under Section 6(b) to obtain a
permanent interest in the Edison Site. Count VI, seeking
declaratory relief, asserts that "Rosen is entitled to retain an
ownership interest in the Edison Site at the time reconveyance of
its 51% interest is triggered pursuant to the Rosen-ODSG Fill
Agreement on account of ODSG's breach of contract and breach of
covenant of good faith and fair dealing in paying down the Boston
Edison mortgage thereby purportedly preventing Rosen from securing
a reduced or discounted mortgage." Finally, the draft complaint's
Prayer for Relief urges that "Rosen is entitled to retain an
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ownership interest in the Edison Site, in an amount to be
determined at trial, on account of ODSG's breach of contract and
breach of covenant of good faith and tortious interference with
Rosen's business relationship in paying down the Boston Edison
mortgage thereby preventing Rosen from securing a reduced or
discounted mortgage."
On the whole, Mintz Levin's draft complaint characterizes
O'Donnell's prepayment of the Edison Note as a breach of
O'Donnell's duties to Rosen imposed on it by Section 6(b). The
absence of this language in the specific count alleging breach of
contract is not sufficient to charge Rosen with knowledge of Mintz
Levin's alleged malpractice in drafting Section 6(b). This is
especially true since the affidavit of one of the defendants,
Stephen Leonard, is the only statement in the record alleging that
Rosen discussed with Mintz Levin whether a count for breach of
Section 6(b) could be included in the draft complaint.3 Reading
these facts and drawing inferences in the light most favorable to
Rosen, we find that the absence in the draft complaint of a
specific count of breach of contract under Section 6(b) is
3
Clifford Rosen was asked during his deposition if he
discussed the complaint with any of three people: Mr. Northrup, his
in-house counsel; Mr. Farrah, the attorney who represented Rosen in
his state court litigation against O'Donnell; and Mr. Carey, an
employee of Rosen's whose role is unidentified in the materials
before this court. Rosen replied that he did not recall discussing
the complaint with any of these individuals. Mintz Levin has not
directed our attention to any questions to Rosen about
conversations he might have had with Leonard about the complaint.
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insufficient to charge Rosen with actual knowledge that Mintz
Levin's alleged drafting error caused its harm, particularly
because the draft complaint amply referenced O'Donnell's
obligations to Rosen under Section 6(b).
b. Language in the Fill Agreement
We also are unpersuaded that the language in the Fill
Agreement was sufficient to apprise Rosen that it lacked the
exclusive option to secure a permanent interest in the Edison Site
by reducing the principal balance of the Edison Note. The relevant
portion of Section 6(b) states that "if Rosen, in its sole
discretion, is able to negotiate with Edison a forgiveness of, or
a reduction in, the principal amount due in order to obtain a
discharge of the Edison Mortgage . . . ." It is a reasonable
inference that a lay person, even an experienced real estate
developer, may not have realized that this language failed to
protect Rosen's right to secure a permanent interest in the Edison
Site.
Indeed, Mintz Levin's draft complaint against O'Donnell
supports Rosen's argument that it reasonably thought that Section
6(b) of the Fill Agreement, as drafted, protected its right to
secure a permanent interest in the Edison Site by negotiating a
forgiveness of or a reduction in the principal amount of the Edison
Note, even though the express language of Section 6(b) does not
prohibit O'Donnell from prepaying the balance of the Edison Note.
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In Rosen's view, its right to negotiate a reduction in the Edison
Note in exchange for a permanent interest in the Edison Site
implied that O'Donnell could not terminate that right at any time
simply by paying off the principal balance with no warning to
Rosen. Otherwise, Rosen's right to secure a permanent interest
through the negotiations with Edison would have little value.
Mintz Levin articulated that view of the meaning of Section 6(b)
when it alleged in the draft complaint that the covenant of good
faith and fair dealing precluded O'Donnell from paying off the
Edison Note almost two years early.
