The Minnesota Court of Appeals has affirmed a lower court's ruling in a legal malpractice case involving Michael L. Reger and his former attorneys, Edward B. Magarian and his law firm, Dorsey & Whitney LLP. The court's decision, filed on June 29, 2026, addresses significant issues regarding the application of the in pari delicto doctrine, which prevents a party from recovering damages if they are equally at fault in the wrongdoing.
This ruling is important for individuals involved in legal malpractice claims, as it clarifies how courts may interpret the in pari delicto doctrine in cases where both parties may share responsibility for the alleged misconduct. The outcome affects not only Reger but also sets a precedent for similar cases in Minnesota.
Background
The dispute centers around Michael L. Reger, who, along with a co-founder, took their company, Dakota Plains Holding Company, public in 2012. Before the company went public, Reger received advice from in-house counsel regarding share transfers that ultimately led to his ownership percentage dropping below five percent. This advice resulted in Reger transferring shares to his minor children while retaining control, which required him to file a disclosure with the Securities and Exchange Commission (SEC).
Reger failed to file the necessary disclosure, leading to investigations by the Department of Justice and the SEC, as well as a private civil securities fraud lawsuit. He hired Dorsey & Whitney to represent him in these matters. Although Dorsey managed to negotiate a settlement with the SEC, Reger was still found liable for securities fraud in a jury trial, which concluded that he had intentionally defrauded investors.
Following the verdict, Reger filed a legal malpractice lawsuit against his former attorneys, claiming they were negligent in their representation and failed to properly advise him regarding the statute of limitations for a malpractice claim against his previous counsel. In response, Dorsey filed a counterclaim for breach of contract, alleging that Reger had not paid the fees owed for their services.
The Ruling
The Minnesota Court of Appeals, led by Judge Worke, ruled in favor of the respondents, affirming the district court's decision to grant summary judgment. The court determined that the in pari delicto doctrine applied to Reger's claims, stating, "A party who engages in a fraudulent scheme forfeits all right to protection, either at law or in equity." The ruling emphasized that Reger's own admissions of wrongdoing in the securities fraud case barred him from recovering damages in his malpractice claims.
The court also noted that the district court did not err in interpreting the law and that there were no genuine issues of material fact that would allow Reger to proceed with his claims. The ruling highlighted that Reger's testimony did not establish that his previous counsel had committed fraud, which is necessary to overcome the in pari delicto defense.
Impact
This ruling reinforces the principle that individuals who engage in wrongful conduct cannot seek legal remedies if they are equally at fault. It clarifies the application of the in pari delicto doctrine in legal malpractice cases, indicating that courts may dismiss claims when the plaintiff's own wrongdoing is evident.
The decision is significant for legal practitioners and clients alike, as it underscores the importance of maintaining clear and ethical practices in legal representation. It also serves as a cautionary tale for those considering legal action based on perceived malpractice, emphasizing that one's own conduct will be scrutinized in the context of such claims.
What's Next
Details were not available in the court filing regarding whether Reger plans to appeal the decision. However, the ruling sets a clear precedent for future cases involving the in pari delicto doctrine in Minnesota.