Third Circuit: Applies Baxt and Distinguishes Petrillo
Flaherty-Wiebel v. Morris, Downing & Sherred, Court of Appeals, Third Circuit, June 10, 2010
Facts: At the request of their client, Wiebel (Plaintiff's former husband), the Defendant attorneys drafted a pre-nuptial agreement. Plaintiff was advised that Defendant attorneys had drafted the agreement on behalf of Wiebel. Plaintiff was represented by separate counsel during the negotiation of the agreement.
The agreement provided that Plaintiff owned 49% of a certain entity ("Entity") and Wiebel owned 51%. In actuality, Wiebel owned 99% and his son owned the remaining 1%. Upon the execution of the pre-nuptial agreement, Plaintiff married Wiebel.
Approximately four years later, Wiebel filed for divorce. Plaintiff subsequently brought this litigation, alleging (1) that the Defendant attorneys' misrepresentations in the pre-nuptial agreement concerning her ownership interest in the Entity disadvantaged her in the negotiation of her property settlement agreement, and (2) that the attorneys' allegedly breached certain Rules of Professional Conduct.
Issue: Does a violation of the Rules of Professional Conduct constitute legal malpractice? What is the extent of an attorney's duty to a non-client?
Ruling: The Court affirmed the New Jersey Supreme Court's holding in Baxt v. Liloia, 714 A.2d 271 (1998), and held that a violation of the Rules of Professional Conduct cannot sustain a cause of action for legal malpractice:
New Jersey does not recognize an independent cause of action for the violation of the Rules of Professional Conduct, but violations of these rules may be used to support a claim of legal malpractice. New Jersey courts have defined legal malpractice as negligence relating to an attorney's representation of a client.
Accordingly, the Court held that it was necessary for Plaintiff to establish that she was the Defendant attorneys' client. Plaintiff could not do so and argued that Defendants owed her a limited duty under Petrillo v. Bachenberg, 655 A.2d 1354 (N.J. 1995).
In Petrillo, the Court held that an attorney representing the seller of property had a duty not to provide misleading information regarding the property to potential buyers who the attorney knew, or should have known, would rely on the information. In order to determine whether the duty applied here, the Court first ascertained the purpose of the document. The Court concluded that the attorneys had drafted the pre-nuptial agreement to memorialize the parties' agreement, not to induce either party to enter into the agreement. Accordingly, the Court held that Petrillo did not apply:
[A]n attorney who puts into writing an agreement between two parties does not vouch for the representations either party has made to the other. The attorney only puts into writing the representations that the parties intend to make to each other. The act of drafting does not make the attorney responsible for the accuracy of the statements placed on paper.
Lesson: A violation of the Rules of Professional Conduct, in and of itself, cannot serve as a basis for a malpractice action. An attorney, by undertaking the task of setting forth the understanding of two individuals in a writing, does not owe non-clients the duty to verify the accuracy of a party's representations therein.
