Baker v. Wood, Ris & Hames
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The issue this case presented for the Colorado Supreme Court's review centered on whether dissatisfied beneficiaries of a testator’s estate have standing to bring legal malpractice or claims against the attorney who drafted the testator’s estate planning documents. Specifically, petitioners Merridy Kay Baker and Sue Carol Kunda sought to sue respondents Wood, Ris & Hames, Professional Corporation, Donald L. Cook, and Barbara Brundin (collectively, the Attorneys), who were the attorneys retained by their father, Floyd Baker, to prepare his estate plan. Petitioners asked the Supreme Court to abandon what was known as the "strict privity rule," which precluded attorney liability to non-clients absent fraud, malicious conduct or negligent misrepresentation. The advocated instead for a "California Test" and for an extension of the third-party beneficiary theory of contract liability (also known as the Florida-Iowa Rule), both of which petitioners asserted would allow them as the alleged beneficiaries of the estate, to sue the Attorneys for legal malpractice and breach of contract. After review of this case, the Supreme Court declined to abandon the strict privity rule, and rejected petitioners' contention that the court of appeals erred in affirming dismissal of their purported fraudulent concealment claims.
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1 2 3 4 5 6 7 8 9 0 1 2 3 4 Opinions of the Colorado Supreme Court are available to the public and can be accessed through the Judicial Branch’s homepage at http://www.courts.state.co.us. Opinions are also posted on the Colorado Bar Association’s homepage at http://www.cobar.org. ADVANCE SHEET HEADNOTE January 19, 2016 2016 CO 5 No. 13SC554, Baker v. Wood, Ris & Hames—Beneficiaries of an Estate— Legal Malpractice—Strict Privity. This case principally requires us to decide whether dissatisfied beneficiaries of a 5 testator’s estate have standing to bring legal malpractice or contract claims against the 6 attorney who drafted the testator’s estate planning documents. Specifically, petitioners 7 ask us to abandon what has come to be called the “strict privity rule” and to allow them 8 to bring malpractice and contract claims against respondents, who were the attorneys 9 retained by their father to prepare his estate plan. 0 We decline to abandon the strict privity rule, and we reaffirm that where 1 non-clients are concerned, an attorney’s liability is generally limited to the narrow set of 2 circumstances in which the attorney has committed fraud or a malicious or tortious act, 3 including negligent misrepresentation. 4 5 6 7 We further reject petitioners’ contention that the division of the court of appeals erred in affirming the dismissal of their purported fraudulent concealment claims. Accordingly, we affirm the judgment of the court of appeals dismissing petitioners’ claims. 1 2 3 4 The Supreme Court of the State of Colorado 5 2016 CO 5 6 7 8 Supreme Court Case No. 13SC554 Certiorari to the Colorado Court of Appeals Court of Appeals Case Nos. 12CA907 and 12CA1702 9 Petitioners: 0 Merridy Kay Baker and Sue Carol Kunda, 1 v. 2 Respondents: 3 4 Wood, Ris & Hames, Professional Corporation, a Colorado professional corporation; Donald L. Cook; and Barbara L. Brundin. 5 6 7 Judgment Affirmed 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 2 East 14th Avenue • Denver, Colorado 80203 en banc January 19, 2016 Attorneys for Petitioners: Stinson Leonard Street LLP William C. Waller, Jr. Reid A. Page Dylan H. Metzner Greenwood Village, Colorado Denis H. Mark, P.C. Denis H. Mark Greenwood Village, Colorado Attorneys for Respondents: Wheeler Trigg O’Donnell LLP Michael L. O’Donnell Carolyn J. Fairless Kendra N. Beckwith Denver, Colorado 2 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 Attorneys for Amicus Curiae Colorado Bar Association: MiletichCohen, PC Nancy L. Cohen Lauren H. Lantero Denver, Colorado Montgomery Little & Soran, PC Christopher B. Little Greenwood Village, Colorado JUSTICE GABRIEL delivered the Opinion of the Court. 3 This case principally requires us to decide whether dissatisfied beneficiaries of a 1 ¶1 2 testator’s estate have standing to bring legal malpractice or contract claims against the 3 attorney who drafted the testator’s estate planning documents. 1 Specifically, petitioners 4 Merridy Kay Baker and Sue Carol Kunda seek to bring malpractice and contract claims 5 against respondents Wood, Ris & Hames, Professional Corporation, Donald L. Cook, 6 and Barbara L. Brundin (collectively, the Attorneys), who were the attorneys retained 7 by their father, Floyd Baker, to prepare his estate plan. Baker and Kunda ask us to 8 abandon what has come to be called the “strict privity rule,” which precludes attorney 9 liability to non-clients absent fraud, malicious conduct, or negligent misrepresentation. 10 They advocate instead for the so-called “California Test” and for an extension of the 11 third-party beneficiary theory of contract liability frequently called the “Florida-Iowa 12 Rule,” both of which they assert would allow them, as alleged intended beneficiaries of 13 Floyd’s estate, to sue the Attorneys for legal malpractice and breach of contract. 14 ¶2 15 non-clients like Baker and Kunda are concerned, an attorney’s liability is generally 1 We decline to abandon the strict privity rule, and we reaffirm that where We granted certiorari to review the following issues: 1. Whether the court of appeals erred in determining that third-party intended beneficiaries of a deceased testator’s estate plan lack standing to pursue a claim for professional malpractice against the testator’s estate planning attorneys based on either breach of contract or professional negligence. 2. Whether the court of appeals erred in confusing petitioners’ claim for fraudulent concealment with the distinct tort of fraudulent misrepresentation in applying the heightened pleading requirements of C.R.C.P. 9(b) to petitioners’ concealment claim as if it were a claim for fraudulent misrepresentation. 4 1 limited to the narrow set of circumstances in which the attorney has committed fraud or 2 a malicious or tortious act, including negligent misrepresentation. 