On these facts, it is not enough to argue, as Mintz Levin
does, that the express language of Section 6(b) was sufficient to
apprise Rosen that it lacked the rights Rosen thought it had
negotiated, and that Mintz Levin's drafting was the source of that
exposure. Rosen relied on Mintz Levin's expertise to draft an
agreement that would protect its ability to secure a permanent
interest in the Edison Site. "The attorney . . . is an expert, and
much of his work is done out of the client's view. The client is
not an expert; he cannot be expected to recognize professional
negligence if he sees it, and he should not be expected to watch
over the professional or to retain a second professional to do so."
Hendrickson v. Sears, 365 Mass. 83, 90 (1974). Until the
Massachusetts state court told Rosen that the express language of
Section 6(b) did not protect its right to secure a permanent
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interest in the Edison Site, Rosen reasonably thought it was
protected. In consequence, we decline to hold that the plain
language of Section 6(b) is enough to apprise Rosen of Mintz
Levin's alleged negligence in drafting the agreement.
c. Anastasia's note
Donald Anastasia's note of May 17, 1995, a month after
the Fill Agreement was executed, mentions "His [Rosen's] concern:
O'D[onnell] pays off note soon, little left to discount." This
notation also does not carry the import that Mintz Levin seeks.
The notation is set forth on a sheet of paper covered with informal
handwritten commentary by Boston Edison's attorney about an array
of subjects discussed during a phone conversation with Rosen, all
apparently related to the status of the shopping center project.
The topics include an upcoming commission meeting, barging in the
required fill, a physical tie-in on the railroad crossing, and
Rosen's needs for meeting "DPU criteria," which presumably refers
to the Massachusetts Department of Public Utilities. On the top
right hand corner of the page, inserted at an angle, is the note:
"Give him status report -- early June? His concern: O'D[onnell]
pays off note soon, little left to discount."
The language Mintz Levin cites is ambiguous. On one
view, it could simply refer to the payment schedule of O'Donnell's
Edison Note. If O'Donnell continued making payments on the note
according to schedule, the balance on the note would be reduced to
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a million dollars by June 1996, just over a year into the future.
At that point, Rosen would be precluded from obtaining the full 50%
ownership interest in the Edison site it sought because there would
be less than a million dollars to discount.4 Although other
readings of Anastasia's note are possible, we decline to hold that
a third party's brief, ambiguous note recorded during a phone
conversation with Rosen proves that Rosen had actual knowledge that
Mintz Levin allegedly was negligent in drafting the Fill Agreement.
d. Northrup's testimony
Mintz Levin claims that
Rosen's in-house counsel, Michael Northrup,
analyzed Section 6(b) of the Fill Agreement.
He warned Clifford Rosen that the provision
was inconsistent with the terms that Clifford
Rosen had told Northrup had been negotiated
with O'Donnell. He told Rosen that he thought
that Mintz, Levin's drafting of this part of
the Fill Agreement had been 'sloppy.'
Although Mintz Levin cites primarily to Northrup's deposition
testimony for these propositions, Northrup's testimony does not
fully substantiate this characterization. During his deposition,
when questioned about a proposed amendment to Section 6(b) that he
had drafted, Northrup replied that
4
Section 6(b) provides that Rosen's permanent interest in the
Edison Site, not to exceed 50%, would be calculated by dividing the
amount it reduced the principal owed on the Edison Note by the
purchase price of $2,000,000. Accordingly, to obtain the full 50%
permanent interest it sought, Rosen would have to reduce the
principal owed by $1,000,000. In consequence, once the outstanding
principal was reduced below $1,000,000, Rosen could only obtain a
less than 50% permanent interest in the site.
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my primary concern is, when I first saw
[Section 6(b)] and prepared the second
amendment it was the fact that Clifford had
always told me his deal was that he had an
ability to come in and get his half-interest
in almost any scenario. When I read it I
didn't think it expressly or clearly stated
that. I don't remember if prepayment was in
my mind. I just generally didn't think it was
fully developed as it should be to protect
him. I don't recall at this time all of the
various concerns I might have had in
particular.
