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Ohio Legal Ethics Narrative
I. Client-lawyer relationship
- Primary Ohio References: Ohio Rule 1.1; ORC 1339.18, 1782.08(B)
- Background References: ABA Model Rule 1.1
- Commentary: ABA/BNA § 301:601; ALI/LGL § 51; Wolfram §§ 5.6.4-5.6.5
The general rule in Ohio, as set forth by the Supreme Court in the leading case of Scholler v. Scholler, 10 Ohio St.3d 98, 462 N.E.2d 158 (1984), is that
an attorney is immune from liability to third persons arising from his performance as an attorney in good faith on behalf of, and with the knowledge of, his client, unless such third person is in privity with the client or the attorney acts maliciously.
Id. (syllabus one).
Accord Simon v. Zipperstein, 32 Ohio St.3d 74, 512 N.E.2d 636 (1987); Altier v. Valentic, 2004 Ohio 5641, 2004 Ohio App. LEXIS 5083 (Geauga); McGuire v. Draper, Hollenbaugh & Brisco Co., L.P.A., 2002 Ohio 6170, 2002 Ohio App. LEXIS 6003 (Highland); Brinkman v. Doughty, 140 Ohio App.3d 494, 748 N.E.2d 116 (Clark 2000). Compare 1 Restatement (Third) of the Law Governing Lawyers § 51 (2000).
The important, and unanimous, 2007 opinion by the Supreme Court in LeRoy v. Allen, Yurasek & Merklin, 114 Ohio St.3d 323, 2007 Ohio 3608, 872 N.E.2d 254, also cites and quotes Scholler (and Simon) with apparent approval (paras. 15-16), but then in the next paragraph seems to leave the door open a crack for possible future modification of the long-standing rule of lawyer nonliability to third parties and its only two equally long-standing exceptions. Thus, the Court notes that
as this case now stands, this appeal does not test the continuing validity of those precedents. This case also does not present issues regarding whether additional exceptions to the general rule beyond those already recognized should exist.
Id. at para. 17.
The LeRoy opinion is explored in detail in this section infra at "Developments in Ohio subsequent to Elam and Arpadi," as well as in section 1.13:520.
Further rumblings about the possibility of change are heard in the concurring opinion of Chief Justice Moyer in Shoemaker v. Gindlesberger, 118 Ohio St.3d 226, 2008 Ohio 2012, 887 N.E.2d 1167, an equally important case decided in 2008. The majority in Shoemaker rejected the frontal attack made by appellants on Simon v. Zipperstein and held that a beneficiary under the testatrix's will could not sue the testatrix's lawyer for alleged negligence in deeding real estate to one of her sons, thereby reducing the value of the estate to the other beneficiaries. But Chief Justice Moyer, joined by two other justices, made clear that if presented again with facts like those in Simon (beneficiary seeking to sue testator's attorney for negligence in drafting will) the Court should revisit the Simon rule: "I believe there would be compelling reasons to recognize a cause of action by an intended beneficiary against decedent's attorney for negligence in the preparation of a will." Id. at para. 28. The Shoemaker decision is further discussed this section infra at "No Liability to Nonclient Based on Lack of Privity," "Malpractice; estates and trusts."
Privity: In order for privity to exist, the interests of the third person must be "concurrent" with the interests of the lawyer's client. See Scholler, 10 Ohio St.3d at 104, 462 N.E.2d at 164 (interests of client/spouse in separation agreement leading to dissolution of marriage are not same as those of minor child of the marriage; accordingly, child not in privity with spouse for purposes of malpractice action against lawyer arising out of his representation of spouse in negotiating and preparing agreement).
Two major cases applying the Scholler privity exception are Arpadi v. First MSP Corp., 68 Ohio St.3d 453, 628 N.E.2d 1335 (1994), and Elam v. Hyatt Legal Services, 44 Ohio St.3d 175, 541 N.E.2d 616 (1989), both of which are discussed in detail this section infra. In Arpadi, a limited partnership case, privity was found to exist by reason of the fiduciary relationship between the general partner and the limited partners. Since the limited partners were in privity with the general partner, they could sue the lawyer representing the partnership/general partner for breach of duty of due care "regarding matters to which the fiduciary duty relates." Syllabus three. In Elam, a trust and estates case, the Court held that vested beneficiaries of an estate are in privity with the estate's fiduciary, whose attorney, pursuant to the Scholler privity exception, was therefore not immune from suit by the beneficiaries for negligence. As discussed infra at "Developments in Ohio subsequent to Elam and Arpadi," these cases may no longer be good law in Ohio, because of statutory developments.