3 ¶3 4 appeals erred in affirming the dismissal of their purported fraudulent concealment 5 claims. 6 ¶4 We further reject Baker and Kunda’s contention that the division of the court of Accordingly, we affirm the judgment of the court of appeals. I. Facts and Procedural History 7 Baker and Kunda were Floyd Baker’s children and the stepchildren of Floyd’s 8 ¶5 9 wife, Betty Baker. Betty had two children by a prior marriage, Paula B. Roosa and 10 Robert F. Brown. 11 ¶6 12 Attorneys’ advice, he decided to use a will and testamentary trusts to govern the 13 dispositive terms of that plan. Floyd’s will provided that on his death, each of the four 14 children would receive a $10,000 distribution, and Betty would receive Floyd’s 15 condominium. The will further provided that the residue of Floyd’s estate would be 16 divided between a marital testamentary trust and a family testamentary trust. Betty 17 was designated as the trustee and beneficiary of both of these trusts, with the right to 18 receive principal and income derived from the assets of each trust. On Betty’s death, 19 the remaining trust assets would be divided equally among the four children. 20 ¶7 21 certain of his assets were held in joint tenancy with Betty. Accordingly, when Floyd 22 died, these assets passed directly to Betty as the surviving joint tenant. In addition, on Floyd retained the Attorneys to prepare his estate plan, and based on the Floyd died in 2003, survived by Betty and all four children. Before his death, 5 1 Floyd’s death, each child received his or her $10,000 testamentary bequest, and the 2 family and marital trusts were both funded, with the family trust receiving assets worth 3 approximately $929,000 and the marital trust receiving approximately $64,000. 4 ¶8 5 assurances as to the proper funding and administration of Floyd’s trusts. 6 November 19, 2003, respondent Brundin answered in writing on behalf of the firm. 7 Brundin’s letter attached a copy of Floyd’s will and explained the $10,000 bequests to 8 each of the children. The letter further described the creation, funding, and general 9 operation of the family trust. And Brundin wrote, “Please understand that I represent 10 Betty Baker as the Personal Representative of Mr. Baker’s estate only and I cannot 11 represent either of you individually. If you feel you need an attorney to review the Will 12 to become familiar with the positions [sic], I encourage you to do so.” 13 ¶9 14 prepare her own estate plan. Betty executed her last will and testament in November 15 2004, and she signed two codicils thereafter. She died in February 2009, survived by 16 Roosa, Baker, and Kunda. 17 ¶10 18 and the residue of her estate was to be divided among Roosa, Baker, and Kunda. Baker 19 and Kunda allege that the distribution of probate and non-probate assets following 20 Betty’s death resulted in Roosa’s receiving seventy percent of Betty’s assets, while Baker 21 and Kunda received only fifteen percent each. They further allege that after Betty’s Thereafter, Baker and Kunda contacted respondent Wood, Ris & Hames to seek On Subsequently, Betty, in her individual capacity, retained respondent Cook to Pursuant to Betty’s will, the condominium that she owned was devised to Roosa, 6 1 death, Roosa was anticipated to receive approximately $3.2 million in assets from 2 Floyd’s will and Betty’s will, while they would receive approximately $962,000 each. 3 ¶11 4 other things, (1) breach of contract–third-party beneficiary, (2) professional negligence, 5 and (3) fraudulent concealment and negligent misrepresentation. In support of these 6 claims, Baker and Kunda alleged that the Attorneys had failed to advise Floyd of the 7 impact of joint tenancy and that titling assets in joint tenancy and failing to sever joint 8 tenancy properties would frustrate his intent to treat the children equally. Specifically, 9 they alleged that (1) the Attorneys’ negligence allowed Betty to override Floyd’s estate 10 plan after his death; (2) the Attorneys had drafted an estate plan for Betty that 11 controverted Floyd’s plan; and (3) Baker and Kunda were the intended beneficiaries of 12 Floyd’s will, the Attorneys had failed to advise them of the above-noted facts, and they 13 suffered damages as a result of the Attorneys’ actions and inactions. 14 ¶12 15 which relief could be granted. As pertinent here, they asserted that Baker and Kunda 16 lacked standing to sue them and that even if Baker and Kunda had standing, their 17 claims failed because Floyd’s intent had to be gleaned from his will itself, and the will 18 was unambiguous and did not evince the intent alleged by Baker and Kunda. The 19 Attorneys further argued that all of Baker and Kunda’s claims were time-barred. 20 ¶13 21 the court dismissed Baker and Kunda’s contract claim, concluding that Baker and 22 Kunda had not alleged sufficient facts to show that Floyd’s testamentary intent was Baker and Kunda subsequently sued the Attorneys, asserting claims for, among The Attorneys moved to dismiss the complaint for failure to state a claim on The district court ultimately granted the Attorneys’ motion. As pertinent here, 7 1 subverted. The court further concluded that Baker and Kunda had not alleged 2 sufficient facts to support their fraudulent concealment and negligent misrepresentation 3 claims. Regarding the fraudulent concealment claim, the court found that Baker and 4 Kunda had not sufficiently alleged that any of the purportedly concealed facts had 5 actually been concealed or that the Attorneys had intended for Baker and Kunda to rely 6 on the allegedly misrepresented circumstances. As for the negligent misrepresentation 7 claim, the court observed that under Allen v. Steele, 252 P.3d 476, 484 (Colo. 2011), such 8 a claim required a business transaction, and the present case involved no such 9 transaction. Finally, with respect to Baker and Kunda’s legal malpractice claim, the 10 court concluded that Baker and Kunda had failed to establish that the Attorneys owed 11 them a duty of care that would give rise to liability. 