When asked if he brought those concerns to Rosen's
attention, Northrup replied that "I certainly engaged him in
conversation about them, depending upon his patience and listening
ability as to how many of them got to him, but I know -- whether I
emphasized one or two, I don't remember for sure, but I would have
tried to have a thorough discussion." When asked if he recalled
having "a particular conversation with Mr. Rosen about Paragraph
6(b) to the fill agreement as it related to Mary O'Donnell's
ability to prepay the Edison note and extinguish any right he had
to obtain the interest in the Edison site," Northrup responded that
he did not recall specifically that point. Northrup testified that
he characterized Mintz Levin's drafting of Section 6(b) as "sloppy
or that kind of language," and that he "tried to deal with it in a
letter [to Mintz Levin], that is the particular issue of what if he
negotiated a reduction in the note, but it didn't go into effect
prior to such time as she started getting the note down below the
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million dollars, and how could it be that she still would have to
pay and that he could retain his interest."
Reading this testimony in the light most favorable to
Rosen, Northrup testified that he had concerns about the drafting
of Section 6(b), that he thought it was sloppy, and that he tried
to address with Mintz Levin the specific issue of what would happen
if Rosen negotiated a reduction in the Edison Note that did not go
into effect until after O'Donnell had paid down the outstanding
balance to less than a million dollars. This concern could have
been motivated by the quick pace of the regular payment schedule
between O'Donnell and Edison, which provided that the balance would
fall below a million dollars in June 1996, giving Rosen little more
than a year to achieve its 50% permanent interest in the Edison
Site through negotiating with Edison. Most importantly, however,
Northrup testified that he did not recall having a conversation
with Rosen about Section 6(b) "as it related to Mary O'Donnell's
ability to prepay the Edison note and extinguish any right he had
to obtain the interest in the Edison site." This testimony, then,
read in the light most favorable to Rosen, establishes that
Northrup did not recall a discussion with Rosen about O'Donnell's
potential prepayment of the Edison Note and that Northrup was
unsure to what degree Rosen heard and understood any of Northrup's
general concerns about Section 6(b). This testimony is not enough
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to charge Rosen with actual knowledge of Mintz Levin's alleged
malpractice.
e. The grounds cited by the district court
Finally, we turn to the two grounds relied upon by the
district court for granting summary judgment in favor of Mintz
Levin: Clifford Rosen's September 1995 memo to file, stating that
he was "under the understanding that as with most loan[s],
[O'Donnell] could prepay at anytime," and O'Donnell's letters to
Rosen in April and June 1996 setting forth its interpretation of
the Fill Agreement. The district court found that the letters were
"sufficient to apprise Rosen . . . that conduct of Mintz Levin had
caused Rosen harm" and that they "at the very least called to
Rosen's attention that the exclusivity provision it had desired was
missing from the Fill Agreement." The district court also found
that O'Donnell's letters were "merely a reminder to Rosen of what
it actually knew on September 20, 1995: Rosen did not have an
exclusive option to acquire a 50% interest in the Edison Site,
because the Fill Agreement did not grant Rosen the exclusive right
to pay the balance of or reduce the Edison Note." We disagree with
the assessment of the significance of the file memo and the
letters.
i. The memorandum to file
The September 1995 memorandum in question, prepared
approximately five months after the execution of the Fill
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Agreement, includes a short recitation of O'Donnell's past payments
on the Edison Note, the due dates of the scheduled future payments,
and two sentences at the end: "It is understood that O'Donnell is
currently negotiating to have a new payment schedule. Also, I am
under the understanding that as with most loan[s], she could prepay
at anytime." On its face, this language in the memorandum is the
strongest piece of evidence available to Mintz Levin. Viewed
through the summary judgment prism, however, it is not substantial
enough to carry the summary judgment burden.