Also, the LeRoy decision teaches that the Arpadi finding of privity is limited in the fiduciary duty context to lawyering on "matters to which the fiduciary duty relates": Since the lawyers' conduct at issue in LeRoy related to a "private transfer of stock" by the majority shareholder of a close corporation, it did not implicate her fiduciary duty to the minority shareholders; as a result, there was no privity under the exception to the Scholler general rule of nonliability of lawyers to nonclients for malpractice. LeRoy, at paras. 27-28. In the Shoemaker case, noted above, the majority opinion looked to and quoted with approval the definition of privity found in Black's Law Dictionary: "‘[t]he connection or relationship between two parties, each having a legally recognized interest in the same subject matter,'" id. at para. 10 (a definition that seems to beg the question whether a "legally recognized interest" exists).
Cases in addition to Scholler, LeRoy, and Shoemaker finding the privity element lacking include: Noth v. Wynn, 59 Ohio App.3d 65, 571 N.E.2d 446 (Hamilton 1988) (for privity to exist, interests must coincide; no such coincidence of interests where purchasers of real estate sought to sue attorneys for mortgage lender for alleged failure to disclose title restriction; purchasers and lender had separate interests). Nor, in a right-of-privacy suit based on alleged disclosures of private financial information by attorneys in the course of defending plaintiffs' former lawyers against plaintiffs' malpractice claim, were plaintiffs in privity with their former lawyers when, at the time of the disclosure, they were adversaries in the malpractice lawsuit. Hahn v. Satullo, 156 Ohio App.3d 412, 2004 Ohio 1057, 806 N.E.2d 567 (Franklin). Similarly, lawyers for defendant in Case A were immune from liability in subsequent Case B, brought by the lawyer who had represented plaintiff in Case A; lawyer-plaintiff in Case B was not in privity with his adversary in Case A. Gruenspan Co., L.P.A. v. Thompson, 2003 Ohio 3641, 2003 Ohio App. LEXIS 3287 (Cuyahoga). Cf. Sayyah v. Cutrell, 143 Ohio App.3d 102, 757 N.E.2d 779 (Brown 2001) (reversal of summary judgment for attorney for homeowners' association in malpractice suit by individual members of the association; material issue of fact existed as to whether members' interests were concurrent with interest (if any) of association in members' suit against third party, defended by same lawyer that represented association). See also sections 1.1:520 and 3.1:400.
With the result in Noth, compare Macken v. KDR Holdings, 2007 Ohio 4106, 2007 Ohio App. LEXIS 3733 (Lorain), where the court found that privity existed between the plaintiff mortgagee and the defendant mortgagor such that plaintiff had standing to sue the lawyers who drafted the mortgage deed for the mortgagor. "[W]e conclude under these facts [both parties sought to encumber certain land to secure plaintiff's investment in KDR and both parties agreed on the amount of the encumbrance], representing KDR for this transaction was the equivalent of representing Appellant." Id. at para. 17. It would seem that as between Noth and Macken, Noth has the better of the argument.
Malice: The Scholler malice exception is something of a chameleon, and the formulation of what constitutes malice seems to depend on the type of case at issue. Some sense of the variety of definitions can be drawn from the following list:
Abuse of process -- "an attorney who attempts to obtain relief from a court that he knows to be powerless to grant it acts in bad faith. The court concludes, therefore, that Plaintiffs may establish that Defendants acted in bad faith, and, therefore, maliciously, when they perverted the Ohio proceeding by seeking relief that the Ohio court could not grant." Luciani v. Schiavoni, C-1-97-272, 2001 U.S. Dist. LEXIS 25918, at *19 (S.D. Ohio Jan. 2, 2001). Despite (or perhaps because of?) the panoply of malice definitions, the Luciani court also remarked that "Ohio courts have provided precious little guidance in the interpretation of the maliciousness requirement of Scholler and similar cases." Id. at *17. See further discussion of Luciani in this section infra at "Liability to Nonclient Found or Supported Based on Malicious Conduct" and in section 1.1:520.
Conversion -- no malice under Scholler where attorney's actions based on good-faith, if erroneous, belief; malice implies a "condition of mind which prompts a person to do a wrongful act willfully, that is, on purpose, to the injury of another without justification or excuse." Moffitt v. Litteral, 2002 Ohio 4973, 2002 Ohio App. LEXIS 5000, at para. 82 (Montgomery). (This definition was also quoted with approval in the Sprouse opinion, cited below.)
