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When a Duty Exists.

Estate of Spencer v. Gavin, 400 N.J. Super. 220 (N.J. App. Div. 2008) is a case in which the court characterized it as "a sad chronology of opportunism." The plaintiffs were beneficiaries of Madeline Spencer's estate. Madeline had retained Daniel Gavin to prepare her will, and directed her estate to retain him for any other legal matters in connection with her estate. In Madeline's will, the executor was her sister Kathryn. When Madeline passed away, Kathryn became executor, and then hired Gavin as her estate attorney. Gavin also borrowed money from Kathryn to build his law firm. His building housed another group of attorneys together known as Averna and Gardner P.C., as well as attorney Alberta Foster who were named as defendants. The main question in the lawsuit was whether knowledge of the wrongdoing by the other defendants subjected them to liability.

The Court first dealt with the relationship between Gavin and Averna. Based on shared clients, using each other's space, and access to common files, the court found a de facto partnership existed. Thus, they began to detail thefts from the Spencer estate. Kathryn died in 1994, leaving a sizable estate. At the time of Spencer's death, Gavin developed terminal cancer. There were rumors throughout the building following Kathryn's death that Gavin had stolen items of personal property from the Spencer Estate. Averna did some work related to the Spencer estate, and there was deposition testimony which showed he had knowledge of the thefts. Many believed that Averna was aware of the theft but chose to look the other way. Eventually, the estate was robbed of between $400,000 and $500,000. The question in this action then became whether there was a duty which Averna had breached.

The court began discussing duty by noting that whether a duty exists is a question of fairness. It involves weighing the relationship of the parties, the nature of risk, and the public interest in the proposed solution. In discussing a lawyer's duty the courts must look to the persons or entities a duty is owed and the conduct required of the lawyer to fulfill that duty. Attorneys obviously have a duty to their clients. The issue involved in this case is whether the Spencer Estate was a client for the purposes of an attorney-client relationship, accompanied by a fiduciary duty.

Averna prepared several trust instruments in accordance with Kathryn's will. Averna's argument was that he performed work for a charitable organization, not for an individual client. A lawyer may have a duty to the individual constituents of a charitable organization. In certain situations, a lawyer has only a duty to an estate but in other situations, the duty may actually be to the estate, or executor. Because there was no clear retention agreement, identifying the client and attorney, the court could not look to it for clarification.

The court eventually determined there was an attorney-client relationship between the months of June and September of 1994. This was based on the legal instruments created for the foundation, the payment originated from the estate and third the estate indirectly benefited from Averna's legal work. The court also noted the lack of responsibility by Gavin, and absence of a retention agreement in finding a duty. The small fee paid to Averna was not dispositive, because the court believed that the legal fees did not affect the duties of a legal professional.

Courts in New Jersey have found duties to exist between attorneys and non-clients where the attorney knows or should know that the non-client attorney relied on the attorney's advice. In this case, the court believed that because the Spencers relied on the advice of Averna implicitly, there was an attendant duty. The court then opined that circumstantial and legal factors controlled in finding a duty. The circumstantial factors were based on the close working relationship between Averna and Gavin. There was also a letter to the malpractice insurer which spoke of a relationship between Averna and Gavin, causing the court to say fairness dictated holding him responsible. There was not a de facto partnership as alleged by the defendants because there was know community of interests between Averna and Gavin.

However, the court decided that based on the rules of professional conduct, Averna owed the Estate a duty, assuming he knew of the thefts. Rule of Professional conduct 8.3 commands attorneys to speak up if they know of a breach of conduct by another lawyer. Knowledge is defined narrowly as actual knowledge which can be inferred or learned. Based on this definition, if Averna had known, then not reporting would have been a serious breach of professional rules of conduct. It is important to note that a violation of a rule of professional conduct is not per se legal malpractice, and the court simply considered it as another factor in finding a duty. As a matter of law and policy, the Court believed there was no unfairness in a rule of law imposing a duty upon a lawyer to blow the whistle on a peer. Clients deserve the protection of the bar.

The court then dealt with the question of what someone must do to fulfill that duty. It was the court's belief that fulfilling the duty requires the attorney to tell the office of attorney ethics, and if possible the affected client of the lawyer's misconduct. This would then afford the client an opportunity to apprise law enforcement. The court however noted that Averna did nothing to report. Since the court decided there was a duty, the Estate would have to pinpoint when Averna gained actual knowledge of the scheme. They would then have to prove once he gained that knowledge, and then the plaintiffs would have to prove that Averna failed to report the attorney. Finally, at trial, the plaintiffs would have to tender expert opinion to show causation and damages. The court found a duty, and out of fairness sought to protect clients from attorney misdeeds which is an unfortunate necessity.

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