12 ¶14 13 dismissing their claims. As pertinent here, they asked the division to recognize an 14 exception to the strict privity rule for third-party intended beneficiaries of a will. 15 Alternatively, they asserted that even if the strict privity rule applied, they had stated 16 viable claims under its exceptions for fraud, malicious conduct, and negligent 17 misrepresentation. 18 ¶15 19 would have extended attorney contractual liability to non-clients, and thus, the division 20 affirmed the dismissal of Baker and Kunda’s contract claims. In addition, although the 21 division acknowledged that under Colorado’s strict privity rule, non-clients could sue 22 an attorney for fraud and negligent misrepresentation, the division nonetheless Baker and Kunda appealed, contending that the district court had erred in The division declined to recognize an exception to the strict privity rule that 8 1 affirmed the dismissal of Baker and Kunda’s fraudulent concealment and negligent 2 misrepresentation claims. Specifically, the division concluded that Baker and Kunda 3 had not pleaded those claims with the particularity mandated by C.R.C.P. 9(b) and had 4 not shown that they were engaged in a business transaction with the Attorneys, as 5 required to support a negligent misrepresentation claim. Finally, and consistent with its 6 above-described conclusions, the division affirmed the dismissal of Baker and Kunda’s 7 professional malpractice claim, concluding that under Colorado law, the Attorneys 8 owed them no duty unless one of the exceptions (i.e., for fraud, malicious conduct, or 9 negligent misrepresentation) applied, and Baker and Kunda had not alleged sufficient 10 facts to state a claim under any of those exceptions. 11 ¶16 We subsequently granted Baker and Kunda’s petition for certiorari. II. Analysis 12 Baker and Kunda contend that the district court erred in dismissing their claims 13 ¶17 14 because (1) as alleged intended third-party beneficiaries of Floyd’s estate, they have 15 standing to sue the Attorneys for legal malpractice and breach of contract; and (2) the 16 division below misconstrued their fraudulent concealment claims and incorrectly 17 applied a heightened pleading standard to those claims.2 We are not persuaded. A. Standing 18 Baker and Kunda acknowledge that, historically, courts have adhered to the 19 ¶18 20 strict privity rule in determining whether a non-client may sue an attorney. They urge Baker and Kunda have not renewed before us their arguments below regarding their negligent misrepresentation claims. Accordingly, we do not address those claims. 2 9 1 us to abandon that rule, however, and to adopt both the California Test and the 2 Florida-Iowa Rule, which would allow them to assert legal malpractice and contract 3 claims against the Attorneys, notwithstanding the absence of privity. On the facts 4 alleged here, we decline to do so. 5 ¶19 6 then proceed to address the California Test and the Florida-Iowa Rule. We decline to 7 adopt either here, and we further conclude that even if these standards were the law in 8 this state, they would not save Baker and Kunda’s malpractice and contract claims 9 against the Attorneys. We conclude by addressing the policy arguments advanced by 10 We first describe the strict privity rule and the policies underlying that rule. We Baker and Kunda to support their alleged standing to assert such claims. 1. Strict Privity 11 As this court has recognized, “[t]he attorney-client relationship is distinctly a 12 ¶20 13 fiduciary relationship arising as a matter of law and founded upon a special trust and 14 confidence.” 15 279 P.3d 658, 663. In light of this relationship, an attorney’s obligation is generally to his 16 or her client and not to a third party. Sav. Bank v. Ward, 100 U.S. 195, 200 (1879); see 17 also Allen, 252 P.3d at 482 (noting that attorneys generally do not owe duties of 18 reasonable care to non-clients and that subject to limited exceptions, “[a]n attorney may 19 be liable for legal malpractice only if the plaintiff has proven the existence of an 20 attorney-client relationship”); Chem-Age Indus., Inc. v. Glover, 652 N.W.2d 756, 770 21 (S.D. 2002) (noting that because trust and confidence between an attorney and his or her Accident & Injury Med. Specialists, P.C. v. Mintz, 2012 CO 50, ¶ 25, 10 1 client are essential, the attorney-client relationship requires greater protection from 2 third-party claims than do nonconfidential relationships). 3 ¶21 4 attorney’s liability is generally limited to a narrow set of circumstances in which the 5 attorney has committed fraud or a malicious or tortious act, including negligent 6 misrepresentation.” Allen, 252 P.3d at 482; see also id. at 484 (“[T]o state a claim of 7 negligent misrepresentation, the misrepresentation must be given for the plaintiff’s 8 business or commercial purposes.”). 9 ¶22 Accordingly, we have concluded that “[w]here non-clients are concerned, an This court, divisions of our court of appeals, and our sister courts have 10 recognized several sound policy reasons justifying this limitation on attorney liability. 11 ¶23 12 duty of loyalty to and effective advocacy for the client. See, e.g., Mintz, ¶ 26, 279 P.3d at 13 663-64; Glover v. Southard, 894 P.2d 21, 23 (Colo. App. 1994); Shoemaker v. 14 Gindlesberger, 887 N.E.2d 1167, 1171 (Ohio 2008); Chem-Age Indus., Inc., 652 N.W.2d at 15 769; Barcelo v. Elliott, 923 S.W.2d 575, 578 (Tex. 1996). 16 Appeals explained in Noble v. Bruce, 709 A.2d 1264, 1270 (Md. 1998) (citations omitted) 17 (quoting Lewis v. Star Bank, N.A., 630 N.E.2d 418, 421 (Ohio Ct. App. 1993)): 18 19 20 21 22 23 24 First, limiting an attorney’s liability to his or her clients protects the attorney’s As the Maryland Court of While the testator/client is alive, the lawyer owes him or her a “duty of complete and undivided loyalty.” The strict privity rule protects an attorney’s obligation to direct his or her full attention to the needs of the client. An attorney’s preoccupation or concern with potential negligence claims by third parties might result in a diminution in the quality of the legal services received by the client as the attorney might weigh the client’s interests against the attorney’s fear of liability to a third party. 11 1 Such a result, in turn, would tend to undermine the purpose of the attorney-client 2 relationship, which requires that an attorney act in his or her client’s best interest. 