The Lawletter Vol 41 No 4
In general, an attorney's duty of care extends only to his or her clients, not to third parties. This rule makes intuitive sense in most areas of the law, where the client is typically the party who is injured directly by attorney malpractice. However, in the estate planning context, where the client is often long dead by the time the malpractice is discovered, the true victims of malpractice may be the beneficiaries, or would-be beneficiaries, of the client's estate.
Recognizing this problem, courts of several states have relaxed the "strict privity rule" in malpractice suits against estate planning attorneys. Most notably, in Biakanja v. Irving, 320 P.2d 16 (Cal. 1958), and Lucas v. Hamm, 364 P.2d 685 (Cal. 1961), cert. denied, 368 U.S. 987 (1962), California adopted what has come to be known as the "California Test," a multifactor balancing test designed to determine whether a beneficiary can maintain a malpractice claim against an estate planning attorney despite a lack of privity. The factors include "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, and the policy of preventing future harm." Lucas, 364 P.2d at 687 (citing Biakanja, 320 P.2d at 19).
Courts of several other states have adopted a narrower cause of action, referred to as the "Florida-Iowa Rule," under which a beneficiary may maintain a cause of action against the estate planning attorney only if the client's intent, as expressed in the will (or other document), is frustrated. See Espinosa v. Sparber, Shevin, Rosen & Heilbronner, 612 So. 2d 1378, 1380 (Fla. 1993); Schreiner v. Scoville, 410 N.W.2d 679, 683 (Iowa 1987).
Some variation of either the California Test or the Florida-Iowa Rule has been adopted in numerous jurisdictions. However, in Colorado, "[w]here non-clients are concerned, an attorney's liability is generally limited to a narrow set of circumstances in which the attorney has committed fraud or a malicious or tortious act, including negligent misrepresentation." Allen v. Steele, 252 P.3d 476, 484 (Colo. 2011) (en banc).
In the recent Colorado Supreme Court case of Baker v. Wood, Ris & Hames, P.C., 2016 CO 5, 364 P.3d 872, Colorado declined to abandon its strict privity rule in favor of either the California Test or the Florida-Iowa Rule. In Baker, the plaintiffs, two daughters of one Floyd Baker, claimed that their father had intended to divide his estate equally between them and their two stepsiblings. However, the daughters claimed that Baker's attorneys had failed to accurately advise Baker regarding the impact of holding significant assets in joint tenancy with their stepmother and that this failure had resulted in a distribution of his estate that overwhelmingly favored his stepchildren over the plaintiffs.
The court recited a number of public policy reasons to require privity as a prerequisite to attorney liability for malpractice, including (1) protecting the attorney's duty of loyalty and objective advocacy for the client, (2) avoiding the creation of adversarial relationships between the attorney and third parties that could give rise to conflicting duties on the part of the attorney, (3) avoiding the creation of situations in which an attorney could be required to reveal confidences that the testator would never have wanted revealed, (4) preventing attorneys from potential liability to a theoretically unlimited number of third parties, and (5) maintaining the "cardinal rule" that the intent of a testator should be ascertained from the instrument itself. Id. ¶ 28, 364 P.3d at 878. The court found that both the California Test and the Florida-Iowa Rule were contrary to these policies, and it declined to adopt them. As a result, the court affirmed the judgment of the court of appeals dismissing the plaintiffs' claims for lack of standing.
Disappointed beneficiaries in Colorado retain a number of common-law and statutory remedies, including claims for fraud, malicious conduct, negligent misrepresentation, or reformation of a governing instrument. Following Baker, it is clear that absent these elements, a nonclient's malpractice claim against an attorney is unlikely to succeed.