The Colorado Supreme Court upheld the strict privity doctrine for attorney malpractice claims by nonclients and reaffirmed that an attorney’s liability is limited to when the attorney has committed fraud or a malicious or tortious act, including negligent misrepresentation. Baker v. Wood, Ris & Hames, case number 2013SC551 (2016 CO 5).
In Baker, the dissatisfied beneficiaries sued the attorneys for their father and alleged as follows:
- The attorneys failed to advise their father of the impact of holding property in joint tenancy.
- The attorneys failed to advise their father that failing to sever those joint tenancies would frustrate his intent to treat his children equally with his stepchildren.
- The attorneys’ actions allowed the surviving spouse to change their father’s estate plan after his death.
- The attorneys drafted documents for the surviving spouse that were different from their father’s original plan.
- The beneficiaries were the intended beneficiaries of the client’s plan, that the attorneys failed to advise the beneficiaries of the relevant facts, and that they had suffered damages as a result.
The beneficiaries asked the Colorado Supreme Court to adopt the “California Test” or the “Florida-Iowa Rule” and set aside the strict privity rule. The Court rejected the adoption of both tests and reaffirmed the strict privity rule. The Court also held that the beneficiaries’ claims would fail under both the California Test and the Florida-Iowa Rule.
The Court put forth the following rationales for upholding the strict privity rule in Colorado:
- It protects the attorney’s duty of loyalty to the client and allows for effective advocacy for the client.
- Abandoning strict privity could result in adversarial relationships between an attorney and third parties. This could result in conflicting duties for the attorney.
- Without strict privity, the attorney could be liable to an unforeseeable and unlimited number of people.
- Expanding attorney liability to nonclients might deter attorneys from taking on certain legal matters. The Court reasoned that this result could compromise the interests of potential clients by making it more difficult to obtain legal services.
- Casting aside strict privity would increase the risk of suits by disappointed beneficiaries. Those suits would cast doubt on the testator’s intentions after his or her death when he or she is unavailable to speak.
- The beneficiaries have other avenues available to them, including reformation of the documents.
- A personal representative can pursue legitimate claims on behalf of a testator.
The Court held, “We further believe that the strict privity rule strikes the appropriate balance between the important interests of clients, on the one hand, and non-clients claiming to be injured by an attorney’s conduct, on the other.” As a result, the strict privity rule remains intact in Colorado.