Exceptions to No Duty

Exceptions to No Duty

A lawyer's duty of care follows the client-lawyer relationship, so a plaintiff confirmed as a nonclient starts with no duty at all. Foreseeable harm does not change that. Courts also ask whether a duty would expose the lawyer to an unmanageable class of plaintiffs or pull the lawyer away from loyalty to the client. This section covers the recurring situations in which courts hold, despite those barriers, that a lawyer answers to someone who never hired the lawyer.

Each exception works by removing a reason for the privity barrier. The barrier rests on loyalty, which a duty to strangers might compromise, and on adversity, since much of a lawyer's work is aimed at people who might otherwise be suing. Where a client hired the lawyer to benefit a third person, that person's interest runs the same way as the client's, so a duty asks the lawyer to choose between no one. Where the lawyer's work invites a nonclient to rely on it, the duty tracks what the lawyer actually undertook, and the invitation itself names the people covered, which answers the worry about an unbounded class. The remaining situations arise when a client is wronging someone. Loyalty carries little weight there, because the client has no legitimate claim on the lawyer's help in harming another person.

The subsections move from the easiest case for a duty, the intended beneficiary, to the most contested, a lawyer's duty to protect third persons from a client's threatened harm. Fraud comes last because it can impose liability without resting on a duty of care at all. On an exam, test a nonclient's claim by asking what ties the plaintiff to the lawyer's undertaking: a purpose to benefit the plaintiff, an invitation to rely, or a client's wrong that the lawyer assisted or failed to prevent. A plaintiff who can point to none of these stays inside the no-duty default.

Intended Beneficiaries

A lawyer who prepares a will or trust instrument so that a client can pass property to particular people owes those people a duty of care, even though only the client hired the lawyer.¹ Courts treat this as one of two narrow exceptions to the no-duty default (the other, invited reliance, follows below), and it took shape in will drafting. Lucas v. Hamm, a 1961 California decision, was one of the first judicial decisions to recognize lawyer liability to nonclients, and it gave the intended legatees standing to sue the lawyer who drafted the will.² The doctrine is limited, and it appears most often in claims over drafting errors in wills and similar documents and over erroneous title reports.³

Neither support for the privity rule survives in this setting. A duty to the person the client meant to benefit points the same way as the duty to the client, so the lawyer is never asked to choose, and the beneficiary is no opponent whose interests the lawyer must work against. Practical need adds to the case. Drafting errors tend to surface late, because nobody learns that a will has failed until the testator dies, and the loss falls on people other than the client who hired the lawyer.⁴ If privity alone controlled, the one person with a real stake in the lawyer's care, the intended beneficiary, would have no remedy, and the testator who might have complained is gone. Letting the beneficiary sue therefore reinforces the duty the lawyer owed the deceased testator.⁵

The modern rule reverses the common law. At common law a lawyer owed no duty to a client's potential heirs or beneficiaries, and because the lawyer was not in privity with them, they had no contract claim for the lawyer's negligence either.⁶ Today most courts allow the harmed beneficiary to proceed in tort or in contract.⁷ The contract route treats the beneficiary as a third-party beneficiary of the agreement between lawyer and testator, meaning a person who was not a party to the promise but whom the promise was made to benefit, and a majority of courts permit such claims under limited circumstances.⁸ The tort route reaches the same plaintiff by holding that a lawyer may be liable in negligence to a person the lawyer's performance was intended to benefit, whether or not any contract ran between them.⁹

Jurisdictions have not moved together. Fabian v. Lindsay aligned itself with the majority of courts that let will beneficiaries recover as third-party beneficiaries against a lawyer whose drafting error defeats or diminishes the client's intent, and MacLeish v. Boardman & Clark LLP reached the same result.¹⁰ On the other side, Baker v. Wood, Ris & Hames, PC adhered to the strict privity rule, and Estate of Agnew v. Ross held that purported beneficiaries could not bring a legal malpractice action.¹¹ When a problem does not name the jurisdiction, state the majority rule, note that some courts keep strict privity, and apply the majority rule to the facts.

What if the client dies before signing the will at all? In Riso v. Dwyer the court found no duty to potential beneficiaries to have a will executed promptly.¹² The result follows from what the exception protects. The duty guards a client's completed instructions against drafting error. Before signing, the document records only a plan the client remains free to change or abandon, so the person named in it holds only an expectation.

