## Facts

- An Indian tribe and a casino manager entered a management agreement for development and operation of a tribal casino; the agreement received approval from the National Indian Gaming Commission (NIGC).
- Miller & Schroeder Financial, Inc. (M&S) arranged two loans to finance the project, to be secured by the borrower’s interest in casino revenues.
- M&S retained Dorsey & Whitney, LLP to structure, document, and secure the loan transaction, including preparing a pledge and security agreement.
- The participating banks purchased loan participation interests sold by M&S.
- A dispute later arose over whether the pledge and security agreement required additional NIGC approval; the banks alleged Dorsey negligently advised M&S that such approval was unnecessary.
- After the loans went unpaid, the banks sued Dorsey for legal malpractice, alleging they were either implied clients or intended third-party beneficiaries of Dorsey’s work for M&S.

## Issues

1. Whether non-client loan participants had standing to sue the originator’s law firm for malpractice as intended third-party beneficiaries of the firm’s engagement by the originator.
2. Whether an implied attorney-client relationship formed between the law firm and the participating banks sufficient to impose a professional duty.
3. Whether Minnesota law should extend an attorney’s malpractice duty to non-clients in a commercial loan-participation setting.

## Decision

- The Minnesota Supreme Court reversed the court of appeals and affirmed summary judgment for Dorsey.
- The court held the participating banks were neither Dorsey’s clients nor intended third-party beneficiaries of Dorsey’s engagement by M&S.
- The court rejected the existence of an implied attorney-client relationship between Dorsey and the banks.
- Because Dorsey owed no duty to the banks, the court did not reach whether Dorsey’s advice about NIGC approval was negligent.

## Legal Principles

- In Minnesota, an attorney’s malpractice duty generally runs to the client, not to non-clients, absent a recognized exception.
- Third-party-beneficiary standing requires proof that the contract for legal services was made with the “primary purpose and intent” to benefit the third party; incidental or derivative benefits are insufficient.
- An implied attorney-client relationship requires objective evidence that the attorney consented to represent the non-client or undertook legal services for the non-client under circumstances supporting a reasonable belief of representation.
- Courts are cautious about extending attorney liability in commercial transactions where doing so could expose attorneys to broad, indeterminate claims by non-client investors.

## Conclusion

The court held that a law firm hired by a loan originator to document and secure financing owed no malpractice duty to banks purchasing participation interests where the engagement’s primary purpose was to serve the originator, the banks were at most incidental beneficiaries, and no implied attorney-client relationship was shown.


McIntosh Cnty. Bank v. Dorsey & Whitney, LLP, 745 N.W.2d 538 (Minn. 2008)