Alaska Rejects Attorney Liability To Non-Client

The Alaska Supreme Court affirmed a lower court decision dismissing claims against an attorney brought by an estate beneficiary

The estate of a deceased Fairbanks entrepreneur languished in probate for years. The value of its assets, already encumbered by tax liens and creditors’ claims, eroded. Eventually the personal representative of the estate was replaced, and the deceased man’s wife and sole beneficiary of his estate became the personal representative. Under her direction, the estate then sued the former personal representative for breach of fiduciary duty and conversion. The estate also sued the lawyer who represented the former personal representative, asserting claims of malpractice and negligence.

The lawyer moved for summary judgment, arguing that because his only client was the former personal representative, the lawyer had no liability for harms to others. The lawyer argued that he was not liable for malpractice to the deceased man’s wife because there was no privity of contract between them. Acknowledging that in some cases a lawyer may owe a duty of care to a nonclient that can give rise to a negligence claim, the lawyer argued that he had no such duty in this case. The superior court granted summary judgment in favor of the lawyer. The estate appeals.

We affirm the superior court’s judgment. The estate’s opening brief failed to challenge the superior court’s ruling on the malpractice claim, so the estate waived this issue. And the estate did not show there are disputed facts material to the question of the lawyer’s duty of care to the deceased man’s wife. Because she had a reasonable ability to protect her own rights against some of the former personal representative’s alleged misdeeds, and because the former personal representative’s lawyer did not know or have reason to know of the other alleged misdeeds, the lawyer did not owe a duty of care to the deceased man’s wife.

Liability to non-client

The estate’s assertion that Wallace owed estate beneficiaries a legal duty is based on five actions by Nesbitt that Wallace allegedly failed to prevent or rectify: Nesbitt’s alleged failure to maintain the Five-Plex; his alleged failure to pay tax on real properties; his alleged failure to insure the Showboat property; his approval of the St. Pierre claim; and his withdrawal of funds from the estate’s bank account. The superior court granted summary judgment to Wallace because it concluded that the estate’s evidence did not establish a genuine dispute of material fact on subsections (b) or (c). It concluded that the evidence did not show that Wallace knew or had reason to know that he was required to act to rectify or prevent a breach of fiduciary duty by Nesbitt. It also concluded that Hester, the sole beneficiary of the estate at the time of the relevant events, was reasonably able to protect her rights. We generally agree with the superior court’s conclusions.

Restatement

The facts of this case resemble an illustration in the Restatement commentary showing when the lawyer has no duty to a nonclient. In this illustration the client, a trustee, told the lawyer that he was planning to transfer trust funds into the trust account. But the client actually transferred the funds into his own personal account.  Even though the lawyer “could have exercised diligence” and upon “further investigation” discovered that “appropriate action was necessary to prevent a breach of fiduciary duty by [c]lient,” the lawyer did not have a duty of care to the beneficiary because the lawyer did not know or have reason to know of the client’s intended breach.

(Mike Frisch)