Who Has Standing to Bring a Legal Suit?

Gerard R. Stowers and Lenna R. Chambers Bowles Rice McDavid Graff & Love LLP Introduction '

Traditionally, were not liable to non-clients for professional malpractice. Malpractice liability arose from contractual relationships, and under the "privity of " rule, only those who were clients of an attorney had standing to assert malpractice claims. See Nat'l Sav. Bank of D.C. v. Ward, 100 U.S. 195 (1 880). Courts were concerned that any other rule would open the floodgates to litigation from any number of individuals, no matter how remote their relationship to the attorney. Id. at 203. Courts were also reluctant to allow these claims because of a concern that they would give third parties control over to which they were not a party. Joan Teshima, Annotation, Attorney's Liability, To One Other Than Immediate Client, for in Connection With Legal Duties, 61 A.L.R. 4th 615, *2 (2006). Although this rule remained in effect throughout much of the 20th century, courts and legislatures have slowly carved out exceptions. Id. Today, lawyers are subject to malpractice actions by a number of non-clients, despite the fact that traditionally these suits were barred. Nonetheless, in most cases, attorneys cannot be liable to non-clients for alleged negligence. Joan Teshima, Annotation, What Constitutes Negligence Suf$cient to Render Attorney Liable to Person Other Than Immediate Client, 61 A.L.R. 4th 464, *2 (2006).

As courts grapple with this change, it has become apparent that standing depends, in part, on the type of claim asserted by a plaintiff, and in part on the nature of the plaintiffs relationship to the attorney. On one end of the spectrum are cases where beneficiaries of a will sue the attorney who drafted the will. Id. Attorneys are most often found liable to third parties in these cases. Id. Also on this end of the spectrum are claims against attorneys for intentional such as . 1999 Laws. Man. on Prof. Conduct (ABAIBNA), at 301 :603. At the other end of the spectrum are cases involving, for example, physicians suing an attorney for negligence based on the attorney's representation of a patient in a malpractice action adverse to the physicians. Teshima, 61 A.L.R. 4th 464, *2. In those cases, no court has allowed standing. Id.

' This article is a compilation of various cases discussing the evolving area of law regarding who has standing to file a legal malpractice suit. Gerard R. Stowers and Lenna R. Chambers are attorneys in the Business Litigation Group at Bowles Rice McDavid Graff & Love LLP and routinely defend attorneys who are named defendants in legal malpractice suits. Non-clients in cases involving domestic relations litigation are also typically denied standing. Id.

Although seemingly a drastic change from the traditional "privity of contract" rule, the acknowledgement that in some circumstances non-clients may bring negligence suits against an attorney is merely the result of an analysis of the essential elements of a negligence claim. That courts would consider whether there is a duty to the non-client in those cases should come as no surprise. See e.g. Biakanja v. Irving, 320 P.2d 16 (Cal. 1958). The Biakanja court described the "principal question" as whether the defendant owed a duty to the plaintiff "even though they were not in privity of contract." Id. at 18. In allowing the plaintiffs to assert their claim, the court noted that California courts had already permitted plaintiffs "not in privity to recover in many situations for the negligent performance of a contract." Id. For example, suppliers of goods and services were held liable even in the absence of privity of contract. Id. Generally, where a non-client was an intended beneficiary of the attorney-client relationship, courts agree with the Biakanja court that a duty exists. 1999 Laws. Man. on Prof. Conduct (ABNBNA), at 301 :601.

When adopting exceptions to the general bar of non-client suits against attorneys, courts also typically consider a number of policy issues. The Supreme Court of California did just that when it allowed the Biakanja suit to proceed and its decision is recognized as originating that analysis. Teshima, 61 ALR 4"' 615, *2. The issues considered by the court included the extent to which the transaction between the client and drafter was intended to affect the plaintiff beneficiaries, the foreseeability of harm to the plaintiff beneficiaries, the degree of certainty that the plaintiff beneficiaries suffered an 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. Id. at 19. Whether the third party is adverse to the client is also a factor given significant weight. Teshima, 61 A.L.R. 4th 464, *2. For example, attorneys are generally protected from suits for defamatory remarks made in the course of judicial proceedings, regardless of malicious intent, because of the inherent adverse nature of these proceedings. 1999 Laws. Man. on Prof. Conduct (ABNBIVA), at 301 :604. An analysis of factors such as these is typically used to justify a court's decision when faced with an option to allow non-client suits for malpractice. West Virginia Cases

Two recent cases from the West Virginia Supreme Court of Appeals highlight the tension between the modem and traditional rules and show that there is still a limit to the context in which an attorney can be sued by a non-client. In June 2005, the West Virginia Supreme Court adopted the rule recognized by a majority of jurisdictions in the country, that beneficiaries of a will have standing to sue the attorney who drafted the will based on a claim of negligence. Calvert v. Scharf; 2 17 W. Va. 684, 6 19 S.E.2d 197 (2005). Although the Court recognized the modem trend, it was careful to place limitations on the extent to which an attorney could be sued in this situation.

