Privity, Duty, and Loss: in Swanson v. Ptak, 268 Neb. 265, 682 N.w.2d 225 (2004), the Nebraska Supreme Court Again Endorses Privity in Legal Malpractice Actions

• Publication year: 2021

84 Nebraska L. Rev. 369. Privity, Duty, and Loss: In Swanson v. Ptak, 268 Neb. 265, 682 N.W.2d 225 (2004), the Nebraska Supreme Court Again Endorses Privity in Legal Malpractice Actions

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Note*

Privity, Duty, and Loss: In Swanson v. Ptak, 268 Neb. 265, 682 N.W.2d 225 (2004), the Nebraska Supreme Court Again Endorses Privity in Legal Malpractice Actions

TABLE OF CONTENTS

I. Introduction ...................................................... 369
II. Privity in Context ............................................... 373
A. The Origins of Strict Privity ................................. 374
B. The New Majority: States without a Strict Privity
Requirement ................................................... 378
C. Indirect Privity and the Kurtenbach Approach
................ 380
D. Professional Negligence in Nebraska ........................... 382
III. Leota's Loss to Bear: The Facts of Swanson
.................... 385
IV. Nebraska's Missed Opportunity .................................... 388
A. Privity as Proof of No Duty ................................... 389
B. Abrogation and an Alternative: The Kurtenbach
Approach ...................................................... 390
C. The Myth of "Automatic Liability" ............................. 391
D. Privity and Loss-Bearing ...................................... 393
V. Conclusion ........................................................ 395

I. INTRODUCTION

The threat of malpractice--that word attorneys dread--is considered by some to be a growing threat in the practice of wills and estates law, where brothers, sisters, spouses, cousins, and friends battle each

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other for gifts of money or property from a decedent's estate. Professor Marvin Begleiter suggests that "[o]ne of the major developments in the law over the last 40 years has . . . been the number of lawsuits against attorneys for malpractice in estate planning."(fn1) While many legal tasks, such as the high number of formalities required in the execution of a will, are intended to protect testamentary instruments from changes that might frustrate a decedent's intent,(fn2) they can be minefields for even the most exacting attorneys.(fn3) The distribution of property when a decedent fails to draft a will can also be taxing. While heirs scramble to determine their shares under a state's intestacy laws, attorneys may be required to exclude seemingly deserving heirs such as stepchildren or in-laws from the division of property if they do not take under the state's statutes. Heirs or friends who fail to take a share--either because of an intestacy scheme that excludes them or their exclusion from a will--may be disappointed by their plight and seek revenge on an otherwise innocent attorney. Scholar Jennifer Knauth has suggested that "the genesis of legal malpractice claims lies in unfulfilled client expectations,"(fn4) and this aphorism seems particularly applicable to the unfulfilled expectations of these so-called "disappointed beneficiar[ies]."(fn5)

However, while attorneys practicing in the wills and estates field may dread the threat of a malpractice lawsuit, their fears are at least partially unfounded. First, estate-related malpractice claims are but a small portion of the malpractice claims filed in the United States. The American Bar Association ("ABA") recently reported that only nine percent of malpractice claims from 1996 to 1999 arose in the areas of estates, trusts, and probate.(fn6) Compare this figure to malpractice claims arising from personal injury cases, which constitute twenty-four percent of legal malpractice actions, and those arising from real estate transactions, which constitute seventeen percent of malpractice claims.(fn7) Further, in only approximately 2.2% of estate, trust, and probate cases did a plaintiff win a judgment in court, while sixty-nine percent abandoned their malprac

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tice claims without payment.(fn8) This is not to suggest that malpractice actions are not a frightening, interruptive part of a professional law practice, but merely that the "threat" of malpractice actions in the estates context may be overrated.

