Lawyer Liability to Non-Clients under the New Restatement of Law Governing Lawyers

Of course, attorneys owe primary duties to clients, but counsel also must be careful to observe the duties of care owed to non-clients IT IS well recognized that the concept of privity is no longer king of the hill when it comes to a professional's liability to non-clients. While a small number jurisdictions retain the privity doctrine as a limit on an attorney's duty to non-clients,(1) most no longer apply the rule and under some circumstances have allowed non-clients to sue attorneys. Generally speaking, under current case law, an attorney may be liable to a non-client if the client intended the attorney's services to benefit the non-client, or the attorney knew or should have known that the non-client would rely on the attorney's actions. These circumstances give rise to a duty to prevent foreseeable injury to the non-client. The duty is limited, however, by the attorney's obligations to the actual client. If the duty to the non-client will interfere or potentially interfere with a duty owed to the actual client, then the duty to the actual client will prevent liability from attaching to the non-client. This is usually the case where the client and non-client are in an adversarial position or have conflicting interests. The seminal case that upheld professional liability to non-clients was decided 40 years ago and did not involve an attorney. In Biakanja v. Irving,(2) a California Supreme Court case, the defendant was a notary public who prepared an invalid will. Under the traditional analysis of privity, the stepson of a former client could not have prosecuted a malpractice action against the notary public because there was no contractual relationship between them. However, the California Supreme Court replaced the privity of contract requirement with a multi-factor analysis based on public policy concerns that are implicit in the concept of duty. The court identified the following factors to be considered to determine whether a duty is owed: * the extent to which the transaction was intended to affect the plaintiff; * the foreseeability of harm to plaintiff; * 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. This analysis was applied by the California Supreme Court to lawyers in Lucas v. Hamm,(3) and it forms the basis for the duty rule currently followed in most jurisdictions. RESTATEMENT VERSION Section 74 of the new American Law Institute Restatement (Third) of the Law Governing Lawyers, as approved by the ALI in May 1998, sets forth certain circumstances in which an attorney may owe a duty of care to a non-client. That section, entitled of Care to Non-clients, provides an alternative to the Biakanja duty analysis with a situational approach based on the case law that may be applied more readily to the realities of the legal practice. This article discusses cases that are illustrative of Section 74's restatement of a lawyer's duty of care to non-clients. Section 74 provides in pertinent part as follows: [sections] 74. Duty of Care to Certain Non-clients For purposes of liability under [sections] 71, a lawyer owes a duty to use care within the meaning of [sections] 75:(4) (1) to a prospective client, as stated in [sections] 27;(5) (2) to a non-client when and to the extent that: (a) the lawyer or (with the lawyer's acquiescence) the lawyer's client invites the non-client to rely on the lawyer's opinion or provision of other legal services, and the non-client so relies, and (b) the non-client is not, under applicable tort law, too remote from the lawyer to be entitled to protection; (3) to a non-client when and to the extent that: (a) the lawyer knows that a client intends as one of the primary objectives of the representation that the lawyer's services benefit the non-client; and (b) such a duty would not significantly impair the lawyer's performance of obligations to the client, and the absence of such a duty would make enforcement of those obligations unlikely; (4) to a non-client when and to the extent that: (a) the lawyer's client is a trustee, guardian, executor, or fiduciary acting primarily to perform similar functions for the non-client; (b) circumstances known to the lawyer make it clear that appropriate action by the lawyer is necessary with respect to a mater within the scope of the representation to prevent or rectify the breach of a fiduciary duty owed by the client to the non-client, where (i) the breach is a crime or fraud or (ii) the lawyer has assisted or is assisting the breach; (c) the non-client is not reasonably able to protect its rights; and (d) such a duty would not significantly impair the performance of the lawyer's obligations to the client. …