3 Glover, 894 P.2d at 23. 4 ¶24 5 relationships between an attorney and third parties and thus give rise to conflicting 6 duties on the part of the attorney. See, e.g., Mintz, ¶ 26, 279 P.3d at 663–64; Glover, 7 894 P.2d at 23; see also Noble, 709 A.2d at 1270 (“[T]here exists the danger of placing 8 conflicting duties on an attorney during the estate planning process if a nonclient is 9 permitted to maintain a cause of action against a testator’s attorney.”); Barcelo, 10 923 S.W.2d at 578 (recognizing a conflict of interest when a beneficiary sues the 11 testator’s attorney for negligence because the alleged deficiencies may well have existed 12 pursuant to instructions issued by the testator after receiving the advice of counsel). 13 Such conflicting duties and loyalties, in turn, could constrain the attorney’s ability to 14 represent his or her client properly. See Blair v. Ing, 21 P.3d 452, 459 (Haw. 2001); see 15 also Barcelo, 923 S.W.2d at 578 (noting that an attorney’s ability to render advice would 16 be severely compromised if the advice could be second-guessed in the future by 17 disappointed beneficiaries). 18 ¶25 19 against an attorney for professional malpractice may require the attorney to reveal 20 confidences the testator would never want revealed.” Noble, 709 A.2d at 1278. By way 21 of example, the court in Noble envisioned a scenario in which the testator tells a relative 22 that he or she will inherit part of the testator’s estate, but, in reality, the testator does not Second, expanding attorney liability to non-clients could result in adversarial Moreover, “[a]llowing a nonclient beneficiary to maintain a cause of action 12 1 intend to leave anything to this relative because the testator secretly believes that the 2 relative is an evil person. Id. If the testator confides this secret belief to his or her 3 attorney and requests that the attorney draft a will leaving nothing to the relative, and if 4 the relative has standing after the testator’s death to sue the attorney for malpractice, 5 then the attorney may be forced to reveal confidences that the testator never would 6 have wanted to be revealed. Id. 7 ¶26 8 attorney could be liable to an unforeseeable and unlimited number of people. See, e.g., 9 Mintz, ¶ 26, 279 P.3d at 663; Allen, 252 P.3d at 482; accord Robinson v. Benton, 10 842 So. 2d 631, 637 (Ala. 2002); Chem-Age Indus., Inc., 652 N.W.2d at 769. Thus, as the 11 Supreme Court stated in Ward, 100 U.S. at 202, requiring strict privity “is plainly 12 necessary to restrain the remedy from being pushed to an impracticable extreme.” See 13 also id. at 203 (“The only safe rule is to confine the right to recover to those who enter 14 into the contract; if we go one step beyond that, there is no reason why we should not 15 go fifty.”). 16 ¶27 17 limited to the attorneys. As other courts have recognized, an expansion of attorney 18 liability to allow claims by non-clients could deter attorneys from undertaking certain 19 legal matters, thus compromising the interests of potential clients by making it more 20 difficult for them to obtain legal services. See Chem-Age Indus., Inc., 652 N.W.2d at 21 770; see also Noble, 709 A.2d at 1270 (noting that an attorney’s preoccupation or 22 concern with potential liability to non-parties might result in a diminution in the quality Third, if an attorney’s duty of care were extended to third parties, then the The impact of an expansion of attorney liability to third parties would not be 13 1 of legal services provided because the attorney would need to weigh the client’s 2 interests against his or her liability risk). As important, in such an environment, the 3 testator/client could potentially lose control over his or her contract for legal services. 4 See Noble, 709 A.2d at 1270. 5 ¶28 6 disappointed beneficiaries that would cast doubt on the testator’s intentions long after 7 the testator is deceased and unavailable to speak for himself or herself. See Blair, 8 21 P.3d at 459. 9 interpretation of wills or other testamentary documents,” namely, that “the testator’s 10 intent should be ascertained from the instrument itself and given effect.” In re Estate of 11 McCreath, 240 P.3d 413, 422–23 (Colo. App. 2009). Allowing disappointed beneficiaries 12 to question a deceased testator’s intentions would also contradict the policy underlying 13 Colorado’s dead man’s statute, § 13-90-102, C.R.S. (2015). 14 admissibility of statements made by persons who are incapable of testifying, see id., and 15 thereby seeks “to guard against perjury by living interested witnesses when deceased 16 persons cannot refute the testimony, thus protecting estates against unjust claims,” In re 17 Estate of Crenshaw, 100 P.3d 568, 569 (Colo. App. 2004). Finally, extending attorney liability to non-client beneficiaries risks suits by Such a result would be contrary to the “cardinal rule in the That statute limits the 2. The California Rule 18 Notwithstanding the foregoing settled and substantial policies favoring privity 19 ¶29 20 as a prerequisite to attorney liability to non-clients, Baker and Kunda urge this court to 21 expand attorney liability to non-clients by adopting the so-called “California Test,” 22 which was first articulated in Lucas v. Hamm, 364 P.2d 685, 687 (Cal. 1961). In that 14 1 case, the California Supreme Court established the following approach for determining 2 whether a beneficiary of an estate is entitled to bring an action against a testator’s 3 attorney for negligence in the drafting of a will: [T]he determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury, and the policy of preventing future harm. 4 5 6 7 8 9 10 Although Baker and Kunda contend that the factors enunciated in the California 11 ¶30 12 Test mirror the factors previously identified by this court, in our view, the California 13 Test is inconsistent with the above-described policies favoring a privity requirement. 