The First District holds that an attorney representing an estate in litigation to recover an asset may be liable to a non-client successor estate representative appointed by a foreign jurisdiction.
After William Smith moved from California to Oregon he and his wife retained California attorney Jerry K. Cimmet to represent them in the investigation of William Smith’s business partnership with Charles McPherson. William Smith died prior to resolution of his claims against McPherson. William’s wife Genevieve was appointed personal representative in Oregon and she authorized Cimmet and another attorney, Matthew Pavone, to file suit against McPherson in California. The McPherson suit was dismissed on summary judgment and proceeded to appeal.
William Smith’s children challenged their father’s will in Oregon claiming it was the result of Genevieve Smith’s undue influence. The children prevailed on their claims while the McPherson appeal was pending. William Smith’s son, Daniel Smith, replaced Genevieve Smith as personal representative.
Subsequently, Cimmet withdrew as counsel of record for Genevieve Smith and the appeal was abandoned. McPherson was awarded substantial attorneys’ fees against the estate, and the estate paid Cimmet and Pavone substantial fees. Daniel Smith filed suit against Cimmet and Pavone for legal malpractice, breach of contract, and breach of fiduciary duty. Daniel asserted the legal services were unnecessary because the claims against McPherson were without merit and were the result of the Cimmet’s abuse of the confidential relationship with William and Genevieve Smith.
A motion to dismiss was granted based on the absence of an attorney-client relationship between Daniel Smith and the attorneys. Cimmet also raised the issue of Daniel Smith’s lack of capacity to sue outside the jurisdiction of Oregon.
The Court of Appeal noted that California follows the common law rule that a personal representative cannot sue outside the state of his or her appointment. A foreign representative must petition a California court for ancillary probate administration. A court-appointed local personal representative can marshal California assets and protect a decedent’s domestic assets for the benefit of local creditors. There are limited exceptions to this requirement and a distinction between a foreign representative acting on behalf of a decedent, which is barred, and acting in another capacity such as trustee, judgment creditor, or intermediary for decedent’s survivors in a wrongful death action, which is generally permitted.
The Court of Appeal was not persuaded that Daniel Smith came under any exception to the general rule and expressly rejected his argument that an Oregon statute could apply as a matter interstate comity. However, the Court held that Daniel Smith should be given leave to seek ancillary administration and in that setting defendants could challenge his qualifications based on his dispute with Genevieve Smith or his delay.
The Court concluded that California law should apply to the question of whether a successor representative can assert a legal malpractice action against attorneys retained by a predecessor representative. Under the Probate Code, a successor personal representative has the powers and duties of the predecessor, including the power to commence and maintain actions and proceedings for the benefit of the estate. Supreme Court precedent holds that if the fiduciary who hired the attorney is replaced, the successor acquires the powers of the predecessor, including the power to sue for malpractice. Although the traditional rule, based on the absence of privity, would generally preclude a successor from suing a predecessor’s attorneys, the Probate Code nonetheless permits it.
The Court rejected the attorneys’ argument that Oregon law applied and that it differed from California law and precluded the suit. Like California law the Oregon statutory scheme allows the successor to commence litigation despite the lack of privity, consistent with Oregon case law that allows exceptions to the privity rule on a case by case basis. A chief consideration in that determination is whether there exists a special relationship that justifies imposing a duty on the attorney.
Relaxation of the privity rule does not create a conflict of interest because the predecessor and successor representative’s interests in estate administration and recovery of estate assets are identical. The conflicts between Daniel Smith and Genevieve Smith relate to their status as will beneficiaries, not as estate representatives suing McPherson. This is distinct from a situation where a Plaintiff seeks to hold an estate attorney liable to the beneficiaries of a trust; an estate attorney cannot simultaneously advise the trustee and serve the economic interests of each beneficiary without risking conflicts of interest.
Even if Oregon law differed, California law applies based on the governmental interest test. California alone has a legitimate interest in the application of its law and policy to protect estates and regulate attorneys. The Supreme Court has held that successor standing to sue is necessary for there to be an effective remedy for legal malpractice that harms estates and trusts administered by successor fiduciaries. California does not have an interest in protecting William Smith’s Oregon estate, but it does have an interest in regulating attorneys practicing in California. Although there are alternatives to regulate attorney conduct such as a suit by the predecessor representative or a disciplinary action, those remedies are of doubtful efficacy. A removed prior representative may have no interest in acting for the benefit of the estate and a disciplinary action does not result in damages.
By contrast Oregon has no interest in regulating California attorneys or in in shielding California attorneys from liability to estate representatives. Oregon’s interest is in regulating Oregon attorneys. Oregon’s general requirement of privity does not apply to California attorneys retained to prosecute California litigation. The power of Oregon to manage the administration of its estates is unimpaired because it can mandate the actions of the successor representative.
California’s interest in protecting the public from incompetent attorneys would be undermined if attorneys escaped liability because one foreign estate representative is replaced by another. By contrast, Oregon’s interest in managing estates is unaffected by California making a cause of action available to redress malpractice.
Comment: This example of attorney liability to a non-client is troubling. While Genevieve Smith and Daniel Smith may theoretically have identical interests, their wishes and intentions may have differed. Because of the action of the Oregon court in replacing Genevieve with Daniel, California attorneys must now confront potential liability to a non-client who may have different values and objectives than the client they represented.