Jurisdictions have been slowly chipping away at the privity requirement when it comes to legal malpractice claims against estate planning attorneys. Generally, only the client can raise a claim of professional negligence or malpractice against an attorney. In more recent years, however, some jurisdictions have become more comfortable with the idea of “the third party intended beneficiary exception to the rule of privity.” Of course, this exception to the rule frequently comes up in will drafting cases, but not exclusively. Now, in Dingle v. Dellinger, aFlorida appellate court has expanded this exception.
The plaintiffs sued a lawyer for legal malpractice, claiming that the lawyer failed to properly draft documents gifting property to the plaintiffs. John P. Kyreakakis had hired the lawyer to prepare a quitclaim deed to gift a piece of real property to the plaintiffs. In a separate case, it was determined that Kyreakakis lacked authority to make the gift and it was determined that the conveyance was invalid. So, the plaintiffs sued the lawyer, alleging legal malpractice. The trial court determined that, because the plaintiffs were not parties to the attorney-client relationship, the law firm and its lawyers did not owe any duty to them and could, therefore, not be liable to them for malpractice. The appellate court disagreed.
The appellate court recognized that the case of whether the plaintiffs could state a claim against the lawyer for malpractice turned on the question of whether the lawyer owed any duty to the plaintiffs. While an attorney’s liability for professional negligence is generally limited to clients with whom the attorney shares privity of contract, the appellate court noted that the privity requirement “has been relaxed most frequently in will drafting situations,” but the relaxation has not been limited to will drafting cases.
The court looked to Iowa to quote extensively from a case where a third party, alleging legal malpractice in preparation of donative nontestamentary instruments of conveyance, could assert a claim for legal malpractice by establishing that the donor specifically identified the third party as the object of the donor’s intent and that the third party’s expectancy was lost or diminished as a result of the lawyer’s negligence. Based largely on the Iowa Supreme Court’s reasoning and law from other jurisdictions, the Florida appellate court concluded that the plaintiffs here had made allegations sufficient to bring their claim within the narrow exception to the privity requirement in legal malpractice cases.
If the plaintiffs’ allegations were true, they would show that they were the intended beneficiaries of the contract between the client and the lawyer. The primary intent of the client hiring the lawyer was to directly benefit the plaintiffs. There was no direct benefit to the client, making this transaction similar to a gift or a devise made in a trust or in a will. The client’s intent was frustrated by the alleged negligence in not preparing an enforceable quitclaim deed.
The lawyer raised the interesting argument that the privity requirement has been relaxed only where there is “one side” to a transaction, such as wills, trusts, estate planning and adoptions. This case, on the other hand, was a two-sided real estate transaction. The appellate court conceded that, generally, an attorney is not liable to third parties for negligence or misadvice given to a client concerning an inter vivos transfer of property. While this case involved a real estate transaction, the court concluded that there was no adversarial relationship or differing interests to be protected, thus suggesting it was more akin to a one-sided transaction.