Another Crack In the Dam: “Narrow” Class of Beneficiaries Who May Sue Attorney Without an Attorney-Client Relationship Not So Narrow After All

It is firmly established in Pennsylvania that to sue an attorney for legal malpractice, one must establish an attorney-client relationship or a specific undertaking of a duty. Of course, our system allows exceptions where public policy requires it, assuming that the exception is first defined and circumscribed by our courts.

Such was the case in the Pennsylvania Supreme Court’s decision in Guy v. Liederbach, 459 A.2d 744 (Pa. 1983). There, while the court reinforced the strict privity requirement in Pennsylvania legal malpractice actions as a matter of important public policy, it, nonetheless, felt obliged to allow for a “properly restricted” legal malpractice cause of action for intended third-party beneficiaries of a testator’s contract with an attorney to draft a will. However, the court emphasized that this grant of standing was to “a narrow class of third-party beneficiaries” where “the intent to benefit is clear and the promisee (testator) is unable to enforce the contract.”

In Guy, an attorney directed a beneficiary of a will to witness its execution, which unfortunately had the effect of voiding her entire legacy pursuant to statute. In determining whether the beneficiary’s right to bring suit against the lawyer was “appropriate to effectuate the intention of the parties,” the court observed that the text of the will specifically named the plaintiff as beneficiary and, thus, “clearly manifest[ed] the intent of the testator to benefit the legatee.”

Since Guy, courts have been careful to uphold the public policies that warrant a strict application of the privity requirement, exhibiting a narrow view of who may qualify as an intended third-party beneficiary. Attempts to establish standing by beneficiaries of wills which, unlike the will in Guy, were never executed, have been rejected. See, e.g., Gregg v. Lindsay, 649 A.2d 935, 940 (Pa.Super. 1994)(testator’s clear intent to benefit beneficiary could not be established where will was never executed). To hold otherwise, our courts have cautioned, would encourage fraudulent claims and undermine a lawyer’s duty of loyalty to the testator.

In Estate of Robert H. Agnew v. Ross, 110 A.3d 1020 (Pa.Super. 2015), the Superior Court of Pennsylvania extended the exception announced in Guy to a trust document that was never executed by the decedent. There, years after an attorney had drafted a will for his decedent-client, the decedent’s niece contacted the attorney advising that the decedent wanted to make changes to his estate plan. It was undisputed that the decedent desired to provide more funds to his family, but he was unsure how he wanted this accomplished and directed his niece to provide the details. Subsequently, the attorney drafted a trust amendment in accordance with the niece’s instructions. However, when the attorney and decedent later met to execute the documents, the attorney failed to bring the trust amendment. The amendment was, therefore, not executed along with the revised will. The decedent, although aware that a draft existed, never mentioned it again. The decedent died four months later.

The trial court determined that the plaintiffs were unable to establish standing since the trust amendment was never executed. In reversing, the Superior Court held that, while Guy focused upon “named legatees” in a will, Guy left open the possibility that non-named legatees could also establish standing by virtue of a singular footnote: “[t]he standing requirement may or may not be met by non-named beneficiaries…the trial court must determine whether it would be ‘appropriate’ and whether the circumstances indicate an intent to benefit non-named beneficiaries.”

Thus, according to Ross, beneficiaries of unexecuted documents are not precluded from asserting standing. What is more problematic, however, is that Ross went a step further. The Superior Court determined that the trial court should have examined the facts in the light most favorable to the plaintiffs, and then should have utilized its “discretion” to find that “the record supports an inference that Ross intended to give Appellants the benefit of his contract” with the decedent and, therefore, satisfied the standing requirement.

Noticeably absent from the Ross analysis is the long-held principle that the intended third-party beneficiary theory is a narrow exception. Ross ignored the potential for the flood of claims that could be brought by non-clients on the basis of draft documents that, for one reason or another, were never executed. Nor does Ross acknowledge a critical point in Guy—that in finding one to be an intended third-party beneficiary, the intent of the parties must be “clear.” In fact, the very footnote upon which Ross relies contains the following restriction: “[i]n making that determination [of standing] the trial court should be certain the intent is clear.”

Instead, Ross implies that trial courts have discretion to find “inferences” of intent. In the process, the court tips any uncertainty in favor of the one claiming intended third party-beneficiary status. This pronouncement bucks up against the intended narrow scope of the exception, as well as the oft-cited concept that evidence of an oral contract for the creation of testamentary documents requires clear, direct and precise evidence. See, e.g., Hatbob v. Brown, 575 A.2d 607, 609 (Pa.Super. 1990)(will setting).

Undoubtedly, the Ross decision will provide ammunition to disappointed beneficiaries who have no contractual relationship with the attorney. Now they may assert claims for unexecuted drafts of wills, trusts and, perhaps, even other contracts and legal documents. Trial courts may be more inclined to allow standing in questionable cases which, in years past, would have been dismissed on dispositive motions.

In facing these new claims, the defense should emphasize the limited scope of the exception, which requires evidence of a “clear intent” to benefit the third party. Despite the specific facts that were present in Ross, the defense should insist that this burden remains a significant hurdle in the face of an unexecuted document.

*Charlene is an associate in our Pittsburgh, Pennsylvania office. She can be reached at 412.803.2442 or csseibert@mdwcg.com.

_{Defense Digest, Vol. 21, No. 2, June 2015}

_{Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2015 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}