Rosen argues that this memorandum pertained to its
understanding of the terms between O'Donnell and Boston Edison as
set forth in the Edison Note, not the terms of the Fill Agreement.
This claim is substantiated by the context of that notation, with
its detailed elaboration of the payment schedule. In other words,
this memorandum to file summarizes Rosen's understanding of the key
terms of the Edison Note, rather than its understanding of the
absence of limitations imposed on O'Donnell by the terms of the
Fill Agreement. Indeed, it is entirely plausible that a mortgagor
may be permitted to prepay the principal balance on an outstanding
note under the terms of the note, but be prohibited from doing so
by an agreement with a third party. Furthermore, the terms of the
Edison Note, the arguable focus of the memorandum, would be
important to Rosen in its attempt to negotiate a reduction in that
note with Boston Edison. Again, Rosen is entitled to these
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reasonable inferences in its favor as the non-moving party on
summary judgment. Therefore, Rosen's memorandum to file regarding
the terms of the Edison Note does not suffice to show that Rosen
actually knew that Mintz Levin allegedly caused Rosen's harm by
drafting Section 6(b) in a way that permitted O'Donnell to
extinguish Rosen's right to secure a permanent interest in the
Edison Site by prepaying the Edison Note.
ii. The O'Donnell letters
O'Donnell's letters notifying Rosen of its interpretation
of the Fill Agreement did not put Rosen on notice that Mintz Levin
negligently drafted the contract. Instead, the letters served only
to notify Rosen that O'Donnell's interpretation of the Fill
Agreement differed from Rosen's. Rosen claims that it believed
that O'Donnell breached contractual obligations under the Fill
Agreement by prepaying the Edison Note. Accordingly, taking the
facts and their reasonable inferences in the light most favorable
to Rosen, it believed that the cause of its harm was O'Donnell
breaching its contractual obligations under the Fill Agreement, not
Mintz Levin's alleged negligent drafting. As confirmation of this
view, Rosen sued O'Donnell for breach and sought Mintz Levin's
representation in the action, turning to Farrah to try the case
only when Mintz Levin refused to take the case on contingency.
When Rosen lost the case, it finally knew that the cause of its
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harm was Mintz Levin's alleged drafting error, not O'Donnell's
purported breach.
3. The Importance of the State Court Decision
In reaching this conclusion about the importance of the
state court decision, we are not adopting the general proposition
that the claims of potential plaintiffs in legal malpractice
actions do not accrue until a court ruling reveals the inadequacies
of their lawyer's work. However, as the facts of this case
demonstrate, if a lawsuit has been filed that implicates the work
of their lawyer, the outcome of that lawsuit may be highly relevant
to a critical question in the accrual analysis--whether the clients
should have known that their lawyers, rather than their
adversaries, were responsible for the harm caused by the legal
problem at issue in the lawsuit.
When Rosen first suffered harm--that is, when its right
to secure a permanent interest in the Edison Site was arguably
extinguished by O'Donnell's prepayment of the Edison Note--Rosen
immediately took action. Rosen consulted its lawyers at Mintz
Levin who assured it that the Fill Agreement protected its rights
and that O'Donnell was in breach. After Mintz Levin drafted a
complaint against O'Donnell but declined to take the case on a
contingency fee basis, Rosen consulted another lawyer about its
claim against O'Donnell. That lawyer, Farrah, filed suit on behalf
of Rosen. Far from sleeping on its rights, as Rosen reasonably
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understood them, Rosen sought promptly to vindicate them.
Moreover, to hold that an adverse party's alleged breach of a
contract is necessarily sufficient to put a client on notice that
his attorney negligently drafted the contract would create a rule
requiring the client in any contract dispute to immediately begin
malpractice proceedings against his attorney. We decline to adopt
such an untenable rule.