Defamation -- in applying the malice exception to the qualified privilege rule, malice means a statement made with actual knowledge of its falsity or with reckless disregard of its truth or falisity. A&B-Abell v. Columbus/Central Ohio Bldg. & Constr. Trades Council, 73 Ohio St.3d 1, 651 N.E.2d 1283 (1995) (nonlawyer defendant).
Intentional interference with parental relationship and fraud -- malice defined "to include actions taken by the attorney with an ulterior motive separate and apart from the good faith representation of the client's interests." Sprouse v. Eisenman, 2005 Ohio 463, 2005 Ohio App. LEXIS 487, at para. 4 (Franklin) (no malice where attorney, allegedly falsely and misleadingly, had in good faith told plaintiffs (the birth father and his family) that her clients (the birth mother and her family) were still considering parenting options shortly before the birth mother put the baby out for adoption).
Malicious civil prosecution -- malice described as intentionally doing a wrongful act without lawful excuse and with intent to inflict injury. Butts v. Bjelovuk, 129 Ohio App.3d 134, 717 N.E.2d 381 (Cuyahoga 1998).
Malicious criminal prosecution -- malice "means an improper purpose, or any purpose other than the legitimate interest of bringing an offender to justice." Criss v. Springfield Township, 56 Ohio St.3d 82, 85-86, 564 N.E.3d 440, 443 (1990) (nonlawyer defendant).
Malpractice -- No allegations of "special circumstances such as fraud, bad faith, collusion, or other malicious conduct which would justify departure from the [Scholler] general rule." Simon v. Zipperstein, 32 Ohio St.3d 74, 76-77, 512 N.E.2d 636, 638 (1987). No malice because no evidence of "hatred, ill-will, or a spirit of revenge." McGuire v. Draper, Hollenbaugh & Brisco Co., L.P.A., 2002 Ohio 6170, 2005 Ohio App. LEXIS 6003, at para. 66 (Highland).
Right of privacy -- act of sending allegedly private documents to a copying service for reproduction "does not constitute malicious conduct or conduct without legal justification or excuse ." Hahn v. Satullo, 156 Ohio App.3d 412, 2004 Ohio 1057, 806 N.E.2d 567, at para. 68 (Franklin).
Liability to Nonclient Found or Supported Based on Privity
As noted above, two principal opinions dealing with attorney liability to a nonclient premised on the privity exception are Elam v. Hyatt Legal Servs., 44 Ohio St.3d 175, 541 N.E.2d 616 (1989) (estates and trusts), and Arpadi v. First MSP Corp., 68 Ohio St.3d 453, 628 N.E.2d 1335 (1994) (limited partnerships).
In Elam, the Ohio Supreme Court held that "[a] beneficiary whose interest in an estate is vested is in privity with the fiduciary of the estate, and where such privity exists the attorney for the fiduciary is not immune from liability to the vested beneficiary for damages arising from the attorney's negligent performance." 44 Ohio St.3d 175, 175, 541 N.E.2d 616, 616-17 (syllabus) (summary judgment for attorneys reversed; after death of testator, counsel for executor caused real property to be transferred in fee simple to executor, whereas under will executor was granted life estate only, with remainder to go to plaintiff/vested beneficiaries in fee simple). Based on the clearly vested interest of the beneficiaries in the case before it, the Elam Court distinguished its earlier decision in Simon v. Zipperstein, 32 Ohio St.3d 74, 512 N.E.2d 636 (1987) (per curiam), which had held that the attorney who prepared the testator's will was immune from liability for malpractice in preparation of the will to a potential beneficiary of his father's estate for want of privity. (Interestingly, Elam noted "without comment" that review of the facts "seems to indicate that the person's interest [in Simon] was vested." See 44 Ohio St.3d 175, 177 n.2, 541 N.E.2d 616, 618 n.2. But, in its most recent excursion into this territory, the Court in Shoemaker v. Gindlesberger, 118 Ohio St.3d 226, 2008 Ohio 2012, 887 N.E.2d 1167, used the Zipperstein potential beneficiary rationale to explain why the beneficiaries in that case were not in privity – because "their rights as beneficiaries did not vest until [their mother's] death." Id. at para. 10.) See also DePugh v. Sladoje, 111 Ohio App.3d 675, 676 N.E.2d 1231 (Miami 1996) (holding rationale of Elam to be equally persuasive on mirror-image facts presented; administrator of estate was in privity with beneficiary and therefore had standing to sue beneficiary's attorney for malpractice).
