Flaherty-Wiebel v. Morris, Downing, Sherred, 384 F. Appx. 173(3rd Cir. 2010) is a legal malpractice case which analyzes the scope of an attorney-client relationship. The center of the case was a pre-nuptial agreement which provided ...
Flaherty-Wiebel v. Morris, Downing, Sherred, 384 F. Appx. 173(3rd Cir. 2010) is a legal malpractice case which analyzes the scope of an attorney-client relationship. The center of the case was a pre-nuptial agreement which provided for post marriage alimony, and the disadvantage of an ex-wife because of the asserted prenuptial agreement. The court ultimately decided the wife failed to state a claim for legal malpractice because of the lack of a relationship. The facts are detailed below.
In March 1998, the Plaintiff began an engagement with her ex-husband. One of the conditions of following through with marriage was a pre-nuptial agreement. Originally the couple was scheduled to be married in 1999, but this arrangement ended, and the couple subsequently became re-engaged, and married in 2001. In August of 2001, about a month before the wedding, Flaherty's ex-husband presented a pre-nuptial agreement prepared by a law firm which he had hired. Flaherty acknowledged during trial that she had hired her own attorneys during the pendency of pre-nuptial negotiation. The agreement stated that Flaherty owned a minority of a business formed by her and her ex-husband. It provided that once married, Flaherty would be given an extra 1% so each spouse would own half of the company. At the time, Flaherty's ex-husband and step-son owed 99% and 1% of the company respectively.
In 2005, Flaherty filed for divorce, and a property settlement agreement was signed in 2006. Flaherty then alleged she was disadvantaged in the pre-nuptial agreement negotiations because it misrepresented her ownership interests. Flaherty's case was dismissed by the district court, but she alleged that based onNew Jerseylaw, there was a claim for legal malpractice based on violations of the rules of professional conduct. She also alleged breach of duty and breach of contract. The court found against Flaherty on each allegation.
As per the first allegation, the court noted thatNew Jerseydoes not provide a cause of action for violation of the rules of professional conduct alone. Rather, violations of these rules may be used to support a claim of legal malpractice. Legal malpractice is defined inNew Jerseyas negligence relating to an attorney's representation of a client. The elements of the cause of action are the existence of an attorney-client relationship creating a duty of care; breach of that duty by the defendant attorney; and proximate cause of damage claimed by the plaintiff. The court based their decision on the fact that Flaherty failed to properly allege an attorney-client relationship, and thus no duty was breached. In this case, the attorneys who drafted the pre-nuptial agreement were hired by Flaherty's ex-husband. The court also found it persuasive that Flaherty had hired her own attorneys during the negotiation period. Since Flaherty was not represented by the named defendant law firm, she could not allege a legal malpractice action against them. Thus, the court dismissed the action alleging legal malpractice.
Flaherty's second claim was an allegation that her ex-husband's attorney's owed her fiduciary duties as a non-client. New Jerseydoes have law which states a member of the bar owes a fiduciary duty to persons, "though not strictly clients" who she knows or should know rely on him in his professional capacity. This duty that has been carved out in New Jerseycase law is limited to situations where the attorney knew of or should have known that the 3rd party would rely on the lawyer's work. This test mainly seeks out the objective purpose of the attorney's work, thus if it is to induce action duty may arise, but if it is merely to represent an intended agreement between parties, then there is no duty. The court decided that a pre-nuptial agreement conformed to the latter, because it reflected an agreement between Flaherty and her ex-husband. She was not induced to act based on the agreement, but rather to simply assent to the terms embodied within. Thus, the court found this limited duty to 3rd parties did not arise in this context.
The breach of contract action was summarily dismissed by the Court because Flaherty failed to allege any specific acts which constituted a breach of contract. When drafting complaints, factual allegations must provide support for the legal conclusions to be established. Thus the court dismissed this action.
The most important rule of law from this case is the way in which the duty to 3rd parties is narrowly drawn. There is little disagreement that an attorney hired to prepare an agreement certainly impacts another person's life. Rather, the problem is that when a party is not relying on such agreement courts will not expand this exception. This seems to be within the trend of limiting legal malpractice actions to those between attorneys and their clients. It is an important lesson in both understanding what you are signing, as well as understanding what tools attorneys provide for decision makers. While this case would seem to indicate a lack of fairness, it does not matter as long as the attorney does not act to induce action by a non-client such as purchasing or selling property.