An Argument Against Imposing Liability Against Attorneys for Aiding And Abetting Their Client's Breach of Fiduciary Duty Under Pennsylvania Law

By
Aaron E. Moore

Pennsylvania – Attorney Liability

Key Points:

  • Liability for aiding and abetting a breach of a fiduciary duty has never been imposed on an attorney in Pennsylvania who merely provided legal representation to his client.
  • Pennsylvania courts have not expressly precluded such claims.
  • If liability for aiding and abetting a breach of fiduciary duty is sought by a non-client against an attorney in Pennsylvania, the court's analysis should include the requirement that there can be no such liability unless the attorney's conduct fell outside the scope of his representation of his client.

 

In Pennsylvania, there are few circumstances which give rise to claims against attorneys brought by persons who had not entered into a professional relationship with the attorney. Recognizing an attorney's duty to his client, Pennsylvania appellate courts have restricted attorney liability to third parties. Generally, when an attorney engages in conduct that is motivated by malice, or commits an intentional tort, he has exceeded the scope of his representation and should be held liable to those harmed. "Such special circumstances exist where the attorney's conduct is motivated by malice or involves the commission of an intentional tort." First Options v. Wallenstein, 1994 U.S. Dist. LEXIS 7132 at 9 (E.D. Pa. May 24, 1994), citing Pelagatti v. Cohen, 370 Pa. Super. 422, 536 A.2d 1337, 1347 (Pa. Super. Ct. 1987). Other, less obvious, instances in which attorneys can be held liable to third parties have been carved out by statute and have arisen under common law. For example, attorneys can be held liable to third parties for wrongful use of civil proceedings pursuant to 42 Pa. C. S. 8351, et seq, malicious prosecution relating to a criminal prosecution and common law abuse of process. Liability for aiding and abetting (offering substantial assistance) a breach of a fiduciary duty, however, has never been imposed on an attorney in Pennsylvania who merely provided legal representation to his client. Nor have Pennsylvania courts expressly precluded such claims. Other states, however, have addressed this issue.

Texas courts have refused "to expand Texas law to allow a non-client to bring a cause of action for 'aiding and abetting' a breach of fiduciary duty, based upon the rendition of legal advice to an alleged tortfeasor client." Alpert v. Crain, Caton & James, P.C., 178 S.W.3d 398, 407 (Tex. App.--Houston [1st Dist.] 2005, pet. denied) (Plaintiff's breach of fiduciary duty claim properly dismissed because the plaintiff did not allege the defendant "committed any acts or misrepresentation, independent of its representation of [its client], upon which he justifiably relied.") In Reynolds v. Schrock, 341 Ore. 338 (Or. 2006), the Oregon Supreme Court held that a lawyer could not be held jointly liable with a client for the client's breach of fiduciary duty unless the third party showed that the lawyer was acting outside the scope of the lawyer-client relationship. In Durham v. Guest, 142 N.M. 817, 820 (N.M. Ct. App. 2007), the New Mexico Court of Appeals ruled that in adversarial proceedings an attorney who is representing a client "is not liable for aiding and abetting a breach of the client's fiduciary duty, unless the attorney acted outside the scope of representation, acted only in his or her own self-interest and contrary to the client's interest, or acted in a manner that would fall within the 'crime or fraud' exception to the attorney-client privilege provided in the rules of professional conduct."

Other states have recognized claims against attorneys for aiding and abetting their clients' breach of a fiduciary duty See, e.g., Rowen v. Le Mars Mut. Ins. Co., 282 N.W.2d 639 (Iowa 1979) (Supreme Court of Iowa holding that a corporation's attorney can be held liable for assisting in a corporate breach of fiduciary duties to shareholders); Hefferman v. Bass, 467 F.3d 596, 601 (7th Cir. 2006) (reversing Rule 12(b)(6) dismissal of claim against lawyer for aiding and abetting a breach of fiduciary duty); Holmes v. Young, 885 P.2d 305, 308-09 (Colo. Ct. App. 1994) (affirming judgment for lawyers following trial on claim for aiding and abetting a breach of fiduciary duty).

It has been suggested that in order for a lawyer to be held liable for aiding and abetting his client, a wrongful intent should be established. See Barksdale, 58 Wash & Lee L Rev at 601 (analogizing aiding and abetting breach of fiduciary duty to advising or assisting client to dissolve a legal relationship, which requires the use of wrongful means by the lawyer). See Restatement (Third) of Law Governing Law § 57(3). See also, Skarbrevik v. Cohen, England & Whitfield, 231 Cal. App. 3d 692, 282 Cal.Rptr. 627, 639 (CalCtApp 1991) (Non-fiduciary attorney must act in furtherance of own financial gain). "California courts have generally held that, to hold a non-fiduciary liable for aiding and abetting a fiduciary's breach of his duties, the non-fiduciary must have participated in the breach for personal gain or in furtherance of its own financial advantage." Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1122 (C.D. Cal. 2003), citing Doctors' Co. v. Superior Court, 49 Cal. 3d 39, 47, 260 Cal.Rptr. 183, 775 P.2d 508 (1989).

Although not formally adopted in Pennsylvania, Restatement (Third) of Law Governing Lawyers § 51 is applicable to this issue. Section 51 specifically sets forth the circumstances in which a lawyer should be held liable for aiding and abetting a breach of fiduciary duty and, in so doing, includes a carve out precluding claims "when the client is a partner in a business partnership." Restat 3d of the Law Governing Lawyers, § 51 (comment h). This is consistent with the language in §57(3), with respect to the issue of attorneys' liability to non-clients. "A lawyer who advises or assists a client to make or break a contract, to enter or dissolve a legal relationship, or to enter or not enter a contractual relation, is not liable to a non-client for interference with contract or with prospective contractual relations or with a legal relationship, if the lawyer acts to advance the client's objectives without using wrongful means."

If liability for aiding and abetting a breach of fiduciary duty is sought by a non-client against an attorney in Pennsylvania, the court's analysis should include the requirement that there can be no such liability unless the attorney's conduct fell outside the scope of his representation of his client. This would not necessarily preclude all aiding and abetting claims against attorneys, however, such claims would be limited to circumstances in which the attorney participated in the breach for personal gain or in furtherance of his own financial advantage, which would implicitly take the attorney outside the scope of his representation of his client.

*Aaron is an associate in our Philadelphia, Pennsylvania, office and can be reached at 215.575.2899 or aemoore@mdwcg.com.

Defense Digest, Vol. 17, No. 4, December 2011