The Calvert case involved an allegedly negligently drafted testamentary exercise of a power of appointment over the assets of a marital trust. Id. at 686. The testatrix attempted to exercise this power of appointment to fund a living trust with five specifically identified beneficiaries. Id. at 686-687. After her death, a declaratory judgment action was brought by the trustee of her and the trusts seeking a declaration that it should distribute the assets in the marital trust to the living trust. Id. The beneficiaries of the trust were also parties to this declaratory judgment action. Id. If the power of appointment were determined to be properly drafted, the assets of the marital trust would fund the living trust, which would then be distributed to the five beneficiaries. Id. If not properly drafted, the assets of the marital trust would fund a different trust with different beneficiaries. Id. at 687-688. The various classes of beneficiaries to this action reached a settlement before the lower court decided the validity of the power of appointment. Id. at 688.

Following the "settlement," one class of beneficiaries brought suit against the attorney who drafted the will in question. Id. at 688. The case reached the West Virginia Supreme Court of Appeals on certified questions from the circuit court, one of which asked whether an intended beneficiary of a will had standing to make a legal malpractice claim against the attorney who prepared the will. Id. The circuit court answered that an intended beneficiary had standing and the Supreme Court affirmed. Id. As a preliminary matter, the Supreme Court described the elements plaintiffs must generally prove in suits against attorneys for negligence, which are: "(1) the attorney's employment; (2) his[/her] neglect of a reasonable duty; and, (3) that such negligence resulted in and was the of loss to the [plaintiff]." Id. at 690. The first element, the attorney's employment, requires a consideration of whether the attorney owed a duty to the plaintiff. Id. Where the plaintiff is a client, the duty is clear; however, where the plaintiff is not a client, establishing a duty is "critical" in determining whether a plaintiff has standing. Id.

To determine whether a duty was owed to plaintiff, the Supreme Court analyzed the policy justifications for and against an exception to the privity rule traditionally applied in non-client malpractice suits. Generally, a client hires an attorney to prepare a will with the goal being to transfer property upon his or her death. Thus, in the context of will-drafting, control over the contractual attorney-client relationship is not undermined by allowing a non-client to bring a claim for negligence since the interests of the client and intended beneficiary are essentially the same. Id. at 691. As a practical matter, the beneficiary is often the only party who could bring this action. Id. Moreover, that beneficiaries may be injured by the negligence of a drafting a will is sufficiently foreseeable to justify standing. Id. at 692. The Supreme Court had previously acknowledged the existence of a duty to parties beyond those in privity in circumstances where there was a "special relationship." Id. at 691 (citing Aikens v. Debow, 208 W. Va. 486, 500-501, 541 S.E.2d 576, 590-591 (2000)). Accordingly, the decision to recognize a for the plaintiffs in Calvert clarified the law, but was not a drastic change from the Supreme Court's earlier rulings.

The Supreme Court was, however, careful to point out that its decision had limitations. When the Supreme Court recognized in Aikens that parties may bring claims for economic damages despite a lack of contractual relationship, it expressed concern that its rule "authorize recovery of meritorious claims while simultaneously providing a barrier against limitless liability." Aikens, 208 W. Va. at 500. To that end, the Supreme Court limited the standing it granted in Calvert to "direct, intended and specifically identifiable beneficiaries" of a will. Calvert, 217 W. Va. at 694. Thus, attorneys are still not liable to parties who would be incidental beneficiaries, nor parties who are not specifically identifiable beneficiaries. Most courts which have recognized the non-clientbeneficiary cause of action against an attorney have imposed the same limitation. 1999 Laws. Man. on Prof. Conduct (ABAIBNA), at 301:605. Additionally, standing of a non-client only exists "where it can be shown that the testator's intent, as expressed in the will, has been frustrated by negligence on the part of the lawyer so that the beneficiaries' interest(s) under the will is either lost or diminished." Calvert, 217 W. Va. at 694. Since the interests of the client and non-client must converge to justify standing, a finding that the testator's intent is not frustrated should defeat any claim for negligence brought by the non-client. Even where plaintiffs can establish a duty on the part of the attorney, they must still show the neglect of a reasonable duty and damages to maintain an action. Id. In Calvert, the Supreme Court found that the plaintiffs had not established the "damages" element required to find standing. Id. at 696. Since the plaintiffs settled the case before a court could determine whether the testator's intent was carried out, the Supreme Court found that the attorney's actions had not, as a matter of law, proximately caused the plaintiffs' damages. Id.

