In RFF Family Partnership, LP v. Burns & Levinson, LLP, et al., SUCV2012-2234-BLS1 2012 WL 6062740 (Nov. 21, 2012) (Billings, J.), in connection with a law firm’s motion to dismiss the malpractice claims alleged against it by a former client, the Massachusetts Superior Court addressed what appears to be an issue of first impression in Massachusetts: whether an attorney’s failure to disclose to his or her client the mishandling of the client’s matter provides an independent basis for tort liability. The Court ruled, concealment from a client of having mishandled the client’s matter may constitute an independent basis for an attorney’s liability in tort. This ruling is consistent with prior precedent in the Commonwealth arising in the context of the medical profession, and also is in accordance with the majority of jurisdictions which have considered the issue.
In this case, the facts of which are set forth in more detail in the related article entitled “Intra-Firm Legal Advice Concerning Potential Liability to Client is Privileged,” the plaintiff, RFF Family Limited Partnership, LP (“RFF”), sued Burns & Levinson, LLP (“B&L”), the law firm it retained to represent it in connection with a commercial loan to the title holder of certain real estate located in Saugus, Massachusetts (the “Property”), which was to be secured by a first mortgage lien (the “Mortgage Matter”), asserting, among other claims, legal malpractice and violation of Chapter 93A. B&L moved to dismiss these claims, arguing: (1) RFF could not establish it incurred any loss or damage as a result of B&L’s conduct; and, (2) it had no duty to disclose to RFF the alleged mishandling of the Mortgage Matter. The Court rejected both of these arguments and denied B&L’s motion to dismiss.
With regard to B&L’s argument that RFF’s Complaint did not adequately allege damages, the Court held RFF’s allegations concerning B&L’s failure to secure a commercial loan with a first mortgage lien but, instead, leaving it in a lien position subordinate to $2.7 million worth of senior liens and, RFF’s resulting inability to deliver clear title to a subsequent purchaser of the Property, was “damage enough.” The Court further held the loss element of RFF’s claims could be established by the “substantial legal bills and expenses” RFF paid to B&L in connection with both the Land Court action and in the related Federal Court proceedings concerning adjudication of the priority of the liens on the Property.
The Court also rejected B&L’s argument that B&L did not have a duty to disclose to RFF that it committed malpractice. The Court explained, under well-established Massachusetts law, “[t]he relation of attorney and client is highly fiduciary in its nature. The attorney owes his client a duty of full and fair disclosure of facts material to the client’s interests.” Applying this principle, the Court reasoned: “surely, a lawyer’s discovery that he or his firm has mishandled a matter in a way that is likely to damage the client’s interests meets any reasonable definition of materiality, and must be disclosed.” The Court further reasoned, although “the confession of error runs contrary to self-interest and human nature,” this is “simply a fact of fiduciary life,” which requires “unflinching loyalty” from an attorney to his or her client’s interests.
Although the Court acknowledged it was not aware of any reported decision in Massachusetts ruling a lawyer’s concealment of his own mistake can itself give rise to tort liability, the Court analogized this situation to Massachusetts court decisions imposing liability for a medical doctor’s concealment from a patient of his or her malpractice where the concealment results in damage to the patient. The Court also found support for its ruling from the majority of jurisdictions considering this issue. The majority view is, whether the claim is advanced on the theory of legal malpractice or breach of fiduciary duty, an attorney’s concealment from his or her client of a significant mistake may provide an independent basis for liability. Accordingly, the Court denied B&L’s motion to dismiss with respect to B&L’s alleged failure to disclose to RFF the mishandling of the Mortgage Matter.
Whether other Massachusetts courts will follow the reasoning applied by the Court is uncertain. Nevertheless, this decision should be a cautionary reminder to attorneys practicing in the Commonwealth that the fiduciary nature of the attorney-client relationship requires an attorney to fully and fairly disclose to his or her client all facts material to the client’s interests. According to this decision, this duty extends to the disclosure of a mistake made in the handling of a client’s matter when the mistake is likely to damage the client’s interests.