Second, in Nebraska and a few other states across the nation,(fn9) the common law requires that the parties to a malpractice suit be in privity.(fn10) In other words, they must be joined in a formal relationship, typically signified by the presence of a contract.(fn11) Consequently, third parties who are negatively affected by the negligent drafting or execution of a will--these are the "disappointed beneficiaries"--probably have no claim against the attorney who drafted or executed the will because they are not contractually linked to her.(fn12) The only individuals who would be in privity are the attorney and her original client who, in a typical wills and estates malpractice case, is already deceased.(fn13) Thus, Nebraska attorneys are at least partially insulated from plaintiff malpractice victories brought by a next-of-kin or other potential beneficiaries. Nebraska scholar Ronald Volkmer, who in 1995 produced a thorough examination of Nebraska's privity requirement in attorney malpractice cases,(fn14) asserts that the privity rule gives Nebraska attorneys little liability-related incentive to more cautiously draft or execute documents that make donative transfers.(fn15) Volkmer concludes that they "have enjoyed `virtual immunity' for negligent will drafting and other estate planning related activities."(fn16)

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In 2004, the Nebraska Supreme Court again endorsed the privity requirement for attorney malpractice cases, although on a set of unusual facts.(fn17) In 1997, Nebraska resident Wilma Pritchard died intestate, effectively excluding her niece-in-law, Leota Swanson, from an inheritance under Nebraska's intestacy laws.(fn18) David Ptak, Pritchard's attorney and later her estate's personal representative, attempted to procure from the rightful heirs an inheritance for Swanson, bargaining with Pritchard's siblings to provide Swanson with approximately one-fourth of Pritchard's estate.(fn19) After giving Swanson a check for $99,000--an early partial distribution to assist her with the purchase of a condominium--the heirs decided not to share the estate.(fn20) Ptak was forced to file suit against Swanson on the estate's behalf to recover the funds, and Swanson filed suit against Ptak alleging, among other things, professional negligence in his failure to obtain the remainder of her share in the estate.(fn21) The Nebraska Supreme Court rejected Swanson's claims, holding that Swanson and Ptak were not in privity as required under Nebraska law to sustain a claim of professional negligence.(fn22) Put simply, "Ptak had no professional duty to secure a gratuitous agreement from [Prichard's] heirs for the benefit of Swanson."(fn23)

In the typical estate planning malpractice case, it is the disappointed beneficiary who seeks access to funds in an estate that she feels she was denied. However, in Swanson, the court was asked whether a non-beneficiary to a decedent's estate could recover damages from a personal representative who gave her a portion of the estate and then took it back. The court determined that Ptak only had duties to himself, as an attorney, and to the estate, as a personal representative. Thus, despite Swanson's seemingly obvious reliance, the court held that Ptak owed no duty to her.

A court that bases an attorney's liability on a privity requirement in this manner views the contractual relationship as the fountainhead of the attorney's duty to the client (or, as it were, lack of duty to the non-client). If the attorney and third party are not bound by a contractual relationship, the attorney is held to have had no legal duty to her. A lack of privity thus precludes discussion of whether a duty existed. And, because no duty can exist outside the contract, the privity requirement effectively bars an entire class of plaintiffs--non-client beneficiaries--from being able to state a claim for attorney malprac

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tice. This seems incredibly problematic in a field that places a premium on professional competence and loyalty.(fn24)

This Note will argue that the Nebraska Supreme Court missed an opportunity to reconsider the entrenched common law rule in Nebraska requiring privity in legal malpractice actions. Part II briefly explores the role of privity nationally and in Nebraska, while Part III discusses the facts of Swanson. Part IV explores the implied relationship doctrine, concluding that the harshness of the privity requirement for clients who reasonably relied on what they assumed to be an attorney-client relationship outweighs any benefits it may have to the legal profession.

This Note does not suggest that any of the attorneys involved in the Swanson dispute were professionally negligent or somehow escaped liability because of the privity requirement, nor should such conclusions be inferred. It seems evident from the facts iterated by the court that Ptak's actions were intended only to help Swanson procure a portion of her uncle's estate, a gift that her aunt's intestacy effectively denied her. Accordingly, this Note only suggests that the court should reevaluate the privity requirement, providing at least the possibility of relief to non-clients whose professional negligence claims are often summarily dismissed. At issue is whether a plaintiff's claims should be barred from court because his relationship with the attorney does not accord with traditional or contractual notions of the attorney-client relationship and not whether any particular acts constituted professional negligence.

II. PRIVITY IN CONTEXT

Because so many scholars have provided thorough reviews of the privity requirement,(fn25) the intent of this Part is to provide but a brief overview of the weight accorded the privity requirement in state courts...