14 Moreover, even if it were the law in this state, the California Test would not support the 15 claims that Baker and Kunda seek to assert here. We address each of these points in 16 turn. 17 ¶31 18 above-described policies favoring a privity requirement, contrary to those policies, the 19 California Test allows non-clients to file lawsuits, after the testator is gone and unable to 20 speak for himself or herself, in which the non-clients may, and often do, question the 21 testator’s intent. For the reasons set forth above, allowing non-clients to do so threatens 22 the attorney’s duty of loyalty to and effective advocacy for his or her client. Moreover, 23 allowing such claims to proceed exposes an attorney to liability to an unlimited number 24 of unforeseeable parties because virtually any disappointed beneficiary could appear 25 and allege that (1) the testator intended a bequest to him or her, (2) the attorney’s failure As to Baker and Kunda’s assertion that the California Test is consistent with the 15 1 to include the bequest caused harm, and (3) allowing the disappointed beneficiary to 2 pursue a claim against the attorney would prevent future harm. 3 ¶32 4 liability to non-clients, divisions of the court of appeals, like the division in this case, 5 have consistently declined to expand attorney liability to non-clients. 6 ¶33 7 892 P.2d 417, 418–19 (Colo. App. 1994), the division rejected the plaintiff’s argument 8 that a third party had standing to bring an action for attorney malpractice if the third 9 party was an intended beneficiary of the client’s will. In reaching this conclusion, the 10 division observed that an attorney has a duty to act in the client’s best interests and is 11 liable to third parties only for injuries caused by, among other things, the attorney’s 12 fraudulent or malicious conduct. 13 discussed above and distinguished the out-of-state cases on which the plaintiff had 14 relied, reasoning that those cases involved situations in which a beneficiary did not 15 receive what the testator expressly intended because of the attorney’s poor 16 draftsmanship or failure to follow through to achieve the testator’s desired result. Id. at 17 418–19. 18 ¶34 19 the same policy considerations in rejecting the plaintiffs’ contention that they had 20 standing as third parties to sue an attorney for malpractice because they were the 21 intended beneficiaries of an allegedly negligently drafted testamentary instrument. As 22 a matter of public policy, the division concluded that Recognizing the importance of the above-described policies for limiting attorney For example, in Shriners Hospital for Crippled Children, Inc. v. Southard, Id. at 418. The division then noted the policies In Glover, 894 P.2d at 23–25, the division applied the same analysis and relied on 16 1 2 3 4 5 6 7 8 9 10 it is in the public’s best interest to protect attorneys from potentially unlimited liability to third parties whose interests may interfere with the attorney’s ability to fulfill the duties of undivided loyalty and advocacy owed to his or her client. Thus, in drafting testamentary instruments at the behest of a client, an attorney should not be burdened with potential liability to possible beneficiaries of such instruments. Id. at 24–25 (citation omitted). ¶35 We agree with these prior divisions of the court of appeals and reiterate that in 11 Colorado, an attorney’s liability to a non-client is limited to the narrow set of 12 circumstances in which the attorney has committed fraud or a malicious or tortious act, 13 including negligent misrepresentation. See Allen, 252 P.3d at 482. In reaching this 14 conclusion, we acknowledge that courts in some jurisdictions have allowed 15 disappointed third-party beneficiaries to sue a testator’s attorney, notwithstanding the 16 absence of an attorney-client relationship. Nonetheless, we believe that the strict privity 17 rule (with its limited exceptions) better protects the sanctity of and duties and 18 protections inherent in the attorney-client relationship. We further believe that the 19 strict privity rule strikes the appropriate balance between the important interests of 20 clients, on the one hand, and non-clients claiming to be injured by an attorney’s 21 conduct, on the other. 22 ¶36 23 provides a means by which disappointed beneficiaries can litigate what they perceive to 24 be the testator’s true intent. Specifically, section 15-11-806, C.R.S. (2015), allows a court 25 to 26 27 Our conclusion finds further support in the Colorado Probate Code, which reform the terms of a governing instrument, even if unambiguous, to conform the terms to the transferor’s intention if it is proved by clear and 17 convincing evidence that the transferor’s intent and the terms of the governing instrument were affected by a mistake of fact or law, whether in expression or inducement. 1 2 3 4 5 ¶37 6 disappointed beneficiaries like them are not without a viable remedy absent claims 7 against the testator’s attorney. Cf. In re Estate of Johnson, 2012 COA 209, ¶ 22, 304 P.3d 8 614, 618 (implicitly recognizing that a disappointed beneficiary has standing to bring a 9 reformation claim under section 15-11-806 but concluding on the facts presented that 10 the petitioner lacked standing because she had been removed as a beneficiary of the 11 instrument at issue). 12 ¶38 13 support the claims that Baker and Kunda seek to assert here. 14 ¶39 15 name the plaintiffs as beneficiaries of a trust and that the attorney drafted a residual 16 trust provision that sought to effectuate that intent but that was held to be invalid based 17 on statutes relating to restraints on alienation and the rule against perpetuities. As a 18 result, the plaintiffs were deprived of the distributions that the testator expressly sought 19 to provide them because of the attorney’s negligence in drafting a legally invalid trust 20 provision. Id. at 687. 21 ¶40 22 limited to the scenario in which the testator’s intent was clear on the face of the 23 documents that he signed. See id. at 687–88. Indeed, California cases decided after 24 Lucas have consistently recognized this limitation and have reiterated the general Accordingly, notwithstanding Baker and Kunda’s assertion to the contrary, Even if the California Test were the law in this state, however, it would not In Lucas, 364 P.2d at 686–87, it was undisputed that the testator intended to Accordingly, contrary to Baker and Kunda’s broad interpretation, Lucas was 18 1 principle precluding liability based on a claim that a properly executed will that was 2 free from legal defects did not accurately express the testator’s intent. 