Chapter 6 ATTORNEY MALPRACTICE

• Jurisdiction: North Carolina

6 ATTORNEY MALPRACTICE

A. Definition

Actions against attorneys for malpractice are frequently labeled "legal malpractice." However, the North Carolina Court of Appeals has made the case for referring to the cause of action as "attorney malpractice." The court said it was concerned that use of the term "legal malpractice" could lead to confusion by its connection in some minds with "legal" or "lawful" conduct.¹

Attorney malpractice is ordinarily considered a negligence action, although the prevailing view is that it embraces any professional misconduct, whether breach of the standard of care (negligence)² or of fiduciary obligations.³

While North Carolina courts have recognized breach of contract,⁴ fraud,⁵ constructive fraud⁶ (breach of fiduciary duty) in addition to negligence as valid malpractice theories,⁷ this chapter addresses only negligence. The elements of actions, such as breach of contract or fraud, are discussed in other chapters.

Chicago Title Insurance Co. v. Holf⁸ expressly rejected the minority view that actions for attorney malpractice are in tort. The court held that claims for relief for attorney malpractice are actions sounding in contract that may properly be brought only by those in privity of contract with the defendants by virtue of a contract providing for employment. As discussed below, the Holt proscription on actions by non-clients has been relaxed but, in any event, never changed the nature of the elements required to prove the action, which are negligence-derived.

The action usually involves representation in a civil matter, although it may derive from representation in criminal issues.⁹ The essence of the tort is a deficiency in the quality of legal services. This distinguishes it from other actions. For example, actual fraud by an attorney would not be a basis for malpractice since the behavior is not unique to the legal profession and does not concern the quality of legal services to any greater extent than would dishonesty by a lay person.¹⁰ Breach of an express contract, since it involves failure to perform a promise rather than deficiency in the quality of legal services, would also not constitute malpractice.¹¹

B. Elements

The elements required to prove a claim of malpractice predicated on a theory of an attorney's negligence are:

(1) The attorney breached the duties owed to his or her client and the negligence,
(2) Proximately caused, and
(3) Damage to the plaintiff.¹²

C. Elements Defined

1. Breach of Duty

The plaintiff must establish the standard of care and its breach.¹³ To show actionable negligence, the plaintiff must prove by the greater weight of the evidence that the attorney breached the duties owed to his or her client.¹⁴ Ordinarily, the plaintiff must demonstrate there was an attorney-client relationship between him or herself and the defendant. It seems generally agreed that the attorney-client relationship may be either express or implied.¹⁵ Whether an attorney-client relationship exists is a question of fact.¹⁶

The viability of actions by non-clients is problematic.¹⁷ At one time, the North Carolina Court of Appeals held that "claims for relief for attorney malpractice are actions sounding in contract and may properly be brought only by those who are in privity of contract with such attorneys by virtue of a contract providing for their employment."¹⁸ That strict limitation no longer applies.

While North Carolina courts remain hesitant to hold an attorney liable for actions that affect non-client third parties since they are not in privity with the attorney's contract of employment,¹⁹ courts do now recognize a cause of action in tort by non-client third parties for attorney malpractice in certain circumstances.²⁰ If a non-client is a third-party beneficiary of the attorney's contract for representation, that non-client may be able to bring a malpractice action.²¹

In Leary v. N.C. Forest Products, Inc.,²² the court said a professional malpractice claim may be based on privity of contract, third-party beneficiary contract liability, or that the defendant, by entering into a contract with another party, placed him or herself in such a relation to the plaintiff that the law imposes an obligation, sounding in tort, not in contract, to act in a way that does not injure the plaintiff.²³ The court identified six factors on which recovery by a non-client third party for an attorney's malpractice under the alternative tort theory depends. These are:

(1) the extent to which the transaction was intended to affect the [third party]; (2) the foreseeability of harm to him; (3) the degree of certainty that he suffered injury; (4) the closeness of the connection between the [attorney's] conduct and the injury; (5) the moral blame attached to such conduct; and (6) the policy of preventing future harm.²⁴

One example of non-client recovery is in the estate planning area, where attorneys who draft defective wills are often found liable to harmed beneficiaries for negligence.²⁵

Lawyers are not required to be infallible.

