LIABILITY OF LAWYERS TO NON-CLIENTS FOR NEGLIGENT OR QUESTIONABLE ADVICE OR OPINIONS: EXPOSURE, DEFENSES, CURRENT JUDICIAL VIEWS, AND ETHICAL CONSIDERATIONS
| Jurisdiction | United States |
(Sep 2007)
LIABILITY OF LAWYERS TO NON-CLIENTS FOR NEGLIGENT OR QUESTIONABLE ADVICE OR OPINIONS: EXPOSURE, DEFENSES, CURRENT JUDICIAL VIEWS, AND ETHICAL CONSIDERATIONS*
Nathan R. Haines
Louis R. Veerman
Attorneys
Guess & Rudd P.C.
Anchorage, Alaska
Joe Perkins is of counsel to the Alaska law firm of Guess & Rudd P.C., where he practices natural resources law, public land law, commercial law, and environmental law, with particular emphasis on the representation of mining companies, oil and gas companies, Native corporations, and financial institutions in connection with mineral and oil and gas transactions and mineral and oil and gas properties generally. From 1984 through 2006 Joe was a shareholder in Guess & Rudd P.C. He became of counsel to the firm in 2007 when he became the E. George Rudolph Distinguished Visiting Professor of Law at the University of Wyoming College of Law for the Spring 2007 semester. He taught Oil & Gas Law this past spring in Laramie at the College of Law while simultaneously maintaining much of his practice. Throughout his career Joe has been active in the Rocky Mountain Mineral Law Foundation. He is the author or co-author of two previous annual institute papers--"Liability of Lawyers To Third Parties for Negligent or Questionable Advice or Opinions--Exposure, Defenses, Current Judicial Views, and Ethical Considerations," 43 Rocky Mt. Min. L. Inst. Paper 7 (1997), reprinted in 47 Def. L.J. 719 (1998), and "The Great Land Divided But Not Conquered: The Effects of Statehood, ANCSA, and ANILCA on Alaska," 34 Rocky Mt. Min. L. Inst. Paper 6 (1988). He also is co-author of "Alaska Lands and Mineral Interests," Title VI (ch. 70-73), American Law of Mining (2d ed. 1984). He also has served as the Foundation's Secretary (2001-2002), as a Trustee At-Large and Member of the Executive Committee (1998-2000), and as an organizational Trustee (1988-1997). In 2003 he served as Public Lands Co-Chair for the Foundation's annual institute, and in 2000 he served as Program Chair for the Foundation's special institute on Ethics and Professional Responsibility. Since 1991 he also has chaired the Scholarship Committee of the Foundation. Joe also has been a speaker at many previous short courses, seminars, and workshops sponsored by other organizations such as the American Bar Association, the Alaska Bar Association, the Alaska Miners Association, and the Alaska Association of Petroleum Landmen. He has lived and practiced law in Alaska since receiving his law degree from the University of Denver College of Law in 1979. He received his undergraduate degree (B.S.E., Geological Engineering, with high honors) from Princeton University in 1976.
Nathan Haines is a litigation associate in the Anchorage office of Guess & Rudd P.C. He received his law degree with high honors from Gonzaga University in 2005 and his undergraduate degree (B.S., Criminal Justice) from Weber State College in 2002. Before joining Guess & Rudd P.C. in 2006, Nathan served as law clerk to Chief Judge Robert G. Coats of the Alaska Court of Appeals.