3 Chang v. Lederman, 90 Cal. Rptr. 3d 758, 770–71 (Cal. Ct. App. 2009); Ventura Cty. 4 Humane Soc’y v. Holloway, 115 Cal. Rptr. 464, 469 (Cal. Ct. App. 1974). As the court in 5 Ventura County Humane Society, 115 Cal. Rptr. at 469, aptly summarized: See, e.g., [W]hen . . . the testamentary intent has been implemented, no good reason exists why the attorney should be held accountable for using certain words suggested or selected by the testator which later prove to be ambiguous. In addition, the task of proving whether claimed ambiguity was the result of negligence of the drafting attorney or whether it was the deliberate choice of the testator, would impose an insurmountable burden on the parties, since in such a case the trier of fact would be required to decide this crucial issue without the benefit of the testimony of the most important witness, the testa[t]or himself. Once recognized, such a duty would apply by parity of reasoning not only to wills, but also to contracts, conveyances and other legal instruments. The duty thus created would amount to a requirement to draft litigation-proof l[e]gal documents. This unlimited liability . . . would result in a speculative and almost intolerable burden on the legal profession indeed. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 ¶41 22 Floyd’s will said they should get. Specifically, Floyd’s will provided that: 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Here, unlike in Lucas and its progeny, Baker and Kunda received precisely what 1. If Betty survived Floyd, then she would receive the condominium, and if not, then the property would go to Roosa if she survived Floyd and was living in the condominium at the time of Floyd’s death. 2. On Floyd’s death, each child would receive a $10,000 bequest, and the residue of his estate would be divided between the family trust and the marital trust. 3. Betty was appointed trustee under both trusts; the trustee was required to pay all of the income from both trusts to Betty; and the trustee was authorized to pay to Betty “such amounts or all of the principal” of the marital trust as Betty might request, as well as so much of the principal of the family trust as the trustee determined to be required to provide for Betty’s reasonable support, maintenance, health, and education. 19 1 2 3 4 5 4. Whatever principal and income remained in the marital trust after Betty’s death would be added to the principal of the family trust, and the principal of the family trust would be distributed among the children in equal shares. On Floyd’s death, the children each received a $10,000 bequest, and the marital 6 ¶42 7 and testamentary trusts were funded. In addition, it appears undisputed that on Betty’s 8 death, Roosa received the condominium, the principal and income remaining in the 9 marital trust was added to the principal of the family trust, and the surviving children 10 received equal distributions of the principal of the family trust—all as Floyd’s will 11 expressly envisioned. And although Baker and Kunda suggest that Floyd intended to 12 limit Betty’s control over her assets, the substantial control over the marital and family 13 trusts that Floyd’s will gave to Betty suggests otherwise. 14 ¶43 15 in Colorado, it would not sanction the malpractice and contract claims that Baker and 16 Kunda seek to pursue against the Attorneys. See Lucas, 364 P.2d at 687–88. In these circumstances, we conclude that even if the California Test were the law 3. The Florida-Iowa Rule 17 Baker and Kunda further urge us to adopt the Florida-Iowa Rule, which would 18 ¶44 19 extend the third-party beneficiary theory of contract liability to allow them to bring 20 what is effectively a malpractice claim against the Attorneys. 21 unpersuaded. 22 ¶45 23 bring an action on the contract if the parties to the agreement intended to benefit the 24 non-party, provided that the benefit claimed is a direct and not merely incidental Again, we are Colorado law recognizes that a person not a party to an express contract may 20 1 benefit of the contract. See, e.g., E.B. Roberts Constr. Co. v. Concrete Contractors, Inc., 2 704 P.2d 859, 865 (Colo. 1985). 3 ¶46 4 Rule and have extended the third-party beneficiary theory of contract liability to allow 5 estate beneficiaries to sue a testator’s attorney for professional negligence. See, e.g., 6 Leak-Gilbert v. Fahle, 55 P.3d 1054, 1062 (Okla. 2002); Fabian v. Lindsay, 765 S.E.2d 132, 7 141 (S.C. 2014). These jurisdictions have justified such an extension on the ground that 8 the beneficiaries are purportedly third-party beneficiaries of the contract between the 9 testator and his or her estate planning attorney. See, e.g., Leak-Gilbert, 55 P.3d at 1062; 10 As Baker and Kunda note, some jurisdictions have adopted the Florida-Iowa Fabian, 765 S.E.2d at 141. Under this theory, [a]n attorney preparing a will has a duty not only to the testator-client, but also to the testator’s intended beneficiaries, who may maintain a legal malpractice action against the attorney on theories of either tort (negligence) or contract (as third-party beneficiaries). However, liability to the testamentary beneficiary can arise only if, due to the attorney’s professional negligence, the testamentary intent, as expressed in the will, is frustrated, and the beneficiary’s legacy is lost or diminished as a direct result of that negligence. 11 12 13 14 15 16 17 18 19 20 DeMaris v. Asti, 426 So. 2d 1153, 1154 (Fla. Dist. Ct. App. 1983) (citation omitted); see 21 also Schreiner v. Scoville, 410 N.W.2d 679, 683 (Iowa 1987) (“[W]e hold a cause of action 22 ordinarily will arise only when as a direct result of the lawyer’s professional negligence 23 the testator’s intent as expressed in the testamentary instruments is frustrated in whole 24 or in part and the beneficiary’s interest in the estate is either lost, diminished, or 25 unrealized.”). 