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Breach of Fiduciary Duty in Legal Malpractice: Yea or Nay?

During one of our recent class meetings at Hofstra Law School, we discussed the different causes of action that are typically brought in legal malpractice lawsuits. We saw in Fiorentino v. Rapoport, 693 A.2d 208 (PA. 1997), at least three separate and distinct causes of action: breach of contract, negligence and breach of fiduciary duty. Many jurisdictions apply different statutes of limitations to each of these causes of action, which frequently determine which one of them will survive a motion to dismiss. Sometimes the facts of a particular case can establish theories of liability in more than one cause of action. For example, the same facts can establish both negligence and breach of fiduciary duty.

One renowned scholar, Professor Charles Wolfram, is critical of the way courts have permitted breach of fiduciary duty claims in legal malpractice cases. He wants them to be scaled back. In “A Cautionary Tale: Fiduciary Breach as Legal Malpractice”, 34 Hofstra L. Rev. 689,692 (2006), he argues that

“courts have allowed fiduciary breach claims to proliferate needlessly on the same ground already adequately occupied by negligence….[M]ost fiduciary breach claims are problematic precisely because of their almost complete and useless overlap with available claims of negligence.”

On the other hand, we studied Judge (now Justice) Sotomayor’s decision in Estate of Re v. Kornstein, et al., 958 F. Supp. 907 (SDNY 1997). She points out that a breach of fiduciary duty claim alleviates plaintiff’s burden of proof particularly in regard to the proximate cause element of the cause of action. (True, the Court dismissed the negligence claim and permitted the fiduciary breach to proceed.) Also, there is generally a longer statute of limitations applicable to breach of fiduciary duty claims than negligence claims. These distinctions can easily make the difference between recovery for or dismissal of a bona fide claim. The notion that meritorious claims deserve appropriate remedies may thus help to explain why the vitality of the fiduciary breach claim is so important to fundamental fairness and justice.

We also read the Restatement of Law Governing Lawyers § 49 which provides that the breach of fiduciary duty claim is “[i]n addition to the other possible bases of civil liability…”

Should fiduciary breach claims in legal malpractice lawsuits be permitted to continue to flourish or should they be scaled back and limited to being, in effect, a cause of action of last resort reserved only for the most reprehensible forms of lawyer misconduct that harms clients? And what if it harms forseeable non-clients?

Do you see any merit to the argument that the proliferation of fiduciary breach claims should be encouraged because of its prophylactic benefit, i.e., it serves as a constant reminder to us of our over-arching, primary duty of undivided loyalty to our client and thus encourages adherence to that duty?

As lawyers, these are concepts we must take to heart in our everyday dealings with clients and non-clients alike. What do you think about this debate? Do you see a lawyer’s fiduciary duty as a standard of care or perhaps even an enforceable “Code of Conduct”? Or do you think in years to come we will see a move toward taking the teeth out of its bite?

Please, share your thoughts and comments with us. Just click the comments link below.

Prof. W.

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Posted in: Fiduciary Duty, Insight & commentary