Instead, viewing all of the facts and their reasonable
inferences in the light most favorable to Rosen, we find that a
reasonable factfinder could conclude that the earliest Rosen knew,
or should have known, that Mintz Levin's alleged negligence in
drafting Section 6(b) caused it harm was the date the Massachusetts
trial court granted summary judgment to O'Donnell--April 29, 1999--
which is well after the operative date of September 2, 1996 set
forth in the standstill agreement. Because the date of the trial
court decision is within the statute of limitations, we need not
decide in this case whether the state trial court decision or the
state appellate affirmance of that decision put Rosen on notice
that Mintz Levin, and not O'Donnell, was the source of its harm.
B. Rosen's Malpractice Allegation Regarding The
Easement
Rosen raises two complaints regarding easement issues.
As the district court noted, the parties did not "devote[] much
argument to the easement question," and
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Rosen does not assert in this case that it was
ultimately unable to secure an easement over
the Edison Site. There is also no evidence
that the problems that arose in securing the
easement over the Edison Site would not have
occurred had Mintz Levin advised Rosen to
secure the easement earlier. As to the MBTA
easement, Rosen does not suggest that it could
have avoided a problem with the MBTA had it
known (presumably at the time the Development
Site was purchased) of the MBTA's easement
rights.
Rosen has not remedied these shortcomings in its briefs to this
court. Like the district court, we are hampered by Rosen's brevity
in developing the facts and arguments on the easement issues.
Indeed, the first easement claim is almost
incomprehensible as stated in the brief. In the spring of 1996,
Rosen apparently requested that O'Donnell grant an easement under
the provisions of Section 3(c), which states that O'Donnell "agrees
that it will, upon request by Rosen, grant to Rosen . . . a
perpetual easement across the Edison Site. . . ." O'Donnell
resisted the request, and Rosen incurred some expenses in
attempting to secure the easement. As best we can determine, Rosen
is making one of two arguments in relation to Section 3(c) of the
Fill Agreement.
First, Rosen might be arguing that Mintz Levin was
negligent in failing to draft Section 3(c) to convey an easement
outright. If so, this claim fails because Rosen could not have
given Mintz Levin the information necessary for such drafting.
Mintz Levin notes that in April 1995, when the Fill Agreement was
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signed, "Rosen did not want O'Donnell immediately to grant an
easement because at that time, Rosen did not know precisely where
he wished to locate that easement." Rosen does not dispute this
contention in its reply brief, and Mintz Levin supports the claim
by citing to the May 1996 letter to O'Donnell requesting the
easement, which explains that "the layout of the proposed easement
is not currently complete," even more than a year after the Fill
Agreement was signed. Since Rosen apparently did not know where it
wanted the easement even in May 1996, Mintz Levin could hardly have
drafted the Fill Agreement in April 1995 to convey an undefined
easement.
In the alternative, Rosen might be claiming that Mintz
Levin was negligent for failing to advise it to request the
easement immediately after the Fill Agreement was executed. If so,
Rosen's inability to define the easement it needed as late as May
1996 again defeats any claim that Mintz Levin was negligent in not
advising it to secure the easement earlier.
A similar result befalls the MBTA easement issue. Rosen
claims that Mintz Levin was negligent in failing to inform it that
the easement on the MBTA property was for emergency use only.
However, Rosen testified at his deposition that Langer informed
Rosen in a May 24, 1996 letter that the MBTA easement was
designated for emergency use only. Rosen also apparently incurred
expenses in the spring of 1996 while attempting to resolve this
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issue. Therefore, "the necessary coalescence of discovery and
appreciable harm" had occurred prior to the statutory bar date of
September 2, 1996, agreed to by the parties in their stipulation,
Cantu, 401 Mass. at 57, and the easement claim must fail.
III.
For the forgoing reasons, the judgment of the district
court is AFFIRMED in part and VACATED in part. We REMAND for
proceedings consistent with this opinion.
So ordered. Each party shall bear its own costs.
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