In probate work, everyone knows that the lawyer for the personal representative tends to do much of the actual work of probating an estate. The fact that the estate’s lawyer can be compensated for his or her work based on a percentage of the estate’s assets reflects the heightened responsibility that the lawyer has toward the estate and its beneficiaries. But if the personal representative of an estate breaches his or her fiduciary duty to the beneficiaries, is the lawyer for the personal representative liable?
Florida caselaw, statutes, and Rules of Professional Responsibility have left a muddled picture as to whether a probate attorney can be liable to the beneficiaries of an estate for malfeasance. Liability conceivably rests on two grounds: that an estate beneficiary is an intended third party beneficiary of the lawyer’s services, and crime/fraud.
Intended Third Party Beneficiary
The starting point for all analysis dealing with lawyers is the Florida Rules of Professional Liability. The Florida Rules of Professional Conduct state in the comment section addressing conflicts, at rule 4-1.7:
In estate administration the identity of the client may be unclear under the law of some jurisdictions. In Florida, the personal representative is the client rather than the estate or the beneficiaries. The lawyer should make clear the relationship to the parties involved.
Why does it matter who the client is? Privity. Only persons in privity with the lawyer can sue the lawyer. Unless an exception applies.
The Florida Evidence Code, at Section 90.5021, codifies that fiduciary lawyer-client privilege, stating that, for purposes of applying the attorney-client privilege “only the person or entity acting as a fiduciary is considered a client of the lawyer.”
90.5021 Fiduciary lawyer-client privilege.—
(1) For the purpose of this section, a client acts as a fiduciary when serving as a personal representative or a trustee as defined in ss. 731.201 and 736.0103, an administrator ad litem as described in s. 733.308, a curator as described in s. 733.501, a guardian or guardian ad litem as defined in s. 744.102, a conservator as defined in s. 710.102, or an attorney in fact as described in chapter 709.
(2) A communication between a lawyer and a client acting as a fiduciary is privileged and protected from disclosure under s. 90.502 to the same extent as if the client were not acting as a fiduciary. In applying s. 90.502 to a communication under this section, only the person or entity acting as a fiduciary is considered a client of the lawyer.
(3) This section does not affect the crime or fraud exception to the lawyer-client privilege provided in s. 90.502(4)(a).
In the context of this privilege rule of evidence, why does the rule go out of its way to state that “only the person or entity acting as a fiduciary is considered a client of the lawyer?” Because this is the core issue in determining who the lawyer owes duties to, and who can sue the lawyer: privity. Only persons “in privity” can normally sue a lawyer for professional malpractice.
As explained in Espinosa v. Sparber, Shevin, Shapo, Rosen and Heilbronner, 612 So.2d 1378 (Fla. 1993):
An attorney’s liability for negligence in the performance of his or her professional duties is limited to clients with whom the attorney shares privity of contract. Angel, Cohen & Rogovin v. Oberon Investments, N.V., 512 So.2d 192 (Fla.1987). In a legal context, the term “privity” is a word of art derived from the common law of contracts and used to describe the relationship of persons who are parties to a contract. Baskerville-Donovan Engineers, Inc. v. Pensacola Executive House Condominium Ass’n, Inc., 581 So.2d 1301 (Fla.1991). To bring a legal malpractice action, the plaintiff must either be in privity with the attorney, wherein one party has a direct obligation to another, or, alternatively, the plaintiff must be an intended third-party beneficiary.
Espinosa, however, does seem to open the door to a malpractice action against a probate attorney: that an estate beneficiary is an “intended third-party beneficiary” of the lawyer’s services.
In Bain v. McIntosh, 2015 U.S. App. LEXIS 3116 (11th Cir. 2015), the beneficiaries of a life insurance trust sued the attorney for the trustee for breach of fiduciary duty. The Court rejected that there was a fiduciary duty between the lawyer for the trustee and the beneficiaries of the trust, relying on the Florida Rules of Processional Conduct and the Florida Evidence Code.
The Walthers’ citation to In re Estate of Gory, 570 So. 2d 1381 (Fla. 4th DCA 1990), is similarly unconvincing. The court in Gory said, “We have no quarrel with the view that counsel for the personal representative of an estate owes fiduciary duties not only to the personal representative but also to the beneficiaries of the estate.” Id. at 1383. This statement, however, was dicta. The question before the court was whether the law firm representing the personal representative of an estate should have been disqualified from representation due to an alleged conflict of interest with the beneficiaries of the estate. Id. at 1382–83. The court held that, even if the law firm owed a fiduciary duty to the personal representative and the beneficiaries, Florida law did not mandate disqualification because no attorney-client relationship existed between the law firm and the beneficiaries. Id. at 1383. Gory did not extend an attorney’s fiduciary duty to the beneficiaries of a trust whenever an attorney agrees to represent a trustee. Accordingly, we conclude Kane, as the attorney for the Trustee, owed no fiduciary duty to the Walther beneficiaries.
