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Day v. Dorsey & Whitney
Citation: 21 F. App'x 530Docket: No. 01-1702
Court: Court of Appeals for the Eighth Circuit; October 29, 2001; Federal Appellate Court
International Gaming Management (IGM) engaged Rowland W. Day, II to secure funding for a new video poker venture in Louisiana and to represent its investors. Day enlisted the law firm Dorsey & Whitney (Dorsey) to evaluate the stock purchase agreement. Dorsey attorney John T. Kramer provided an opinion letter indicating IGM was largely compliant with relevant laws, aside from issues noted in an attachment. This attachment revealed that IGM’s income stemmed from leasing gaming devices to Indian tribes in Michigan and Wisconsin, where no regulatory compacts were in place. It was mentioned that while it was unlikely, the states could potentially order IGM to remove the devices from casinos. After two years with no profits from the Louisiana venture, the FBI confiscated IGM’s records, citing connections to organized crime. Investors Day, Theodore Stern, Richard Roon, Peter Bendheim, and George Cantos filed a diversity action against Kramer, Dorsey, and attorney Charles L. Potuznik, alleging fraudulent misrepresentation, legal malpractice, and violations of the Minnesota Consumer Fraud Act. They contended the Dorsey opinion was misleading by not disclosing that IGM’s business violated federal law, risking seizure of its gaming devices. The district court dismissed claims against Potuznik and granted summary judgment to Kramer and Dorsey, also dismissing Bendheim’s claim for lack of subject matter jurisdiction. The court determined that the investors’ reliance on Dorsey’s opinion was unreasonable, given their sophistication and access to risk information, including prior warnings about the potential removal of IGM's games. Additionally, the court found no evidence linking the Louisiana venture's failure to the Indian gaming operations, attributing the FBI seizure more to corruption than legal violations. Day and Stern appealed the summary judgment and a protective order preventing further depositions of Dorsey attorneys, arguing there were material factual disputes regarding reasonable reliance and proximate cause. The reviewing court confirmed the district court’s decisions, affirming the summary judgment and protective order without further elaboration.