Even in a majority jurisdiction, the plaintiff must be the person the lawyer's work was actually meant to benefit. In Donald v. Garry a creditor sued the collection agency's attorney, and the court relied on the Restatement (Second) of Torts § 324A to hold that an attorney may be liable for negligence to a person intended to be benefited by the attorney's performance, irrespective of any lack of privity.¹³ The court stressed that the transaction was intended primarily for the creditor's benefit.¹⁴ Where the nonclient's interests oppose the client's, the same reasoning cuts the other way. One court declined to presume that lawyers hired by a mortgagee also represented the bidders at a sale, because the mortgagee wants the highest price while the bidders want to pay as little as possible, and a lawyer could not lawfully represent both sides of that transaction.¹⁵ The same worry explains why courts have rejected malpractice claims by heirs against lawyers who drafted wills for allegedly incapacitated testators: a duty to those heirs would subject the lawyers to potentially conflicting duties.¹⁶ A devisee who won a will contest, by contrast, was allowed to sue the drafter for failing to firmly establish the testator's capacity and free will, even though the devisee was not the drafter's client.¹⁷

Lucas also teaches that duty and breach are separate questions. The court held that the intended legatees had standing in tort and in contract, but it found no breach, because the alleged error concerned the Rule Against Perpetuities, an obscure rule that a lawyer using the requisite skill, prudence, and diligence might still get wrong.¹⁸ That breach holding has since been distinguished away, and a competent lawyer is now expected to comply with the Rule.¹⁹ The lesson survives the change in outcome. A duty to the beneficiary leaves the plaintiff still to prove that the lawyer's work fell below the professional standard. On the contract route, the claim is also subject to any defense the lawyer could raise against the testator, and to limits in the contract itself, such as an obligation to arbitrate.²⁰ The standard of care is the subject of a later section.

Invited Reliance

A lawyer's duty to a nonclient can arise from the lawyer's own work, and the client-lawyer relationship is not its only source. When a lawyer's work for a client specifically invites another person to rely on the lawyer's opinion or legal services, the lawyer owes that person a duty of care even though the person never hired the lawyer.²² The standard illustration is an opinion letter delivered to a lender, in which the borrower's lawyer certifies having checked and found no liens or encumbrances on the property the borrower is pledging as collateral, and Greycas, Inc. v. Proud is the well-known decision illustrating the exception.²³ The lender is a nonclient, so under the default rule it would begin without a duty. The letter changes that starting point because the lawyer wrote it for the lender to read and act on, which makes the lender's reliance the very purpose of the document.

Both supports for the privity rule fall away here. Loyalty is not strained, because the client commissioned the letter so that the lender would rely on it, and a duty to certify the facts carefully asks the lawyer for nothing the client did not already want. Adversity does not arise the way it does with a litigation opponent, since the lawyer is vouching to the lender on the client's behalf and is working against no one. The worry about an unmanageable class of plaintiffs also loses its force, because the letter marks out the person who will rely on it, so the lawyer's own act draws the boundary of the duty.

A commercial reason points the same way. When the facts are peculiarly within the defendant's knowledge and out of the plaintiff's reach, dealings between the parties would stall unless the plaintiff could rely on the reasonable accuracy of what the defendant says.²⁴ A lender that accepts an opinion letter leans on the borrower's lawyer for exactly that kind of knowledge, and a rule denying the lender recourse would drain the letter of value to the person it was written for. The invited-reliance exception is therefore one application of a wider tort rule about negligent misstatements. A duty of care in supplying information is the exception, and it arises when the defendant undertakes to exercise care or when a special relationship leads the plaintiff reasonably to expect it.²⁵ The clearest cases involve defendants retained to provide accurate information, and a defendant's own words or deeds can also warrant a belief that care has been undertaken on the plaintiff's behalf, even where the parties bargain adversely on some issues.²⁶

The label for the claim depends on who brings it. When a client sues over a lawyer's misstatement, the claim is simply malpractice, and a separate negligent misrepresentation count merely duplicates it. Negligent misrepresentation is the theory under which a nonclient who relied on the lawyer's statement may sue.²⁷ In Safeway Managing General Agency, Inc. v. Clark & Gamble, a Texas appellate court applied that division to an insurer that had retained lawyers to defend its insured: because the insurer was not a client, its claim was one for negligent misrepresentation and not malpractice.²⁸ The case ties back to the earlier discussion of fee payors and insureds, since a payor who is not a client is one kind of nonclient who may still reach the lawyer by this route.

