Friday, June 20, 2008

No Privity

A client in a divorce case entered into a settlement agreement that included disposition of two parcels of land. Her attorney reviewed a quitclaim deed drafted by opposing counsel and the client executed the agreement. She later sued her attorney for legal malpractice over the property description in the deed, claiming that it was not in accord with the actual agreement. She also sued opposing counsel and her former attorneys cross-claimed against opposing counsel as well.

The New York Appellate Division for the Second Judicial Department held that summary judgment should have been entered as to opposing counsel:

"Absent fraud, collusion, malicious acts, or other special circumstances, an attorney is not liable to third parties not in privity or near-privity for harm caused by professional negligence" (Fredriksen v Fredriksen, 30 AD3d 370, 372; see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 595). Here, the record establishes that Hecht, who was retained by George Breen to draft a legal document, was not in privity or near-privity with the plaintiff (see Fredriksen v Fredriksen, 30 AD3d at 372; Goldfarb v Schwartz, 26 AD3d 462, 463; Rovello v Klein, 304 AD2d 638). Thus, Hecht established his entitlement to summary judgment dismissing the cause of action alleging legal malpractice, and, in opposition, the plaintiff and the Barket defendants failed to raise a triable issue of fact.

Hecht also established his entitlement to summary judgment dismissing the cause of action alleging breach of contract by showing that the plaintiff was not a third-party beneficiary of the alleged retainer agreement between Hecht and George Breen, but rather was, at most, an incidental beneficiary of such an agreement (see BDG Oceanside, LLC v RAD Term. Corp., 14 AD3d 472, 473). Any benefit the plaintiff may have derived from the alleged retainer agreement was not "sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate [her] if the benefit is lost" (State of Cal. Pub. Employees' Retirement Sys. v Shearman & Sterling, 95 NY2d 427, 434-435). In opposition, the plaintiff and the Barket defendants failed to raise a triable issue of fact.

The plaintiff and the Barket defendants also failed to raise a triable issue of fact in response to Hecht's prima facie showing of his entitlement to summary judgment dismissing the cause of action alleging negligent misrepresentation. As between Hecht and the plaintiff, there was no "special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff" (J.A.O. Acquisition Corp. v Stavitsky, 8 NY3d 144, 148). Moreover, as Hecht asserted in an affidavit, and the plaintiff does not dispute, Hecht never had any contact with the plaintiff, and thus there was no "linking conduct" evincing his understanding of the plaintiff's alleged reliance (Securities Inv. Protection Corp. v BDD Seidman, 95 NY2d 702, 711; see Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536, 553-554). Nor did the quitclaim deed constitute a representation made by Hecht to the plaintiff (cf. Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377). Furthermore, neither the plaintiff nor the Barket defendants could have justifiably relied on whatever representation the deed may have contained (see Verschell v Pike, 85 AD2d 690, 691). Any such reliance by the Barket defendants would have been particularly unreasonable, since the plaintiff herself discovered the alleged error in the deed and brought it to her attorney's attention, but was advised by the attorney to sign the deed nonetheless.

(Mike Frisch)

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