§ 7.01 INTRODUCTION
[1] Identification of topic and goals
[2] Recognition of existing source material (see sources at § 7.06)
[3] Summary of analysis and conclusions
§ 7.02 EXPOSURE TO LIABILITY
[1] Certain key concepts
[a] Generally
[b] Lawyer's duties to client
[c] Lawyer's duties to
[d] Relationship of lawyer's role to the transaction
[2] Recognizing the situations in which a duty to a non-client may exist
[a] Generally
[b] Client's intent toward
[c] Lawyer's intent toward
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[d] Circumstances under which a duty of due care to non-client arises, and typical non-clients to whom duty of care may be owed
[e] Situations in which the lawyer's role may be such as to increase exposure to liability
[f] Role of disclaimers and limitations on use
[3] Theories of liability
[a] Introduction
[b] Traditional analysis
[c] Modern third party beneficiary analysis
[d] Modern balancing test
[e] Modern negligence analysis
[g] Applicability of cases involving other professionals
[h] Statutory bases for lawyer liability to
[i] FRCP 11, 28 U.S.C. § 1927, and state counterparts
[4] Public policy basis for expansion of traditional liability analysis beyond privity and intentional misconduct
[a] Generally
[b] Public policy goals
[c] Countervailing concerns
[5] Restatement (Third) of the Law Governing Lawyers
§ 7.03 IMPACT ON POTENTIAL LIABILITY OF THE "OLD" CODE OF PROFESSIONAL RESPONSIBILITY AND THE "NEW" MODEL RULES OF PROFESSIONAL CONDUCT
[1] Effect of "old" Model CPR (1969) and "new" Model Rules (1983, as amended) on exposure to liability
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[2] Duties to client of loyalty and zealous advocacy and to protect and preserve client confidences; exceptions and practical difficulties
[a] Generally
[b] Conflict between duty to preserve client confidences and duty of candor to tribunals and potential duty to disclose certain information to
[c] Special problems of in-house counsel
§ 7.04 DEFENSES
§ 7.05 ADDRESSING AND AVOIDING POTENTIAL LIABILITY TO NON-CLIENTS IN THE TYPICAL NATURAL RESOURCES OR ENVIRONMENTAL PRACTICE: SUGGESTIONS FOR IMPROVING ONE'S PRACTICE
§ 7.06 SOURCES (not exhaustive)
[1] Sources re lawyer liability to non-clients generally
[2] Sources re accountant liability to
[3] Sources re unique aspects of attorney-client relationship
[4] Sources re legal opinions
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§ 7.01 INTRODUCTION
[1] Identification of topic and goals
Lawyers may be found liable to persons other than their clients under various statutes and under one or more principles of common law. In all cases in which such liability may arise, however, the questions are similar: Does the lawyer owe any duty to the non-client and, if so, what is the nature and scope of any such duty?
In considering these questions, the authors of this paper have established three goals:
(a) To identify the key factors that courts consider in determining whether to find lawyers liable to particular non-clients and thereby to increase the awareness and sensitivity of natural resource practitioners to situations presenting potential liability to non-clients;
(b) To discern current trends in the law concerning lawyer conduct generally (including ethical rules) and the law concerning lawyer liability to non-clients in particular, to identify current trends in the practice of law, and to reflect on the implications of these trends for natural resource practitioners;
(c) To identify certain procedures and techniques that may help natural resource practitioners to meet the expectations of both the clients and the non-clients to whom they may owe duties while avoiding or limiting exposure to liability.
[2] Recognition of existing source material (see sources at § 7.06)
In preparing this paper the authors have not attempted to compile a complete list of case citations or a bibliography of secondary sources on the subject, in part due to space limitations and in part because others have already undertaken that task. In § 7.06 we identify the secondary sources to which we have referred. All were useful, but the most useful source by far on the subject was and is the Restatement (Third) of the Law Governing Lawyers (1998).1 The Reporter's Notes to the various sections of the Restatement provide substantial background on the origins of the statements of black-letter law set forth in the Restatement and contain excellent case citations and cross-references to the ethical rules applicable to the stated principles of law. The Restatement (Third) of the Law Governing Lawyers is essential reading for practicing lawyers everywhere on every issue arising in practice and not just the issues relating to potential duties to non-clients.
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[3] Summary of analysis and conclusions
Since John P. Akolt, III and Nancy Shea White addressed the Foundation in 1987 on the subject of opinion letters in certain resource transactions,2 there has been a continuous stream of reported cases addressing the potential liability of lawyers to non-clients in certain situations. Some of the cases involve situations where the lawyer affirmatively undertook, as part of a transaction pursuant to which the lawyer's client would receive a benefit, to render a formal opinion on some matter to the particular non-client who later sues the lawyer.3 Other cases present situations in which the lawyer's actions or undertaking were less formal in nature or were not directed to or for the person who later sues the lawyer.4
From these and other cases, certain general rules of law concerning lawyer liability to third parties have emerged to the point where the Restatement becomes both a realistic undertaking and a much needed distillation of the relevant precedent (although it probably will take some time for the applicable precedent within each jurisdiction to conform to the Restatement). While these rules may astonish the uninitiated or appear almost revolutionary to some lawyers, the authors believe (based on precedent going back to Justice Cardozo when he served on the Court of Appeals for the State of New York)5 that the rules as restated in the Restatement are (with one possible exception concerning disclosure of confidential client information)6 neither new nor revolutionary but merely the result of the general development of the law relating to the provision of professional services of all types to a society that needs and values very highly the delivery of proper professional services to persons entitled thereto and seeks to provide a remedy for such persons when they are injured by legally inadequate service.
While the applicable rules of law...
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