The Supreme Court has since issued another decision that, although not specifically referencing Calvert, places additional limitations on standing of non-clients to assert malpractice and negligence claims. As a result of that decision, West Virginia courts now recognize the "litigation privilege," which applies to bar claims for civil damages against an opposing party's attorney where the alleged act of the attorney occurred in the course of the attorney's representation of an opposing party and is related to the civil action. Clark v. Druckman, 218 W. Va. 427, 434, 624 S.E.2d 864, 871 (2005). In adopting the "litigation privilege," the Supreme Court recognized that in any context, lawyers have no duty to a party's adversary upon which the adversary can base a negligence claim.

The underlying suit in Clark was brought by a physician against the attorneys who represented a fonner patient in a malpractice suit. Id. at 429. The patient's malpractice suit, which was based on the physician's alleged failure to timely diagnose her breast cancer, was ultimately voluntarily dismissed. Id. at 865. Thereafter, the physician filed suit against the patient's attorneys, alleging negligence, intentional infliction of emotional distress, with her insurance carrier and . Id. Specifically, the physician claimed that the patient and her attorney disclosed expert witnesses that they had never spoken to and, therefore, violated a statute requiring plaintiffs in medical malpractice actions to obtain expert witnesses to testify regarding the applicable standard of care. Id. at 867. The circuit court certified two questions to the Supreme Court:

1. Whether an attorney for a party in a lawsuit owes a to that party's adversary in the lawsuit such that the adversary may assert a cause of action for negligence against the opposing attorney?

Answer of the circuit court: No.

2. Is a party to a civil action barred, by virtue of the litigation privilege, from bringing any type of claim for civil damages against the opposing party's attorney if the alleged act of the attorney in the course of the attorney's representation of the opposing party is conduct and not a written or oral statement which arose in the civil action and which has some relationship to the civil action?

Answer of the circuit court: Yes.

Id. at 868.

In affirming the first certified question, the Supreme Court made it clear that the primary duty of an attorney is to his client. Id. The Supreme Court stated that an attorney has an "inflexible" requirement to "diligently, faithfully and legitimately perform every act necessary to protect, conserve and advance the interests of his client." Id. (citing Del. CWC Liquidation Corp. v. Martin, 213 W. Va. 617, 623, 584 S.E.2d 473, 479 (2003)). Indeed, attorneys who do not adhere to this requirement are subject to disciplinary action by the state bar or civil liability to their own client. Id. If adversarial third parties were permitted to bring suits against attorneys, a conflict of interest would exist whereby the attorney's relationship with his client would be harmed. Id. Although an attorney does owe a duty to the court, the Supreme Court did not believe that this necessitated an extension to opposing parties such that a negligence claim could be brought. Id. at 432. The Supreme Court also recognized that attorneys have a duty to the trial court, because they are licensed by the courts and are officers of the court, but refused to translate this requirement to a duty to opposing parties. Id. at 432. The Supreme Court followed other jurisdictions that "uniformly" reject the idea that an attorney has a duty to a third party, including an opposing party, that would subject them to negligence claims. Id The Supreme Court's affirmation of the second certified question broadened the scope of this immunity. The plaintifflphysician in Clark argued that the litigation privilege applied only to defamatory communications made during the litigation process and that it should not be extended to apply to conduct occurring during the litigation process. Id. at 432-433. The Supreme Court disagreed and held that the privilege extends beyond communications to conduct as well. Id. The Supreme Court justified its decision by addressing the policy implications of having a litigation privilege, including the desire to avoid the chilling effect of threatened litigation, the policy that parties should be required to meet their own burdens, and the promotion of zealous advocacy on the part of attorneys. Id. at 433. At the same time, the Supreme Court recognized that there are some, albeit limited, circumstances in which a non-client can bring suit against an attorney. Id. Specifically, the Court noted that attorneys may be liable to non-clients for fraud or malicious conduct, such as malicious prosecution. Id.

Finally, the Supreme Court stressed that its ruling would not preclude attorneys from facing consequences for their conduct occurring during litigation. Id. at 434. Rather, the Supreme Court felt that the Rules of Civil Procedure and Rules of Professional Conduct, as well as a court's inherent authority over litigation and its participants, provide the more appropriate mechanism to govern attorney conduct in relation to litigation. Id. The plaintiff in Clark could have pursued her case through any of these avenues, but did not. Id, at 435.