The Restatement shows how far the idea could stretch and where it is held in check. Restatement (Second) of Torts § 552 imposes a duty of care when the defendant has a pecuniary interest in the transaction, and it does not require that the defendant be in the business of supplying information.²⁹ That breadth is also its weakness, because the pecuniary-interest wording can be read to include adversary bargainers who never undertook to exercise care for the other side's informational interests.³⁰ The Restatement Third follows the Second with small changes that require invited reliance, and that requirement fits the lawyer cases, because the duty runs to people the lawyer's own work invited to rely.³¹

The instinct that loses points here is to read the Second Restatement's wide wording as saying that anyone who hears a lawyer's statement and acts on it can sue. Ordinary adversarial bargaining does not become a duty merely because the other side listens.

The analysis shifts when the listener has no one else to turn to and the lawyer knows the listener will lean on what the lawyer says.

That last variation shows who controls the scope of the duty. The duty exists only where the lawyer has invited reliance, so a lawyer who does not want a nonclient to rely can say so, and the invitation itself identifies who is covered. That control is why courts can accept the duty for opinion letters and similar undertakings without fearing that it will swallow adversarial practice.

Aiding Fiduciary Breach

A lawyer whose client is a fiduciary faces a distinct kind of nonclient claim. A fiduciary is someone, such as a trustee, who holds property or authority for another person's benefit and owes that person duties of loyalty and care. The beneficiary never hired the lawyer, so the no-duty default governs at the start. The exception is narrow: the lawyer owes the beneficiary a duty to refrain from acts that assist the client in breaching the fiduciary's duties. Courts now let nonclients proceed against lawyers under theories such as aiding and abetting breach of fiduciary duty, and that development is one reason lawyers face claims from more nonclients than strict privity alone would predict.³³

The exception is a duty to refrain, and it is not a general duty of care running from the trustee's lawyer to the beneficiary. The beneficiary cannot complain that the lawyer's advice to the trustee was careless, or that the lawyer failed to protect the trust in some way the trustee had not asked for. The beneficiary can complain only that the lawyer helped the trustee breach duties the trustee owed to the beneficiary.

The duty has this shape because of the two supports for the privity rule. A trustee's obligations run to the beneficiary, but the trustee's lawyer is hired to help the trustee. If the lawyer owed the beneficiary a duty of care in every piece of advice, the lawyer would have to weigh the beneficiary's interests against the trustee's whenever they diverge, and that is the divided loyalty the privity rule exists to prevent. A duty to refrain from assisting a breach asks for something different. A client has no legitimate claim on a lawyer's help in violating duties owed to someone else, so declining to give that help costs the client nothing the client was entitled to. A lawyer who knowingly supplies the means to defeat the fiduciary's obligations has also made the lawyer's own services the instrument of the harm, and that conduct is what justifies reaching a nonclient.

The question an exam stem asks is therefore whether the lawyer contributed to the breach. Two scenes with the same injured beneficiary answer it differently.

In both scenes the trustee breached, the beneficiary was hurt, and the beneficiary was never the lawyer's client. Only what the lawyer did moved the answer. The quality of the lawyer's advice does not matter to the beneficiary's claim, since no general duty of care runs to the beneficiary. What matters is whether the lawyer's own act assisted the breach. The second scene has the lawyer knowing the transfer was wrongful. This chapter does not chart the precise knowledge a given jurisdiction demands, so an answer should apply whatever standard the problem supplies.

Because the duty is limited to assistance, a beneficiary who wants the lawyer to answer for careless advice, or for failing to stop a breach the lawyer merely observed, needs a different theory. The next situation, a lawyer's failure to prevent a client's harm to a third person, is more contested and is taken up separately.

Preventing Client Harm

The model for any claim that a lawyer must protect third persons from a client comes from a therapist case, not a lawyer case. In Tarasoff v. Regents of the University of California, the California Supreme Court held that when a therapist determines, or under the standards of the profession should determine, that a patient presents a serious danger of violence to another, the therapist incurs an obligation to use reasonable care to protect the intended victim.³⁵ Meeting that obligation may require warning the victim or others likely to apprise the victim of the danger, notifying the police, or taking whatever other steps are reasonably necessary under the circumstances.³⁶

