Real Estate & Property Law

Dorsey & Whitney Faces Malpractice Suit Over Dual Representation in Small Real Estate Matter

A well-known Minneapolis-based international law firm is facing a malpractice suit over a former associate’s representation of both parties in the purchase of an ownership share in a Wisconsin bed-and-breakfast.

The purchasers, who are represented by Robins Kaplan Miller & Ciresi, have sued Dorsey & Whitney, contending that they weren’t told by former associate Regan D. Waller that the property was already encumbered by a $700,000 mortgage when they anted up $530,000 for a 40 percent interest in the property, reports Minnesota Lawyer.

Their purchase was documented by a quitclaim deed and a tenancy in common agreement drafted by Waller, according to the suit. It says a Dorsey partner executed a joint representation agreement after the sellers suggested that both sides use the law firm. The buyers and the sellers had known each other for years at the time of the transaction.

After the transaction, the sellers subsequently took out two additional loans on the property without the buyers’ knowledge, as they discovered once the lender eventually foreclosed, the complaint recounts. The plaintiffs say they would not have purchased an interest in the property if they had known about the $700,000 mortgage and allege that Waller neither told them about it nor suggested a title search.

A spokesman for Dorsey & Whitney told Minnesota Lawyer that law firm intends to defend the suit, which it believes to be without merit, vigorously.

Experts told the legal publication that dual representation in a real estate transaction can present issues for lawyers, since the buyers and sellers may have conflicting interests.

“The buyer and the seller may think they are looking for a scrivener, but those situations are rare,” said attorney Kent Gernander. He formerly headed the Lawyers Professional Responsibility Board.

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