Expanding Duties of Attorneys to 'Non-Clients': Reconceptualizing the Attorney-Client Relationship in Entity Representation and Other Inherently Ambiguous Situations

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Under the traditional approach to legal malpractice, an attorney is liable for negligence only to a client, with whom the attorney is in a privity relationship.' Thus, an attorney's duties to non-clients are limited primarily to the avoidance of intentional wrongs.2 Recently, courts have expanded duties owed by attorneys to third-party non-clients; 3 however, considerable confusion and disagreement exists regarding both the parameters and the rationales for such extensions.4 For example, courts invoking such diverse legal doctrines as third-party beneficiary, negligent representation, gratuitous undertaking, and the "balance of factors" test in negligence have reached different results in cases involving fact patterns ranging from will and trust drafting and trust administration to litigation, opinion letters, and business transactions and disputes.'

In an effort to clarify or explain these cases, some commentators examine the various doctrinal approaches, 6 while others focus on the different fact patterns in which issues of third-party liability commonly arise.7 Whether the viewpoint is doctrinal or contextual, determining the proper scope of a lawyer's duty to non-clients is complicated by competing policy demands. On one hand, there is a need to deter attorney misconduct and to protect and compensate non-clients who have suffered as a result of an attorney's negligence. 9 This latter need is especially compelling when the non-clients have reasonably relied on the attorney to protect their interests.' 0 On the other hand, there is a need to protect lawyers from indeterminate liability." Further, any widespread extension of attorney liability will cause the public to bear a large share of the burden in the form of higher legal fees."

Taken alone, these competing policy considerations are no different than those which exist in other areas of third-party liability, including that of accountants, architects, and engineers. 3 An additional concern that applies with special force in the legal profession, however, is the extent to which recognizing a lawyer's duty to third persons may diminish the quality of the lawyer's service to a client, particularly when the client and the third persons have actual or potential conflicting interests.' 4

Consider, for example, the development of third-party liability in California, the jurisdiction that led the way in extending a lawyer's duty to non-clients. The early cases involved a lawyer's liability to the beneficiaries of a negligently drafted will." The traditional privity requirement was eliminated in favor of what appeared to be an extremely broad "balance of factors" test:

The determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and invokes the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, and the policy of preventing future harm.16

That the test was intended to be applied broadly is evidenced by subsequent California cases outside the legal malpractice area. Thus, the balance of factors test was applied both to eliminate restrictive rules of liability of possessors of land for injuries to persons entering upon the land 7 'and to extend liability for negligent infliction of emotional distress" and negligent interference with prospective economic advantage.' 9 Indeed, at one point the California Supreme Court boldly declared that in negligence cases generally, it had shifted away from "traditional notions of duty" in favor of "foreseeability as the key component necessary to establish liability. 2

In the legal malpractice area, however, the court hastily retreated from the broad "foreseeability" test to a much narrower test in which virtually the only factor considered is the extent to which the transaction was intended to benefit the third-party non-client.2 " The stated reason for this retreat was the court's concern that extending an attorney's liability to third parties "with whom the client deals at arm's length would inject undesirable self-protective reservations into the attorney's counselling role, . . . [resulting in both] 'an undue burden on the profession' and a diminution in the quality of legal services received by the client. "I The early will-drafting cases did not address these concerns because they did not involve any conflict of interest between the client-testators and the non-client beneficiaries.' Given this lack of conflict, it should not be surprising that the will-drafting cases are accepted in almost every jurisdiction as the one exception to the traditional privity rule, irrespective of the particular doctrinal approach taken.24 Outside the narrow spectrum of will drafting cases, however, most cases do present the possibility of conflicting interests in varying degrees, thereby resulting in an understandable reluctance on the part of courts to extend the scope of a lawyer's duty to nonclients. 5

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