The victim was not the therapist's patient, so the duty needed another source, and the court found it in a special relationship. The pleadings asserted no special relation between the victim, Tatiana, and the therapists. They did establish the relation between the patient, Poddar, and the therapists, the relation of a patient to his doctor or psychotherapist, and such a relationship may support affirmative duties for the benefit of third persons.³⁷ The opinion reasons that by entering a doctor-patient relationship the therapist becomes involved enough to assume some responsibility for the safety not only of the patient but of any third person the doctor knows the patient threatens.³⁸ Because that relationship was enough, the court did not decide whether foreseeability alone would create a duty to protect a potential victim of another's conduct, the reservation noted earlier in the discussion of foreseeability.³⁹

Applied to lawyers, that structure produces the contested question. A lawyer who actually knows that a client intends to harm an identified person stands much like the therapist, because the relationship has given the professional knowledge of the threat and some ability to act on it. Whether the lawyer-client relationship is a special relationship of the kind that supports the exception is the unsettled point, and that uncertainty is why a lawyer's duty to protect third persons is highly controversial and not widely accepted. Tarasoff does not settle it, because the case involved a therapist and a patient, so it serves as an analogy and not as binding lawyer authority. The lawyer's confidentiality obligations bear on what steps a lawyer may take, but those rules belong to a separate reading.

The usual exam error is to treat Tarasoff as though it already governs lawyers. A stem in which a client's violence injures a stranger to the representation raises the question the earlier sections taught you to ask first: what duty, if any, ties the plaintiff to the lawyer? The two scenes below show how the answer moves when the lawyer's knowledge and the jurisdiction's rule change.

Two facts did the work in those scenes: what the lawyer knew, and whether the governing jurisdiction has adopted the duty at all. The first is a matter of proof and the second a matter of law, so an answer should address both before it reaches the quality of the lawyer's response.

Fraud and Assisting Client Wrongs

A nonclient's claim against a lawyer does not always depend on a duty of care. Attorneys who engage in fraud can be held liable to third parties even without privity, that is, without any client-lawyer relationship with the people deceived.⁴¹ The intended-beneficiary and invited-reliance theories ask whether the lawyer's undertaking created a duty of care running to the plaintiff. A fraud claim asks what the lawyer knew and what the lawyer did with that knowledge, so the missing relationship does not end it. The privity rule protects a lawyer's undivided loyalty and freedom to act against adversaries, but loyalty to a client has never required deceiving a third person, and a client who asks for that help asks for something the client had no entitlement to receive. Where the lawyer's own conduct is knowing wrongdoing, those interests carry no weight, and the barrier gives way.

An exam stem that pairs deceived investors with a lawyer who worked on offering documents is testing one fact above all: what the lawyer knew. A second scene with the same kind of loss shows how the answer moves when knowledge and undertaking are absent.

The two kinds of claim also differ in how many people may bring them. A lawyer's exposure to injured persons is greatest when the wrongful conduct is highly blameworthy, so a lawyer who intentionally misrepresents a fact may answer to a wider class of plaintiffs than one who makes a merely negligent misstatement.⁴² The reason lies in how each theory is limited. Negligence liability needs a duty, and the duty rules (a relationship, an intended benefit, invited reliance) hold the class of plaintiffs to people tied to the lawyer's undertaking. A lawyer who knowingly deceives has no comparable claim to that protection, so the limit has little work to do.

The defenses differ as well. Under rules of contributory negligence, comparative negligence, or comparative fault, a defendant may point to the plaintiff's own negligence in defending a negligence claim, but not a claim founded on intentionally tortious conduct, and whether the plaintiff's carelessness is a defense to a claim that the lawyer acted recklessly depends on state law.⁴³ A nonclient who can show that the lawyer knew the truth therefore gains a wider class of plaintiffs and removes a defense, at the price of proving a state of mind that is harder to establish than carelessness.

Statutory liability adds a third route that bypasses the common-law duty question. In the BarChris securities decision, lawyers were held liable under Section 11 of the Securities Act of 1933, but only because of the roles they held. Section 11 gives no basis for suing someone who simply prepares or drafts a registration statement, yet outside counsel who was both a director of the issuer and a signer of the registration statement was properly a Section 11 defendant.⁴⁴ The court noted that the case was not a malpractice action, and it still held him to a statutory duty of independent investigation despite his reliance on what his clients told him.⁴⁵ The practical lesson is that counsel should hesitate to sign any registration statement, because expertise and access to inside information may impose an especially high standard of conduct.⁴⁶ The liability rested on the lawyer's role as signer, director, or named expert. A professional who advises on part of the statement without being any of these, or an underwriter, stays outside Section 11.⁴⁷