21 Explaining the basis for extending the third-party beneficiary theory of contract 1 ¶47 2 liability to legal malpractice claims by intended beneficiaries of a will, the Iowa 3 Supreme Court explained that a lawyer is subject to a malpractice suit in these 4 circumstances because he or she “owes a duty of care to the direct, intended, and 5 specifically identifiable beneficiaries of the testator as expressed in the testator’s 6 testamentary instruments.” Schreiner, 410 N.W.2d at 682. 7 ¶48 8 California Test, we likewise decline to adopt the Florida-Iowa Rule. Specifically, such a 9 rule is contrary to each of the settled policies underlying the strict privity rule to which 10 Colorado courts have long adhered, and we perceive no justifiable policy reason for so 11 extending attorney liability. 12 statutory remedies already available to disappointed beneficiaries (e.g., claims 13 involving fraud, malicious conduct, or negligent misrepresentation and claims for 14 reformation of a governing instrument). 15 ¶49 16 same reasons that the California Test would not save Baker and Kunda’s claims, the 17 Florida-Iowa Rule would not do so. Specifically, as noted above, the Florida-Iowa Rule 18 requires that the testator’s intent be expressed in the will itself. See DeMaris, 426 So. 2d 19 at 1154; Schreiner, 410 N.W.2d at 683. Thus, courts that have adopted the Florida-Iowa 20 Rule have refused to allow actions claiming that the lawyer failed to follow the 21 testator’s directions when the action was based on the testimony of disappointed 22 beneficiaries seeking to prove, through evidence extrinsic to the will, that the testator’s For the reasons discussed above in connection with our refusal to adopt the This is particularly true given the common law and Even if the Florida-Iowa Rule were the law in this state, however, for much the 22 1 intent was other than what was expressed in the will. See, e.g., Mieras v. DeBona, 2 550 N.W.2d 202, 208 (Mich. 1996); Calvert v. Scharf, 619 S.E.2d 197, 208 (W. Va. 2005). 3 As the Iowa Supreme Court stated in Schreiner, 410 N.W.2d at 683: If the testator’s intent, as expressed in the testamentary instruments, is fully implemented, no further challenge will be allowed. Thus, a beneficiary who is simply disappointed with what he or she received from the estate will have no cause of action against the testator’s lawyer. This limitation . . . protects the integrity and solemnity of an individual’s testamentary instruments as well as the testator’s express intent . . . . 4 5 6 7 8 9 Here, as noted above, Baker and Kunda received precisely what Floyd’s will said 10 ¶50 11 they would receive. Accordingly, even if the Florida-Iowa Rule were the law in this 12 state, Baker and Kunda’s malpractice and contract claims would still fail because 13 (1) those claims would amount to an action by disappointed beneficiaries seeking to 14 prove, through evidence extrinsic to the will at issue, that the testator’s intent was other 15 than what the will said; and (2) those courts that have adopted the Florida-Iowa Rule 16 have refused to extend the rule to recognize such claims. See, e.g., DeMaris, 426 So. 2d 17 at 1154; Schreiner, 410 N.W.2d at 683; Mieras, 550 N.W.2d at 208; Calvert, 619 S.E.2d at 18 208. 4. Baker and Kunda’s Remaining Policy Arguments 19 Baker and Kunda contend that because the interests of a testator and his or her 20 ¶51 21 beneficiaries are identical, there is no adversarial relationship between them, and thus, 22 allowing the beneficiaries to sue the testator’s attorney would neither affect the 23 attorney’s duty of loyalty to the testator nor create conflicts of interest. They further 23 1 argue that allowing only third-party beneficiaries to sue would sufficiently limit the 2 potential class of non-clients who can sue an attorney. We do not agree. 3 ¶52 4 between the goals of the testator/client and the beneficiary. See, e.g., Noble, 709 A.2d at 5 1270; Barcelo, 923 S.W.2d at 578. Moreover, we are not persuaded that allowing only 6 third-party beneficiaries to sue would sufficiently limit the potential class of non-clients 7 who could sue an attorney. To the contrary, under the theory that Baker and Kunda 8 espouse, an unlimited and unforeseeable number of people could appear after a 9 testator’s death and file lawsuits claiming that they were intended beneficiaries of the 10 testator’s will or other instrument disposing of the testator’s property. And even if this 11 were not the case, allowing such causes of action would still contradict the other settled 12 policies discussed above favoring privity as a prerequisite to attorney liability to 13 non-clients. 14 ¶53 15 bring claims such as those at issue because (1) the personal representative would likely 16 have no motivation to bring the claim (because, often, the personal representative 17 allegedly will have received the benefit of the attorney’s negligence); and (2) aside from 18 the fees paid to the attorney, the estate has not been damaged, as long as the assets flow 19 into the estate. Again, we are not persuaded. 20 ¶54 21 which disappointed beneficiaries can seek to effectuate what they believe to be a 22 testator’s true intent, namely, a reformation action. See § 15-11-806 (giving a court the As noted above, in a number of situations, an attorney’s loyalties can be divided Baker and Kunda further assert that only injured beneficiaries could effectively As noted above, the Colorado Probate Code provides an appropriate vehicle by 24 1 authority to reform the terms of a governing instrument, even if unambiguous, to 2 conform the terms to the transferor’s intention). Moreover, the personal representative 3 also has standing to bring claims on behalf of the testator, see § 15-12-703(4), C.R.S. 4 (2015), and we are not convinced by Baker and Kunda’s suggestion that a personal 5 representative would decline to pursue a legitimate claim on behalf of a testator when 6 the personal representative believes that the testator’s intent is being subverted. B. Fraudulent Concealment 7 Baker and Kunda next allege that the division of the court of appeals erred in 8 ¶55 9 (1) treating their fraudulent concealment claims as if they were based on overt 10 misrepresentations and (2) improperly applying the C.R.C.P. 9(b) heightened pleading 11 standard to such claims. We perceive no reversible error. 