California Bar Journal
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May be safer in the world of consulting
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Diane KarpmanDisgruntled clients could always complain to the State Bar and sue for malpractice and breach of fiduciary duty. Still, since they were clients, they fell within the penumbra of foreseeable malcontents. In the 1970s, the courts began to impose liability upon lawyers for non-client complaints even though privity was absent.  However, there were always clear margins of liability that created a modicum of security that now may have suddenly vanished.

There is an overarching idea in the minds of some ethicists that is being echoed in recent cases. When a lawyer is advising another fiduciary, the lawyer has enhanced duties beyond our already amplified fiduciary obligations. The American Bar Association Ethics 2000 Commission, which is involved in redrafting and updating the Model Rules, recently considered a new rule in an attempt to articulate this idea. It would have imposed greater liability where a lawyer was advising another fiduciary (e.g., trustee, member of the board of directors, spouse).  However, since the definition of fiduciary is ever expanding and too hard to contain, they rejected the proposed rule.

In California, a stranger to the attorney-client relationship (a “third party”) can assert a claim against a lawyer.  The courts apply what legal malpractice guru Ronald Mallen labels the “multi-criteria test,” initially expressed in Biakanja v. Irving (1958) 49 Cal. 2d 647. This test balances various factors, including: intent of the parties, reliance upon the lawyer’s representations, foreseeability of harm, certainty of injury, closeness of the connection, “moral blame” and preventing future harm.

In Price v. Lyman (1991) 1 Cal. App. 4th 1093, the attorney helped the trustee deceive the Probate Court by concealing information, and aiding and abetting the trustee in the preparation of false accounting.  These accountings demonstrated active participation or collusion with the trustee and misrepresentations.  Significantly, the attorney received access to “investment opportunities” for personal gain.   This is consistent with the theory of RICO liability (where control of the criminal enterprise is required), that the lawyer must do more than give legal advice in exchange for fees.

A disturbing recent case could be interpreted as indicating a major shift in the known world of liability, to a black hole into which almost any lawyer who is advising a fiduciary could fall, merely by accepting fees for legal advice. In Wolf v. Mitchell (1999) 76 Cal. App. 4th 1030 (denial of a motion for summary judgment), the fountainhead of all the allegations of professional negligence and breach of fiduciary duty was the attorney’s desire to receive a greater amount of fees from the trustee, and to continue receiving the fees.  All the charges were supported by the firm’s receipt of fees.

If the predicate for third party liability is reduced to the mere receipt of legal fees for legal services, then all lawyers are at risk. They could be sued by an unlimited class of unhappy plaintiffs. Maybe attorneys should stop practicing law and go into “consulting.” It might be far safer.