NJ: Lawyers Duties to Adverse Parties
Davin, L.L.C. v. Daham, 329 N.J. Super. 54, (App. Div. 2000)
NJ Underlying landlord tenant action and property dispute
Student Contributor: Coleen Gaedcke
Facts: The defendants argued that the owner’s attorney owed them a duty to disclose “any factual and/or legal impediments which might follow or encumber the subject lease.” They also argued that the owner’s attorney owned the defendants a duty not to include a covenant of quiet enjoyment in the lease where there was a pending foreclosure on the property.
Issue: Whether the owner’s attorney owed the defendants a duty to notify them of his client’s financial difficulties when negotiating the commercial lease?
The Ruling: The Appellate Court found that the owner’s attorney had an affirmative obligation to be fair and candid with the defendants and not to include a covenant of quiet enjoyment in the lease when he was aware and involved in the pending foreclosure. They also said the owner’s attorney was obligated to advise his clients that they were responsible for notifying the defendants of the foreclosure.
1) When determining whether the owner’s attorney owned the defendants a duty the court “must weigh and balance the following factors: the relationship of the parties; the nature of the attendant risk; the opportunity and ability to exercise care; and the public interest in the proposed solution.”
2) In addition, the Rule 1.3 of the Rules of Professional Conduct state that “attorneys may owe a duty of care to non-clients in situations in which the attorneys know or should know that the non-client would rely on the attorney’s representations, and the non-client is not too remote from the attorney to be entitled to protection.”
3) Furthermore, an attorney has a duty to advise his clients to disclose facts that are material to a transaction and if the clients fail to follow the advice, the attorney has the right to decline further representation of the client.
The Lesson: The absence of an attorney-client relationship does not necessarily protect an attorney from owing a duty to a non-client third party, therefore it is important to remember that an attorney must always act with candor and honesty even though disclosure of significant facts that go the essence of a transaction might not be in their client’s best interests.
Professional responsibility rules such as this one are what allows the lawyers to be a well respected and trusted profession. Upholding a duty not only to one's client (who will likely benefit the attorney monetarily) but to a third party, shows the moral caliber of the profession. Attorneys owe a duty to a third party of honesty and candor, and may not mislead or deceive them. Not many other professions require that the professional have a duty to anyone who they do not have a relationship with, and thus they may behave in a manor they so choose, even if it is not moral sound. However, attorneys are bound to act in accordance with these professional rules, which allows the professionm to remain well respected and trusted.
I think this is a good rule. Attorneys, while owing a duty to their client's to represent them vigorously, still is in a position where he cannot take advantage of unknowing people. Being a good lawyer, should no be synonymous with acting dishonestly. A good lawyer should be able to represent his client to the best, and remain honest while doing so.
I think this case presents a tough balancing test for lawyers. One the one hand, lawyers want to protect their clients, but on the other hand, lawyers must speak candidly with non-client third parties. It would be helpful if there was a bright line rule that would help lawyers prevent a situation like this from occurring.
I think this a rule that a lawyer could comply with fairly easily by not lying, misleading, or omitting to tell the non-client keys facts that the non-client third party might not know and by attempting to rectify the client's deceit or omission or failing that, withdrawing from the representation. Be candid and demand the same from your client.
I agree with Ms. Neuman. I think a bright line rule would be very helpful, but as with many other issues with the law, it is very difficult to create a bright line rule. However, sometimes a bright line rule is not always best, and a client is better served when the attorney has discretion in certain cases.