TX: Underlying Commercial Real Estate Action
Facts: The non-client, as owner of one of fifteen limited partnership interests in a partnership, asserted claims against counsel for the partnership based on his participation in the purchase of the partnership’s sole asset. The partnership was created between two businessmen in the interest of acquiring real estate. The partnership was to be the purchase entity acquiring an apartment complex. These men hired said attorney to prepare necessary documents. In order to raise funds for the purchase they solicited participation in the real estate investment through the sale of limited partnership interests in the partnership. The attorney prepared the partnership agreement in accordance with the information provided by the clients. The attorney provided the fully executed copy of the purchase agreement to all partners. The real estate investment began to experience financial difficulties and this suit ensued.
Issue: Whether attorney negligently misrepresented information knowing a non-client would rely upon
Ruling: Negligent misrepresentation liability is based from the attorney’s manifest awareness of the non-client’s reliance on the misrepresentation and the attorney’s intention that the non-client rely on that misrepresentation. The duty imposed on an attorney to a non-client is limited and a non-client cannot rely on an attorney’s representation unless it is invited. The reliance element is absent in this case as there is no evidence attorney invited or was aware of non-client’s reliance. Here, the only communication attorney had with non-client was in the form of a cover letter attached to the purchase agreement. The cover letter contained no legal opinions. The attorney represented the partnership and it is well established that an attorney’s representation of a partnership does not extend to each of the individual partners.
Lesson: Attorney’s dealing with legal issues involving the formation of partnerships should warn all parties involved of who they represent and that each should seek their own individual attorney.