Ouch. The Eleventh Circuit seemed to hold that the lawyer of an estate might owe duties to beneficiaries, but the lawyer of a trust does not. This is what is known as a “difference without a distinction,” as trust administrations and estate administrations are functionally equivalent in many ways, especially with regard to the attorney’s role in the process. It gets ouchier. In a footnote, the opinion makes the following statement:
Because the Walthers failed to plainly and prominently argue in their initial brief that they were intended third-party beneficiaries of the legal services contract between Kane and the Trustee, they have abandoned this argument.
So it turns out that the beneficiary of an estate or trust is likely an intended third-party beneficiary of the lawyer’s services, but only if it is stated in the appellate brief “plainly and prominently.” So the Florida Supreme Court’s remark in Espinosa about whether a lawyer owes duties to third parties where the third party is an intended beneficiary is not an exception to the rule, it is the rule, at least with regard to trust and estate administration. Because in every estate and trust administration, the beneficiaries are the intended third-party beneficiaries of the lawyer’s services.
Fraud / Aiding and Abetting
The law in Florida is now sufficiently developed that, if a lawyer helps a client commit fraud, the lawyer can be liable to the person injured by the fraud.
In Logan v. Morgan Lewis, 350 So.3d 404 (2d DCA 2022), an accounting firm, BDO, sold tax shelters, leading to several partners pleading guilty to tax fraud. BDO brought in the law firm Morgan Lewis to provide legal advice to help the tax shelter scheme continue. The court explained:
Morgan Lewis does dispute that it did anything other than provide legal advice to its client in the normal scope of its representation. Logan alleged, however, that Morgan Lewis, like the tax executives, knew that the investment scheme was actually an illegal tax shelter but nonetheless agreed to provide a false opinion downplaying the risk of criminal liability so that the scheme could continue. Logan further alleged that by providing the opinion, Morgan Lewis did not simply enable the underlying torts to occur but was instrumental to their success and directly contributed to Logan’s ultimate damages. Without Morgan Lewis’s “blessing,” the concerns of other BDO executives and BDO’s board would have killed the tax executives’ program, and BDO never would have been able to continue to falsely assure Logan of the program’s legitimacy and encourage Logan in his ongoing dispute with the IRS.
Aiding an abetting the fraud was enough for the law form to potentially face liability from the people who purchased the tax shelters from BDO, even though law firm was never retained by the investors in the tax shelter.
Thus, Logan has sufficiently alleged that Morgan Lewis substantially assisted BDO in its breach of fiduciary duty and fraud. “Substantial assistance occurs when a defendant affirmatively assists, helps conceal[,] or fails to act when required to do so, thereby enabling the breach to occur.” Chang v. JPMorgan Chase Bank, N.A. , 845 F.3d 1087, 1098 (11th Cir. 2017) (quoting Lerner v. Fleet Bank, N.A. , 459 F.3d 273, 295 (2d Cir. 2006) ). Although Morgan Lewis contends that it was not required to act and had no duty to make any disclosures to Logan, this contention misses the mark: Morgan Lewis did not merely remain silent or fail to act; instead, as alleged by Logan, Morgan Lewis provided the tax executives with affirmative assistance in the form of a knowingly false and misleading opinion.
And contrary to Morgan Lewis’s suggestion, no blanket rule insulates attorneys from liability for aiding and abetting a tort that harms a third party. Rather, [350 So.3d 412] courts have recognized that attorneys and law firms can be liable under Florida law for aiding and abetting when they knowingly help their clients breach a fiduciary duty to or defraud another. See, e.g., Grape Leaf Cap., Inc. v. Lafontant , 316 So. 3d 760, 761 (Fla. 3d DCA 2021) (reversing grant of motion to dismiss and permitting aiding and abetting claim against attorney and law firm to proceed); Cordell Consultant, Inc. Money Purchase Plan & Tr. v. Abbott , 561 F. App’x 882, 884–86 (11th Cir. 2014) (applying Florida law and reversing grant of motion to dismiss to allow aiding and abetting claim against attorneys to proceed); Int’l Cmty. Corp. v. Young , 486 So. 2d 629, 630 (Fla. 5th DCA 1986) (reversing summary judgment in favor of corporate attorney and concluding that whether attorney knowingly assisted officer’s breach of trust was a fact issue to be decided by a jury).