Sunday, March 15, 2009

Non-client can sustain claim vs lawyer for negligent misrepresentation

In the famous case Togstad v. Vesely, Otto, Miller & Keefe (1980) the Supreme Court of Minnesota recognized the possibility of a legal malpractice claim by a prospective client. In other words, the court recognized that it would be possible for a plaintiff to have a legal malpractice claim against a lawyer with whom the plaintiff did not have an attorney-client relationship.

About a month ago, the Colorado Court of Appeals decided a similar case but using a very different approach. In this case, the plaintiffs sought legal advice from the defendants regarding their legal options after a traffic crash. Defendants allegedly misinformed the plaintiffs about the applicable statute of limitations. Relying on that advice, plaintiffs waited to file their complaint. When they did, the claims were dismissed because they were barred by the statute of limitations.

Plaintiffs then brought this action against defendants asserting claims for professional negligence and negligent misrepresentation. The court dismissed both claims. On appeal, though, the court of appeals reversed the claim for negligent misrepresentation. It is not clear how the court would have approached the malpractice claim because the plaintiffs did not appeal that part of the decision.

Applying the standard set forth in section 552 of the Restatement (Second) of Torts, and citing an older case, the court noted that to establish a claim for negligent misrepresentation, the plaintiff must show that the defendant supplied false information to others in a business transaction and failed to exercise reasonable care or competence in obtaining or communicating information on which other parties justifiably relied.

Because this approach would open lawyers to potential liability to an unlimited number of third parties, the court opines that the plaintiff show that the defendant supplied false information in the context of a business transaction regarding the representation of a potential client. Informal statements by an attorney in a social setting would generally not result in a viable claim against the attorney. Thus, whether statements are made during an initial consultation for legal services or in a casual manner in a social setting may ultimately be determinative of whether a lawyer is liable for negligent misrepresentation.

The case, Steele v Allen & Allen, is available here.

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