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Hjersted Family Limited Partnership v. Hallauer

November 5, 2008

HJERSTED FAMILY LIMITED PARTNERSHIP, PLAINTIFF,
v.
DEBRA DAVIS HALLAUER, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Carlos Murguia United States District Judge

MEMORANDUM AND ORDER

Plaintiff Hjersted Family Limited Partnership, a Nevada limited partnership, brings this diversity action against defendants Debra Davis Hallauer, a Missouri resident, and Vold, Morris & Hallauer, PA, n/k/a Hallauer Law Offices, PA, of Kansas. On October 15, 2008, this court granted defendants' Motion for Summary Judgment (Doc. 65), denied plaintiff's Motion for Partial Summary Judgment (Doc. 67), denied plaintiff's request under Rule 17, and dismissed the case. The case is now before the court on plaintiff's Motion to Reconsider (Doc. 97). For the reasons below, the court grants the motion to reconsider, vacates its Memorandum and Order dated October 15, 2008, and enters the following orders.

I. Background

Defendants represented Norman Hjersted and his wife, Maryam Hjersted. It is undisputed that, on or about February 20, 1997, defendants helped Norman Hjersted form the Hjersted Family Limited Partnership in Kansas ("HFLP-Kansas").*fn1 At the time defendants established HFLP- Kansas, the two partners were Norman and his son, Lawrence Hjersted. Both contributed capital to the partnership. Acting on the erroneous advice of defendants, who believed that application of a tax rule known as the 80/20 rule might have adverse consequences on the contributions, Norman Hjersted executed a back-dated promissory note to HFLP-Kansas in the amount of $360,659.74. By its terms, this note bore interest at the rate of 8 percent per annum and was payable on demand.

In late 1999 and into 2000, the Barber Emerson law firm assisted Lawrence Hjersted with a part gift--part sale transaction in which Norman Hjersted gave and sold his limited partnership interest in HFLP-Kansas to Lawrence. Norman Hjersted died on April 28, 2001, apparently leaving Lawrence Hjersted unaware of the promissory note.

Lawrence Hjersted was appointed the executor of Norman's estate. The deadline for asserting claims against Norman Hjersted's estate was February 18, 2002. By the time a claim on the promissory note was made, this deadline had passed.

Plaintiff alleges that, despite repeated requests for copies of "all of [defendant's] files pertaining to Norman," defendants had refused to disclose HFLP-Kansas's business records-including the promissory note-citing attorney-client privilege and the need to obtain consents from, inter alia, Norman's widow, Maryam Hjersted. Lawrence was granted access to the records pursuant to a court order dated October 2, 2002.

Lawrence subsequently discovered a copy of the promissory note, and, on January 7, 2003, HFLP-Kansas submitted an untimely claim seeking payment on the note by the estate.

On July 12, 2004, the District Court of Leavenworth County, Kansas, issued a written order denying HFLP-Kansas's claim on the note as untimely, and ordered the claim on the promissory note not to be paid from the probate estate, noting:

[T]he court finds that the cases presented by the special administrator and the surviving spouse indicate that the lack of timely filing under the facts as presented (that is that even if Lawrence did not know of the existence of the note, he had constructive notice and/or should have known of its existence had reasonable diligence been exercised prior to the death of decedent), bar the filing of the claim.*fn2

(Doc. 75-2, Plaintiff's Ex. L.)

Plaintiff filed this complaint on June 5, 2006, alleging that, by failing or refusing to disclose files related to the representation, particularly the promissory note, defendants: (1) committed legal malpractice; (2) breached a contract for legal services; (3) breached their fiduciary duty; (4) negligently supervised their employees; (5) converted plaintiff's property; and (6) acted with "intentional, wilful, malicious and with reckless disregard for the effect on [plaintiff,]" entitling plaintiff to punitive damages.

Defendants filed a motion for summary judgment, suggesting several bases upon which they seek judgment as a matter of law. (Doc. 65.) Plaintiff filed a motion for partial summary judgment on several of defendants' affirmative defenses, and moved the court to grant partial summary judgment eliminating defendants' "look through" damages defense. (Doc. 67). In a Memorandum and Order dated October 15, 2008, this court granted defendants' Motion for Summary Judgment (Doc. 65), denied plaintiff's Motion for Partial Summary Judgment (Doc. 67), denied as moot the motions to ...


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