12 ¶56 13 the circumstances constituting fraud or mistake shall be stated with particularity.” 14 (Emphasis added.) Baker and Kunda cite no case, and we are aware of none, that 15 excepts fraudulent concealment claims from this requirement. 16 Colorado courts have consistently required all claims sounding in fraud to be pleaded 17 with particularity. See, e.g., Wiley v. Byrd, 408 P.2d 72, 74 (Colo. 1965) (noting that 18 fraud “may of course manifest itself in a multitude of forms” and that “fraud must be 19 pleaded with considerable particularity”); State Farm Mut. Auto. Ins. Co. v. Parrish, 20 899 P.2d 285, 289 (Colo. App. 1994) (noting that claims “sounding in fraud” must be 21 pleaded with particularity, regardless of the labels attached to the claims). C.R.C.P. 9(b) provides, in pertinent part, “In all averments of fraud or mistake, 25 To the contrary, Additionally, federal courts have expressly recognized that the pleading 1 ¶57 2 standards set forth in Fed. R. Civ. P. 9(b) apply to fraudulent concealment claims. See, 3 e.g., P.R. v. Zavaras, 49 F. App’x 836, 840 (10th Cir. 2002). Because these pleading 4 standards are substantively identical to those set forth in C.R.C.P. 9(b), we deem the 5 federal cases and authorities interpreting Fed. R. Civ. P. 9(b) to be highly persuasive. 6 See Leaffer v. Zarlengo, 44 P.3d 1072, 1080–81 (Colo. 2002) (noting that federal cases 7 interpreting virtually identical rules “provide helpful and highly persuasive guidance” 8 in interpreting Colorado rules). 9 ¶58 Accordingly, we conclude that claims for fraudulent concealment must be 10 pleaded with particularity pursuant to C.R.C.P. 9(b). 11 ¶59 To state a claim for fraudulent concealment, a plaintiff must allege: 12 13 14 15 16 17 (1) the concealment of a material existing fact that in equity and good conscience should be disclosed; (2) knowledge on the part of the party against whom the claim is asserted that such a fact is being concealed; (3) ignorance of that fact on the part of the one from whom the fact is concealed; (4) the intention that the concealment be acted upon; and (5) action on the concealment resulting in damages. 18 First Interstate Bank of Fort Collins, N.A. v. Piper Aircraft Corp., 744 P.2d 1197, 19 1200 (Colo. 1987). 20 ¶60 21 “numerous material facts that in equity and good conscience should have been 22 disclosed.” These purportedly included the facts that: 23 24 25 26 Here, Baker and Kunda alleged that the Attorneys concealed from them (a) the majority of Floyd’s estate was comprised of assets which, instead of passing to the Martial [sic] Trust as was intended by Floyd, had passed to Betty outright, free of trust; (b) as a consequence, Betty could change her own estate plan and eliminate or reduce the share that Plaintiffs would 26 each receive of the assets which Floyd had intended them to receive, and (c) that Defendants, and Donald Cook in particular, represented Betty in the drafting of her estate plan, which was being designed to foil Floyd’s testamentary intent. 1 2 3 4 Baker and Kunda further alleged that (1) they relied on “the assurances” in 5 ¶61 6 Brundin’s November 19, 2003 letter and did not conduct further investigations into the 7 funding and administration of Floyd’s trusts; and (2) as a direct and proximate result of 8 the Attorneys’ fraudulent concealment, they suffered damages. 9 ¶62 When reviewing a district court’s ruling on a motion to dismiss, we are in the 10 same position as the district court. See Cherokee Metro. Dist. v. Upper Black Squirrel 11 Creek Designated Ground Water Mgmt. Dist., 247 P.3d 567, 573 (Colo. 2011). Moreover, 12 because Baker and Kunda’s complaint specifically referred to Brundin’s letter, we may 13 consider the contents of that letter in reviewing the district court’s order. Yadon v. 14 Lowry, 126 P.3d 332, 336 (Colo. App. 2005). For several reasons, like the division below, 15 we perceive no error in the district court’s order dismissing Baker and Kunda’s 16 fraudulent concealment claim. 17 ¶63 18 support their conclusory assertion that equity and good conscience required the 19 Attorneys to disclose to them that Floyd had joint tenancy property. 20 ¶64 21 intended for Baker and Kunda to act on any purported concealment. To the contrary, 22 Brundin’s letter specifically stated, “I represent Betty Baker as the Personal 23 Representative of Mr. Baker’s estate only and I cannot represent either of you First, Baker and Kunda cite no applicable law, and we are aware of none, to Second, Baker and Kunda’s allegations do not establish that the Attorneys 27 1 individually. If you feel you need an attorney to review the Will to become familiar 2 with the positions [sic], I encourage you to do so.” In our view, these statements refute 3 any claim of intended reliance. 4 ¶65 5 the purported concealment to their detriment (i.e., that they acted based on their belief 6 that the facts were other than what they understood them to be and therefore suffered 7 damages). To the contrary, they alleged that they took no action to investigate the 8 administration of Floyd’s will or trusts, despite Brundin’s express admonition that they 9 discuss the documents with another attorney if they wanted to become more familiar 10 with the documents’ terms. Moreover, Baker and Kunda did not allege how they were 11 damaged by any action that they took or did not take as a result of their alleged 12 misunderstanding of the true facts. 13 ¶66 14 order dismissing Baker and Kunda’s fraudulent concealment claim, and we need not 15 address Baker and Kunda’s assertion that the division misconstrued the nature of their 16 fraud claims. Third, Baker and Kunda did not allege sufficient facts to show that they acted on Accordingly, we conclude that the division properly affirmed the district court’s C. The Attorneys’ Remaining Arguments 17 In light of our foregoing disposition, we need not address the Attorneys’ 18 ¶67 19 remaining arguments for affirmance, including their contentions that Baker and 20 Kunda’s claims were barred by the applicable statutes of limitations. III. Conclusion 21 22 ¶68 For these reasons, the judgment of the court of appeals is affirmed. 28
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