Third-Party Negligence Claims Against Counsel: A Proposed Unified Liability Standard

Abstract

When should attorneys be liable to nonclients for negligence? If attorney third-party liability law is, as one commentator laments, "hopelessly confused," then the standards addressing third-party negligence claims against counsel deserve much of the blame. Courts typically approach the problem under one of four theories: privity, third-party beneficiary law, California balancing, and the composite approach of the Restatement of the Law Governing Lawyers. These approaches yield different outcomes on basic questions, and fail to offer principled accounts for their recognition or rejection of duties.

This article takes up the search for a principled standard. It reconceptualizes the problem as two distinct questions: why should we impose on attorneys duties of care to third parties; and, why should we limit such attorney duties? This article contends that we impose duties of care on attorneys for the same reason that we impose such duties on tortfeasors generally: because their unreasonable behavior can harm the third parties identified by the duty, or "nexus," standards of negligence law. We limit attorney duties when the attorney's unique role implicates interests that warrant differentiation of attorneys from tortfeasors generally. In conflating these two questions, the current approaches manipulate the nexus standards to limit attorney duties of care. Because the real source of such limits lies elsewhere, the current approaches are consigned to vague, impressionistic accounts or categorical denials of duties without reason. Limits on attorney negligence duties derive not from revision of these nexus standards but from the attorney's unique and conflicting obligations to others.

This article contends that attorneys differ from others for third-party, negligence-liability purposes not because of their tort or contract obligations to clients, but rather because their professional-ethical standards impose duties that are not imposed on tortfeasors generally. Thus, this article proposes an "ethical differentiation" standard: an attorney should owe a duty of care to a nonclient if: (1) such duty is recognized under the nexus standards of negligence law that are applicable to all tortfeasors; and (2) no attorney-ethics obligation contradicts the nexus-based duty.

In application, the proposed standard offers an array of heretofore undeveloped distinctions between classes of cases in which duties of care should be countenanced or denied. The standard also offers insight on perhaps the most vexing question posed by such claims: whether an attorney owes a duty of care to a third party to investigate before furthering a transaction when the attorney has reason to suspect client wrongdoing.

Keywords: Attorney Liabilty, Legal Ethics, Torts, Negligence