In most circumstances, an attorney’s legal duty of care extends to his/her clients and not to third parties, since the harm caused by a lawyer’s negligent performance proximately damages only the client’s interests.
But is this policy fair for malpractice victims who discover a lawyer’s negligence only after the client has passed away?
This is exactly what happens when an estate planning attorney’s poor performance invalidates a lawful bequest made to an heir or beneficiary named in a Will or Trust.
Such injured parties only find out their expected inheritance has disappeared years after the negligent act occurred. And because the testator is no longer around to bring legal action, the malpractice victim often holds little or no standing to sue the lawyer who harmed his/her interests.
Thirty years ago, the Supreme Court of Iowa scrutinized the contractual relationships that exist between clients and estate planning attorneys (privity) and the subsequent legal malpractice liability that sometimes follows.
The Court in its findings made clear how much “privity” intended beneficiaries in Iowa must hold before they can sue estate planning attorneys for breach of duty—a precedent that today narrows legal malpractice standing for all interested parties harmed by a lawyer’s negligence.
To better understand how legal malpractice policy has matured in Iowa, we must first consider how the relaxation of privity rules in other states affected the entire estate planning profession over the last decade.
California’s Lucas Doctrine
In 1961, Eugene Emmick asked California estate attorney, L.S. Hamm, to include a clause in his Will that would convey valuable trust residuals to his heirs. Unfortunately for the intended beneficiaries, the estate attorney’s “phrasing” in the residual clause violated the rule against perpetuities, causing Emmick’s beneficiaries to lose $75,000 after the estate settled. [Lucas v. Hamm (Cal. 1961)]
Case law tells us that Hamm must have drafted Emmick’s Will competently to satisfy the duty of care owed to his client—but did the attorney’s duty extend to third party beneficiaries named in Emmick’s Will as well?
To answer this question, the Supreme Court of California imposed a “balancing of factors” test to determine if imposing liability on Hamm would later present an undue burden on the entire estate law profession.
The Court first scrutinized the Gray Doctrine, a century-old precedent law that held lack of privity bars beneficiaries from seeking recovery from negligent will drafters.
According to Chief Justice Gibson, a will-drafting contract’s main purpose is to bring about a legal instrument that would successfully convey the testator’s estate to his/her named beneficiaries after death. So, it’s therefore foreseeable that a will drafter’s negligent performance would cause damages to third parties when the negligent act invalidates intended bequests.
Justice Gibson also affirmed if the courts disallowed legal recourse to remedy such harm, the non-privity plaintiffs would have no means to recover what was lost, setting a policy that allows for future harm to occur freely and without redress.
The Lucas Court therefore allowed the plaintiffs to sue Hamm in both tort and breach of contract action. Justice Gibson observed however that “attorneys are not liable for every mistake they make,” and in this case, a reasonable attorney could have made the same error that Hamm made regarding perpetuities. The Court therefore held the defendant was not negligent in his performance.
Lucas Faces Scrutiny in the Iowa Judiciary
For twenty five years following Lucas, Iowa judges strictly enforced the Lucas Doctrine when considering standing in estate planning malpractice lawsuits—lack of privity does not bar beneficiaries from suing negligent estate attorneys, since proscription would force third parties to bear unrecoverable losses.
The Supreme Court of Iowa however took a second look at Lucas when deciding the now benchmark case, Schreiner v. Scoville.
In 1980, Mary Eickholt hired attorney, Robert Scoville, to draft her Will with intent to leave real property to Martin Schreiner. However, when Eickholt’s Will entered probate, the intended beneficiary received nothing from the estate.
Schreiner sued Scoville claiming the attorney must have erred when drafting Eickholt’s testamentary documents. Schreiner’s lawsuit further asserted Scoville failed to advise Eickholt on how to properly bequest her property, causing his inheritance to fail.
The district court and the Iowa Court of Appeals eventually dismissed Schreiner’s claim, holding “no attorney-client relationship or other special relationship existed between Scoville and Schreiner.” Eickholt’s attorney thus owed the plaintiff no duty of due care, according to the lower courts.
Iowa Supreme Court Narrows the Lucas Rule
We first should mention that Schreiner’s lawsuit never expressed a specific breach of duty claim against Scoville. It only asserted that Scoville’s carelessness proximately harmed Schreiner’s inheritance.
The question before the Iowa Supreme Court therefore was whether a disappointed third-party beneficiary may sue a will draftsman under any circumstance, according to Chief Justice Reynoldson.
Jurisdictions across the nation in the 80s were reaffirming privity requirements among parties when considering legal malpractice standing, and the Schreiner Court believed Iowa should follow as well.
In Justice Reynoldson’s opinion, lawyers would be exposed to “virtually unlimited liability” if they owed legal duties to the “general public.” Further, without privity of contract, third parties could easily influence the legal service agreements made between attorneys and their clients, according to Reynoldson.
The Court therefore affirmed that estate planning lawyers in Iowa only owe a duty of care to the “direct, intended, and specifically identifiable beneficiaries” named in Wills and Trusts.
Limiting Privity Requirements Further
Reynoldson didn’t just stop there. The Chief Justice also held “intended beneficiaries” only have standing to sue when the lawyer’s professional negligence “frustrates the testator’s intent” to convey assets and when the negligent act “diminishes or eliminates” the beneficiary’s inheritance.
Beneficiaries who are merely disappointed in what they received or didn’t receive from the estate will consequently hold no valid legal malpractice claim against a testator’s attorney, according to the Court, provided that the testator’s will is valid and that the intent found in his/her testamentary instrument was executed fully.
The Schreiner Court ultimately ruled Schreiner was a named beneficiary and that sufficient evidence existed to indicate that Scoville’s negligence frustrated Eickholt’s testamentary intent to convey assets to the plaintiff—Schreiner therefore held standing to seek recovery from Eickholt’s attorney.
In Summary…
Today’s courts uphold a much narrower exception to liability and privity requirements.
You may only bring estate planning legal malpractice action if the testator clearly expressed intent to convey assets to you in his/her testamentary instruments and if the drafting attorney’s malpractice frustrated the testator’s intent.
To determine whether an attorney actually “frustrated” your intended bequest, the Iowa judiciary first will examine the scope of your intended inheritance and how your disinheritance affects the Will or Trust document in its entirety.
The harm caused by the attorney’s legal malpractice must also have been foreseeable, meaning but for the defendant’s carelessness you would have certainly received a benefit from the testator’s Will or Trust.
There also must have been a causal link (close connection) between the attorney’s negligent act and the injury to your inheritance. Finally, the courts will only allow you to sue the defendant if the ruling does not establish a precedent that imposes an undue burden on the entire legal profession.