Tipton v. Porter, Court of Appeals of Kentucky, September 17, 2010
Facts: The Tiptons purchased a home from the Lucases. The Lucases engaged the services of Porter & Associates, Attorneys at Law. The Tiptons never met any member of Porter & Associates, but were charged a portion of the overall closing fee associated with the transaction.
The Tiptons’ purchase was owner financed. Some point after the transaction was completed, the Tiptons failed to pay the Lucases. As a result, the Lucases failed to make payment on a pre-existing mortgage — that the Tiptons were unaware of — with Community First Bank ("CFB"). CFB eventually filed a foreclosure action and the property was sold at a judicial sale.
The Tiptons, thereafter, sued Porter & Associates for legal malpractice.
Issue: Does an attorney owe a duty of care to third-parties?
The Kentucky Court of Appeals noted that the State has no privity requirements for legal malpractice actions:
Rather, an attorney may be held liable for damage caused by his negligence to a person intended to be benefited by his performance irrespective of any lack of privity.
The Court further noted that an attorney may be liable to a third-party who reasonably relies on him even where he did not supply any false information.
Here, the Court found that Porter & Associates could be liable if, in breach of the applicable standard of care, they never undertook to complete a title exam to discover and disclose the existence of the CFB mortgage. The Court held that "[e]xpert testimony would be required to answer this question as this is not the sort of question that would be within the common knowledge of a layperson." The Appellate Division remanded the matter with instructions to allow the Tiptons time to retain an expert and conduct depositions.
Lesson: In Kentucky, attorneys owe a duty of care to third-parties where the third-party reasonably relies on the attorney’s performance to his or detriment. The fact that the attorney did not give out false information is not dispositive — the attorney may still be liable for malpractice for omissions under the applicable standard of care.
Posted in: Privity