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PRESENTS:
Expanding Privity
12900 Hall Rd., Suite 470 ▪ Sterling Heights, MI 48313Phone: 586-803-8500 ▪ Fax: 586-803-8508
Email: [email protected]
Presented By:
Privity
• What is privity?a. a relationship between persons who
successively have a legal interest in the same right or property
b. an interest in a transaction, contract, or legal action to which one is not a party arising out of a relationship to one of the parties
• Traditionally limited to direct contractual relationship.
Counsel
Trustee
Beneficiary
Traditional Relationship
Professor Geoffrey C. Hazard Jr.,Yale Law School:
1. Defending Guardian • No prior relationship with ward, e.g. defending
Guardian in action to surcharge • Arms-length representation
2. Representation of Guardian on initial petition for appointment• Advises them of their duties• Arms-length representation
3. Termination of Guardianship• Being brought in for the first time to terminate the
fiduciary appointment • Arms-length representation
Expanding Traditional Relationships
• Derivative relationship like that in joint representation• Basis is duty of confidentiality
• Confidentiality: Information between parties-lawyer, guardian and ward. • Those inside the representation relationship are
confidential to all those outside the relationship.
• Loyalty: attorney owes duty of loyalty to guardian and ward as long as no adverse interests
• Focus is not on the structure of the relationship, but what happens during the relationship. • How the duties are carried out.
Expanding Traditional Relationships
Lawyer Guardian
Ward
Lawyer Guardian
Ward
What happens during the relationship?
Six Part Test
Biakanja v. Irving, 49 Cal. 2d 647, 320 P.2d 16 (1958)
Six factors determining expanded privity: 1. The extent to which the transaction was intended to
affect the plaintiff; 2. The foreseeability of harm to the plaintiff; 3. The degree of certainty that the plaintiff suffered
injury; 4. The closeness of connection between defendant’s
conduct and the injury suffered; 5. The moral blame attached to the defendant’s
conduct, and 6. The policy of preventing harm.
Case Law
Lucas v. Hamm, 56 Cal.2d 583 (1961), cert. denied, 368 U.S. 987 (1962)
The Lucas court expanded the six-part test to include attorney’s duties to non-clients.
• No undue burden• Would not create unlimited liability• The innocent third party shouldn’t suffer• The intent was and would be frustrated.
Case Law
Stewart v. Sbarro, 142 N.J. Super. 581, 362 A.2d 581 (1976)
“It is true that generally an attorney is not liable to third persons for negligence in the performance of his professional duties.”
“Where an attorney assumes a fiduciary obligation it applies to persons who, though not strictly clients, he has or should have reason to believe rely on him. We believe, moreover, that where … an attorney undertakes a duty to one other than his client, he may be liable for damage caused by a breach of that duty to a person intended to be benefited by his performance.”
Case Law
Gould v. Mellick & Sexton, 263 Conn. 140 (2003).
The Court used a balancing test similar to that set forth in Biakanja
The court held that under the facts presented the defendant attorneys did not owe a duty of care to the plaintiffs.
1. Determine whether an ordinary person would have anticipated the harm
2. Determine whether the defendant’s responsibility for its negligent conduct should extend to the particular consequences or particular plaintiff in the case
Case Law
JP Morgan Chase v. Marie Homan, 2012 NY slip Op 22387
• Trustees have “an unwavering duty of complete loyalty to the beneficiary of the trust to the exclusion of the interests of all other parties.”
• Courts will intervene not only when the trustee behaves recklessly, but also when the trustee fails to exercise judgment altogether
• Both case law and basic principles of trust administration and fiduciary obligation require the trustees to take appropriate steps to keep abreast of Son's condition, needs, and quality of life, and to utilize trust assets for his actual benefit.
Case Law
In Liranzo v. LI Jewish Education / Research (N.Y. Sup. Ct., Kings Cty., No. 28863/1996, June 25, 2013
• The trust specifically stated a good-faith effort must be made in assessing the availability of government benefit before make disbursement.
• BNY Mellon required to payback $180,000 to SNT for improper disbursements
• Failed to abide by the terms of the trust;
• Failed to assess whether public benefits were in the best interest;
• Failed to seek governmental assistance to pay for care;
• Made disbursements that rendered beneficiary ineligible for SSI
Protective Measures
• Retainer agreement language• Non-engagement letters• Closing letters• Know when to get out• Use caution when volunteering information
to non-client• Clarify in writing: fact vs. opinion• Be aware of the subjective nature of the
standard
Thank You
12900 Hall Rd., Suite 470 ▪ Sterling Heights, MI 48313Phone: 586-803-8500 ▪ Fax: 586-803-8508
Email: [email protected]