An attorney who acts in good faith and in an honest belief that his advice and acts are well founded and in the best interest of his client is not answerable for a mere error of judgment or for a mistake in a point of law which has not been settled by the court of last resort in his State and on which reasonable doubt may be entertained by well-informed lawyers.²⁶

The North Carolina Supreme Court set forth the duty of an attorney in an early case where the court said:

Ordinarily when an attorney engages in the practice of the law and contracts to prosecute an action in behalf of his client, he impliedly represents that (1) he possesses the requisite degree of learning, skill, and ability necessary to the practice of his profession and which others similarly situated ordinarily possess; (2) he will exert his best judgment in the prosecution of the litigation entrusted to him; and (3) he will exercise reasonable and ordinary care and diligence in the use of his skill and in the application of his knowledge to his client's cause.²⁷

Subsequently, the court elaborated:

The third prong . . . requires an attorney to represent his client with such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake. The standard is that of members of the profession in the same or similar locality under similar circumstances.²⁸

Among the "tasks attorneys undertake" that may lead to liability are: real estate closings,²⁹ title searches,³⁰ reviewing and explaining legal documents,³¹ drafting documents,³² sale of corporate stock,³³ representation in "domestic" matters,³⁴ settling a case,³⁵ legal research,³⁶ and even referrals to another attorney.³⁷

Two yardsticks for measuring the standard of care are the Rules of Professional Conduct and the Restatement of The Law Governing Lawyers. The North Carolina Rules of Professional Conduct specifically address their use in the malpractice context, stating:

Violation of a Rule should not give rise itself to a cause of action against a lawyer nor should it create any presumption in such a case that a legal duty has been breached . . . . The rules are . . . not designed to be a basis for civil liability . . . . Nevertheless, since the Rules do establish standards of conduct by lawyers, a lawyer's violation of a Rule may be evidence of breach of the applicable standard of conduct.³⁸

The last sentence was added to the rules effective February 27, 2003, and acknowledges the trend in the courts to hold that a rule violation may be evidence of a breach of the applicable standard of conduct,³⁹ although violation of a rule is not considered liability per se.⁴⁰

Another source for evaluating the standard of care is the Restatement. It provides, a lawyer:

[W]ho owes a duty of care must exercise the competence and diligence normally exercised by lawyers in similar circumstances. Proof of a violation of a rule or statute regulating the conduct of lawyers:

(a) does not give rise to an implied cause of action for professional negligence or breach of fiduciary duty;
(b) does not preclude other proof concerning the duty of care or the fiduciary duty; and
(c) may be considered by a trier of fact . . . to the extent that (i) the rule or statute was designed for the protection of persons in the position of the claimant and (ii) proof of the content and construction of such a rule or statute is relevant to the claimant's claim.⁴¹

Usually, the standard of care will need to be established through expert testimony;⁴² however, expert testimony may be not required where a jury, based on its common knowledge and experience, is able to decide the issue. For example:

Where no issue is raised as to defendant's responsibility for allowing the statute of limitations to run, where the negligence of defendant is apparent and undisputed, and where the record discloses obvious and explicit carelessness in defendant's failure to meet the duty of care owed by him to plaintiff, the court will not require expert testimony to define further that which is already abundantly clear.⁴³

The Restatement of the Law Governing Lawyers provides that a law firm is subject to liability for injury caused by a wrongful act or omission of a principal or employee of the firm acting in the ordinary course of the firm's business or with actual or apparent authority.

A principal of a firm organized other than as a general partnership without limited liability may be vicariously liable under the Restatement for the acts of another principal or employee, and principals of a firm organized as a general partnership without limited liability may be liable jointly and severally with the firm.⁴⁴ North Carolina's partnership law is applicable to attorneys.⁴⁵ The act provides:

Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in

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