Attorneys do not owe a duty to non-client prospective beneficiaries of undrafted, unexecuted wills.

Strong v. Fitzpatrick, 2017 VT 35 [May 12, 2017]

REIBER, C.J. In this legal malpractice case, plaintiff claims that his deceased mother’s attorney failed to draft a will reflecting her alleged intent to leave plaintiff a greater share of real estate than that left to his siblings. Plaintiff appeals the trial court’s summary judgment decision for defendant, arguing that defendant owed him a duty of care as a prospective beneficiary of his mother’s estate. We disagree and therefore affirm,

Plaintiff argues that “if an attorney owes a duty of care to intended beneficiaries of estate planning legal services the duty must encompass an obligation to complete a contracted-for will, already begun, in a reasonable amount of time, or at least obligate the lawyer to inform the client that he will not complete the drafted will so that client can hire another lawyer to do the work.”

As this Court has previously observed, courts around the country have made exceptions to the general rule requiring attorney-client privity, often in the estate-planning or will-drafting context. See, e.g., Hedges, 2003 VT 63, ¶ 7 ("Many courts have held lawyers liable to nonclient plaintiffs for negligence where the plaintiff is an intended third-party beneficiary of the attorney-client relationship—in estate-planning and will-drafting cases for example."); Bovee, 174 Vt. at 488, 811 A.2d at 140 ("[A] number of courts have relaxed the privity rule in limited circumstances—most often in the estate-planning context—where it can be shown that the client's purpose in retaining the attorney was to directly benefit a third party.")

Plaintiff’s case is not about negligent drafting but rather about the absence of any drafting. We reject plaintiff’s request to extend an exception to the general rule to the circumstances of this case; imposing on attorneys a duty to prospective beneficiaries of undrafted, unexecuted wills would undermine the duty of loyalty that an attorney owes to his or her client and invite claims premised on speculation regarding the testator’s intent.

We hold that attorneys do not owe a duty to non-client prospective beneficiaries of undrafted, unexecuted wills and therefore do not recognize an exception here to the general rule requiring attorney-client privity to maintain a legal malpractice action.

Defective construction claim dismissed: Economic loss rule bars recovery for negligence; privity rule bars recovery for breach of warranties.

 Long Trail House Condominium Association, v. Engelberth Construction, Inc., 2012 VT 80 (Skoglund, J.)

Plaintiff Condominium Association appeals from the trial court's order granting summary judgment to defendant general contractor Engelberth Construction, Inc. on the Association’s complaint that Engelberth in constructing the project was negligent and breached express and implied warranties. The Association argues that the court erred by: (1) applying the economic loss rule to bar its negligence claim; and (2) dismissing its breach of warranty claim because of lack of privity. We affirm.

The economic loss rule "prohibits recovery in tort for purely economic losses." EBWS,LLC v. Britly Corp., 2007 VT 37, ¶ 30, 181 Vt. 513, 928 A.2d 497. The rule serves to maintain a distinction between contract and tort law. Id. We require actual injury, not simply risk of harm, before one can recover in negligence. Privity, or lack thereof, is not the determining factor. The rule's application does not turn on whether the parties had the opportunity to allocate risks. The existence of a duty, apart from a contractual duty, is a prerequisite to recovery of economic damages in a negligence case. That critical element is lacking in the instant case.  The "professional services" exception to the economic loss doctrine does not apply.  Foreseeability alone is not sufficient to warrant the imposition of a professional duty. We have twice rejected the notion that contractors owed a special duty of care for purposes of this exception, separate and apart from their contractual obligations.  Engelberth presented itself as a contractor and it operated as a contractor, not as a provider of a specialized professional service. 

Our case law plainly contemplates the existence of contractual privity before a breach of implied warranty claim can be raised. The Association's warranty remedy lies against the entity that sold it the condominium units and implicitly warranted through the sale that the units were built in a good and workmanlike manner and that they were suitable for habitation. Its remedy does not lie against Engelberth.

Note: Only two regular members of the Court sat on this case, Skoglund and Burgess, JJ.. These two joined by Davenport, Supr. JJ., formed the majority, with Kupersmit, Supr. JJ., and Johnson, J. (Ret.), dissenting.