Calvert and Clark establish the framework within which West Virginia courts will decide whether non-clients have standing to assert legal malpractice claims. The fundamental question is whether the attorney owes a duty to the party asserting negligence. Culvert and Clark make it clear that the courts should consider the relationship between the non- client and attorney to assess whether the interests of the client and non-client are sufficiently aligned such that the attorney owes a duty to the non-client. Where the client and non-client are adversaries in litigation, this assessment is simple. Under Clark, the attorney owes no duty to an adversarial non-client for conduct or communications related to the litigation. In cases where the client and non-client are not in litigation, courts must undertake a more detailed analysis of the purpose of the attorney-client relationship, whether the non-clients are intended or incidental beneficiaries of that relationship, and whether imposing a duty to the non-client on the attorney would create a conflict of interest. The Line That Other Courts Have Drawn

Although the West Virginia Supreme Court of Appeals has not yet considered a case falling in the "middle" of the spectrum of non-client malpractice cases, many other courts have. For example, a number of courts have dealt with non-client malpractice suits in the context of estate administration. Applying the same reasoning that the Supreme Court did in Clark and Cal~~ert,these courts have uniformly held that beneficiaries of an estate may not maintain a cause of action against the attorney representing the estate administrator. See e.g. Rhone v. Bolden, 608 S.E.2d 22 (Ga. Ct. App. 2004); Allen v. Stoker, 61 P.3d 622 (Ida. Ct. App. 2002); Ferguson v. Cramer, 709 A.2d 1279 (Md. Ct. Spec. App. 1998). An examination of the reasoning used by these courts helps to highlight the line at which courts are not willing to cross to expand the scope of attorney liability to non-clients.

These courts first consider to whom the attorney for an administrator owes a duty. Although plaintiff beneficiaries often argue the attorney owes a duty to the estate, this argument has been repeatedly rejected. See e.g. Rhotze, 608 S.E.2d at 30. Although an administrator must manage the assets of the estate and distribute them to beneficiaries, courts have refused to find that this creates a duty on the part of the administrator's attorney to the beneficiaries. Id. Nor does the administrator's obligation to the beneficiaries extend to the administrator's attorney. Id. The purpose of the attorney-client relationship between an administrator and his or her counsel is not to benefit the intended beneficiaries of the estate. Id. The purpose of that relationship is to aid the administrator in performing his or her duties. Id. Any benefit to the beneficiaries from that relationship is "merely incidental." Id.

In addition, allowing beneficiaries to bring suits against an administrator's attorney implicates the litigation privilege. Although courts have not expressly tied the two theories together, their rulings in this coiltext highlight the relationship between the analysis applied to grant or deny standing for non-client malpractice suits and the litigation privilege. Administrators must often arbitrate disputes among beneficiaries of an estate. Rhone, 608 S.E.2d at 31. As the Court of Appeals of Idaho noted, "the imposition of a duty owed by the attorney [for the administrator] to the heirs would create a conflict of interest whenever a dispute arose between the personal representative and an heir." Allen, 61 P.3d at 624. Because conflicts of this nature often lead to litigation, the litigation privilege becomes an important basis for determining that an administrator's attorney has no duty to a non-client beneficiary.

Inherent in the litigation privilege is the idea that attorneys are bound by the Rules of Professional Conduct and Rules of Civil Procedure to act as counsel to and advocates for their clients. Among the requirements imposed by those rules is that an attorney should not represent a client when representation of that client will be materially limited by the attorney's responsibilities to a third party. See W. Va. R. Prof. Conduct 1.7(b). Also relevant is the instruction that an attorney must zealously advocate for his or her clients. Id. at Preamble. While these Rules provide a justification for denying standing to a non-client for a negligence or malpractice claim, they also serve as a protection for clients and non-clients alike. As the West Virginia Supreme Court of Appeals found, these Rules, as well as the court's inherent authority, "provide adequate safeguards to protect against abusive and tactics." Clark, 218 W. Va. at 434. Further, because a malpractice suit can be brought by the personal representative of an estate, and a beneficiary has standing to sue the representative, there are ample opportunities to redress any damages caused in the course of these actions. While this is only one example of the many types of cases in which the courts may be called upon to determine the extent and scope of an attorney's liability to non-clients, the analysis in each case remains essentially the same.

Conclusion

The last Gfty years has proven that the traditional "privity of contract" rule does not apply to deny standing to non-clients in every case, but it is clear that courts should and will proceed very carefully when the question is whether a non-client can bring a suit against an attorney for negligence. Before deciding that a duty is owed to a non-client, courts should be careful to consider whether that duty will create a conflict of interest or subject an attorney to suit for actions that are protected by the litigation privilege. Enforcing these limitations will ensure that attorneys can effectively and zealously represent their clients.