No Duty To Non-Client

The New Mexico Supreme Court has held that an attorney had no duty to a non-client who had brought a legal malpractice claim

On interlocutory appeal to the New Mexico Court of Appeals, the district court certified a single issue of law: “An alleged violation of a Rule of Professional Conduct, specifically [Rule] 16-403 [NMRA], even with expert testimony, cannot create a duty to a non-client for purposes of civil liability.” However, in the present petition for writ of certiorari, Petitioner Jason Waterbury posed a different construction of the issue: whether a New Mexico Rule of Professional Conduct for the legal profession, specifically Rule 16-403, when supported by expert testimony, establishes the standard of care for a lawyer’s obligation to a non-client. This Court granted certiorari on the latter question. Petitioner’s alteration of the issue certified on interlocutory appeal is material—the certified question concerns duty whereas Petitioner’s question concerns breach. And because an analysis of duty necessarily precedes the question of breach, to which the standard of care is relevant, we address both.

Held

we reject Petitioner’s argument that the Rules of Professional Conduct create a duty and affirm the district court’s grant of partial summary judgment. Nonetheless, we take this opportunity to reaffirm the use of the Rules of Professional Conduct to establish standard of care.

The attorney had represented a client (Emry) in estate planning

Respondent prepared two powers of attorney on behalf of Emry designating Petitioner as attorney-in-fact for personal and estate planning matters. Emry requested that Petitioner, using his power of attorney, sign documents at Los Alamos National Bank (LANB) relating to the POD account on which Petitioner was named beneficiary. As instructed, Petitioner used the power of attorney to sign POD documents at LANB. Later, Respondent prepared two codicils to Emry’s will. The second codicil designated Petitioner as the payee on death (POD) beneficiary for the LANB account, an account which contained approximately two million dollars. Petitioner then emailed Respondent requesting a document or letter regarding his designation as beneficiary of the LANB account and stating he had signed documents at LANB on behalf of Emry. This email communication is the basis for Petitioner’s malpractice suit. 

The attorney did not reply

It is undisputed Respondent did not respond to Petitioner’s email requesting clarification regarding the POD. It is also undisputed that Respondent did not represent Petitioner as his attorney. Upon Emry’s death four years later, LANB refused to honor the POD designation because it had been signed by Petitioner, not Emry himself, and the account was absorbed into the probate estate. Approximately half of Emry’s estate was left to his daughter. Following receipt of her bequest, Emry’s daughter challenged the probate of the estate alleging undue influence by Petitioner. Petitioner settled the undue influence claims with Emry’s daughter.

Petitioner asserts that but for Respondent’s failure to answer his email query regarding the use of the power of attorney to sign documents at LANB, he would not have “lost a significant amount of money” or could have mitigated the impact of the claims of undue influence. Consequently, Petitioner brought a legal malpractice lawsuit alleging breach of fiduciary duty by Respondent.

No duty to non-client

The Rules of Professional Conduct are not an independent basis for civil  liability. Spencer, 2013-NMSC-010, ¶ 19. Instead, the rules “become relevant when ascertaining the scope of the duty owed by the attorney.”

…Policy leads us to conclude that Respondent did not owe a duty to provide Petitioner with direct advice and thus shield Petitioner from any claim of undue influence. In analyzing the policy dimensions specific to this issue, we consider “the relationship of the parties, the plaintiff’s injured interests[,] and the defendant’s conduct.” Calkins, 1990-NMSC-044, ¶ 11. In this case, the lack of a formal client relationship is central to Petitioner’s alleged injury and Respondent’s conduct. Imposing an affirmative duty to warn a non-client about potential claims of undue influence is not consistent with the aim of Rule 16-403. Rule 16-403 directs lawyers to be clear with non-clients about whom they represent as to avoid misunderstanding.

Conclusion

A determination of legal duty is a question for the district court to resolve, and  the Rules of Professional Conduct do not create a legal duty. Therefore, we affirm the district court’s partial grant of summary judgment.

The cited Rule is linked here. (Mike Frisch)