SCOVT Note:  As  to the  Court's statement, "that the existence of a duty is a prerequisite to recovery of economic damages in a negligence case," at ¶ 18 see Restatement (Third) of Torts: Liability for Economic Harm  § 1 (rejecting a broader articulation of the economic loss rule) 

Municipal attorney did not owe a professional or other fiduciary duty to municipal employee.

Handverger v. City of Winooski, 2011 VT 134 (Burgess, J. )

Plaintiff, the former city manager of Winooski, appeals from the trial court’s summary judgment in favor of the Winooski city attorney.  Plaintiff sued the city attorney, individually, for breach of fiduciary duty in the course of municipal infighting over plaintiff’s performance as manager and the city’s decision to dismiss him.  Plaintiff’s complaint is that the city attorney breached a duty of loyalty by threatening cross-examination at a municipal hearing and by signing a disparaging letter and press release calling for his resignation.   The trial court determined that the city attorney owed plaintiff no fiduciary duty beyond the attorney’s duty to the city.  We affirm.

There was no evidence or finding that the city attorney, implicitly or explicitly, represented plaintiff individually or in any capacity other than as city manager.   Lacking any lawyer-client relationship the city attorney did not owe plaintiff a duty of faithful conduct for the personal benefit of plaintiff.

Nor did a fiduciary duty exist by operation of law due to the parties’ dealings. In Bovee v. Gravel, 174 Vt. 486, 811 A.2d 137 (2002) (mem.), we acknowledged some jurisdictions relax the strict attorney-client privity basis for legal malpractice where injured third parties could show the “client’s purpose in retaining the attorney was to directly benefit a third party.”  174 Vt. at 488, 811 A.2d at 140.  Plaintiff presents nothing approaching such a relationship of privity between himself and the city attorney.  There is no evidence that the attorney was appointed or retained to serve plaintiff’s personal interests.  Nor is there evidence of surrounding circumstances, or interaction between the parties, suggesting a blurring of municipal objectives with plaintiff’s own.

Attorney not liable to non-client for nondisclosure of a matter of opinion during a negotiation, where underlying facts equally available.

Lay v. Pettengill, 2011 VT 127 (Dooley, J.  )

 Plaintiff David M. Lay appeals from an order granting summary judgment to DPS staff attorney Novotny on Lay’s claim of fraudulent nondisclosure. Lay’s claim stems from an internal investigation into his behavior as a state trooper. Lay hired an attorney who negotiated a resolution to the internal charges with attorney Novotny. Lay, alleges attorney Novotny had a duty to inform him during the negotiation process that that she believed Lay’s conduct might give rise to a criminal action, even though there was no discussion or inquiry between the parties’ attorneys about  criminal matters.   As a result of the negotiation, Lay resigned and executed a release in exchange for eight weeks of pay and an agreed-upon process for addressing future employment referral requests.   Following Lay’s resignation, criminal charges were brought. Lay argues that the superior court erred in granting judgment to defendant on his claim of fraudulent nondisclosure.  We affirm.

 “Fraudulent concealment involves concealment of facts by one with knowledge, or the means of knowledge, and a duty to disclose, coupled with an intention to mislead or defraud.”  “[A]s between bargaining adversaries there can ordinarily be no justifiable reliance upon an opinion.  The recipient is not justified in accepting the opinion of a known adversary on the law and is expected to draw his own conclusions or to seek his own independent legal advice.”    “Failing to disclose information is not fraudulent unless one has an affirmative duty to disclose, as in a confidential or fiduciary relationship.” A duty to disclose may arise “from the relations of the parties, such as that of trust or confidence, or superior knowledge or means of knowledge.”   “In arm’s-length transactions,” however, “where facts are equally within the means of knowledge of both parties, neither party is required to speak, in the absence of inquiry respecting such matters.”  In context of fraudulent nondisclosure cases that a “defendant may reasonably expect the plaintiff to make his own investigation, draw his own conclusions and protect himself”)   

As an initial matter, at issue is a subjective opinion, not a statement of fact. Lay knew the facts on which Novotny based her opinion about his potential criminal liability.  He and his attorney had full access to the information and presumably both Lay and his attorney read these materials before engaging in settlement negotiations. Lay and his attorney could have inquired whether a criminal referral had been made. Novotny and Lay were adversaries.   Novotny was representing DPS, and Lay had his own lawyer who was actively involved in the negotiation process.   Each attorney owed a duty of care to her own client, not to third parties