The Lawletter Vol 42 No 2

Lee Dunham, Senior Attorney, National Legal Research Group

     Tax-related identity theft occurs when someone uses a taxpayer's stolen Social Security number to file a fraudulent refund. Often, the taxpayer is not aware of the identity theft until he or she files a valid tax return and is notified by the Internal Revenue Service ("IRS") that multiple returns have been filed in his or her name. Its incidence, like that of other forms of identity theft, has increased in recent years due to hacking and phishing scams that have enabled cybercriminals to obtain far-reaching access to taxpayers' personal data, including Social Security numbers.

     The schemes of the criminal defendants described in United States v. Philidor, 717 F.3d 883 (11th Cir. 2013), and United States v. Gonzalez, No. 13 CR 154 RWS, 2014 WL 316984, at *2 (S.D.N.Y. Jan. 27, 2014), are illustrative of the nature and scope of the problem.

The Lawletter Vol 41 No 10

Lee Dunham, Senior Attorney, National Legal Research Group

     Model Rules of Professional Conduct Rule 3.7 contains the well-known prohibition on lawyer testimony known as the "Lawyer as Witness Rule" or the "Attorney Testimony Rule." It provides:

(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness unless:

     (1) the testimony relates to an uncontested issue;

     (2) the testimony relates to the nature and value of legal services rendered in the case; or

     (3) disqualification of the lawyer would work substantial hardship on the client.

(b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9.

Ann. Model Rules of Prof'l Conduct R. 3.7 ("Lawyer as Witness").

The Lawletter Vol 41 No 4

Lee Dunham, Senior Attorney, National Legal Research Group

     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).