Estate Planning and Administration in Colorado after Baker v. Wood. Ris & Hames. PC, 1016 COBJ, Vol. 45, No. 10 Pg. 43
| Author | Kevin D. Millard, J. |
Kevin D. Millard, J.
Trust and Estate Law
In Baker v. Wood, Ris & Hames, PC, plaintiffs urged the Colorado Supreme Court to abandon the strict privity rule for malpractice claims by non clients against attorneys. This article examines the case and its implications for trust and estate attorneys.
In Baker v. Wood, Ris & Hames, PC,[1] the plaintiffs alleged that they were harmed by malpractice committed by their father's estate planning lawyers. Baker was married to his second wife and they each had two children from previous marriages. Baker's estate plan left small gifts to all four children and a condominium to his wife Betty, and divided the rest of the estate between a marital trust and a family trust, of which Betty was both trustee and primary beneficiary. At Betty's death, the balance of the trust property was to pass equally to all four children After Baker's death, the lawyers who had prepared his estate plan represented Betty as personal representative of Baker's estate, and they also prepared an estate plan for Betty. Because the Bakers owned substantial property as joint tenants, which became his wife's sole property at Baker's death, Baker's children ultimately did not receive as much of the couple's total wealth as they thought they should have, and they sued the lawyers for malpractice.
The Malpractice Claim
The gist of the malpractice claim was that the lawyers (1) should have advised Baker that the nature of the joint tenancy property might prevent the ultimate equal division of that property among the children, and (2) should have taken steps to prevent that from happening. The trial court dismissed the case for failure to state a claim on which relief could be granted, and the Court of Appeals affirmed in an unpublished opinion.
Strict Privity Argument
Before
Baker, Colorado case law had established that
Colorado follows the strict privity rule, under which an
attorney is liable to a non client only when the plaintiff
can show that the lawyer committed fraud or a malicious or
tortious act.
[T]he determination whether in a specific case the defendant
will be held liable to a third person not in privity is a
matter of policy and involves the balancing of various
factors, among which are the extent to which the transaction
was intended to affect the plaintiff, the foreseeability of
harm to him, the degree of certainty that the plaintiff
suffered injury, the closeness of the connection between the
defendant's conduct and the injury, and the policy of
preventing future harm.
The
Florida-Iowa Rule applies the third-party beneficiary concept
of contract law to lawyer malpractice claims, treating the
client's intended beneficiaries as third-party
beneficiaries of the contract between the client and the
estate planning lawyer.
1. Limiting a lawyer's liability to clients "protects the attorney's duty of loyalty to and effective advocacy for the client."5
2. "[E]xpanding attorney liability to non-clients could
result in adversarial relationships between an attorney and
third parties and thus give rise to conflicting duties on the
part of the attorney."
3. Extending liability to third parties could subject the
lawyer to liability "to an unforeseeable and unlimited
number of people."
4. "[E]xtending attorney liability to non-client
beneficiaries risks suits by disappointed beneficiaries that
would cast doubt on the testator's intentions long after
the testator is deceased and unavailable to speak for himself
or herself"
Based on these policy considerations, the Supreme Court concluded that the strict privity rule better protects the attorney-client relationship than does either of the rules urged by the plaintiffs, and that the strict privity rule strikes the appropriate balance between the interests of clients and non-clients who claim to have been injured by an estate planning lawyer. The Court also noted that retaining the strict privity rule does not leave disappointed beneficiaries without a remedy, because the Colorado Probate Code expressly allows a governing instrument to be reformed to correct a mistake, if the mistake and the transferor's intent are proved by clear and convincing evidence.[9]As one commentator has noted,
It is an interesting thought experiment to ask whether the plaintiffs in Baker could manage to prove to the requisite degree of certainty that their father intended them and their step-siblings to benefit equally from his wealth defined to include his non probate property.[10]
Although
not specifically mentioned by the Court, the plaintiffs in
Baker could have sought other remedies, such as the
imposition of a constructive trust
The Colorado Supreme Court's ruling in Baker is a minority position Most states have expanded an estate planning lawyer's malpractice liability to include nonclient intended beneficiaries in certain circumstances, under either the California Rule or the Florida-Iowa Rule. Although the Colorado Supreme Court declined to adopt either of those rules, it also said that, if it had, the plaintiffs in Baker would have lost under either rule. [12]
Tort Claims
The plaintiffs m Baker also asserted claims for fraudulent concealment and negligent misrepresentation. After Baker died, his children contacted the lawyers, who were then representing Betty as personal representative of Baker's estate. In response, the lawyers wrote to Baker's children, enclosing a copy of the will and explaining the outright bequests to the...
To continue reading
Request your trial