In Arpadi v. First MSP Corp., 68 Ohio St.3d 453, 628 N.E.2d 1335 (1994), the Ohio Supreme Court held that attorneys for a limited partnership and its general partner owe a duty of due care arising from the attorney-client relationship to limited partners regarding matters to which the fiduciary duty relates. The Court first rejected the defendant attorneys' argument that former OH EC 5-18 (subsequently renumbered 5-19) supported the view that no duty is owed to limited partners by the attorney for the partnership; the Court found this provision inapposite because, unlike a corporation, a partnership is an aggregate of individuals and does not constitute a separate legal entity. The Arpadi decision was based on the premise that the general partner of a limited partnership owes a fiduciary duty to the limited partners, 68 Ohio St.3d at 454, 628 N.E.2d at 1336 (syllabus two), and that "the fiduciary relationship between the general partner and the limited partners provides the requisite element of privity under Elam, supra [Elam v. Hyatt Legal Servs., 44 Ohio St.3d 175, 541 N.E.2d 616 (1989)]. Such privity, in turn, extends the duty [of care] owed [by the attorney] to the general partner to the limited partners regarding matters of concern to the enterprise." 68 Ohio St.3d at 458, 628 N.E.2d at 1339 (bracketed material added).
One aspect of the holding in Arpadi, however, was not expressly limited to partnership law. In syllabus three, the Court stated the rule in terms applicable to fiduciaries generally:
Those persons to whom a fiduciary duty is owed are in privity with the fiduciary such that an attorney-client relationship established with the fiduciary extends to those in privity therewith regarding matters to which the fiduciary duty relates. (Elam approved and followed.)
Id. at 454, 628 N.E.2d at 1336 (syllabus three). This extension of the attorney-client relationship and its related duties caused concern in the estate and trust legal community and led to the enactment of ORC 1339.18 and the adoption of former OH EC 5-16, discussed this section below at "The ‘duty' issue." See Sidney Nudelman, Adoption of a New Ethical Consideration Relating to Lawyer's Representation of a Trustee of an Express Trust, Executor, Administrator or Personal Representative, Prob. L.J. of Ohio, Nov.-Dec. 1999, at 17 (discussing adoption of former OH EC 5-16 as resolving some of the concerns of estate and trust practitioners raised by Arpadi); Robert G. Dykes, Scope of Lawyer's Duty in Estates and Trusts Clarified, Prob. L.J. of Ohio, Jan.-Feb. 1999, at 44 (similar discussion regarding enactment of ORC 1339.18).
Arpadi is cited by the Restatement as being out of sync with the "apparent majority of recent decisions" that, "[c]onsistent with the position of the Section and Comment [h]," hold "that a lawyer for a limited partnership does not owe a duty of care to partners." 1 Restatement (Third) of the Law Governing Lawyers § 51 reporter's note to cmt. h, at 373 (2000). The same reporter's note cites ORC 1339.18, but makes no mention of Elam.
Developments in Ohio subsequent to Elam and Arpadi: In response to the Court's decisions in Arpadi and Elam, the legislature amended the Ohio Revised Code to make clear that a limited partnership was a legal entity, a position Arpadi had rejected, and enacted a new Code section providing that a lawyer for a fiduciary who is a trustee or an executor or administrator does not, absent express agreement to the contrary, owe duties to those to whom the fiduciary owes fiduciary obligations.
The "entity" issue: In 1996 the Ohio legislature amended ORC 1782.08(B) by adding the words "an entity" to the then-existing language. Pursuant to subsequent amendment (adding a new subpart B), the relevant language is now contained in ORC 1782.08(C) and reads as follows:
A limited partnership is an entity formed at the time of filing the certificate of limited partnership pursuant to section 1782.13 of the Revised Code [ORC 1782.13] or at any later time specified in the certificate if, in either case, there has been substantial compliance with the requirements of divisions (A) and (B) of this section [ORC 1782.08(A)-(B), setting forth requisites of limited partnership formation].
(Emphasis and bracketed material added.)
In comments on Substitute House Bill 495, which as enacted into law (146 Ohio Laws 5359) included the 1996 amendment to ORC 1782.08(B), the Corporation Law Committee of the Ohio State Bar Association stated that "[t]o the extent that the decision in Arpadi v. First MSP Corp., 68 Ohio St.3d 453 (1994) was based on the court's conclusion that the limited partnership was not an entity, the result in that case would now be different."
Nevertheless, since the effective date of the amendment to ORC 1782.08(B), a number of cases have continued to cite Arpadi as good law on the entity issue. No case has cited ORC 1782.08(B) or (C) or indicated that Arpadi's holding that a limited partnership is not an entity is no longer the law of Ohio. In a word, Ohio decisions have ignored the statute. E.g., Geren v. Westfield Ins. Co., 2002 Ohio 1230, 2002 Ohio App. LEXIS 969 (Lucas, Mar. 8, 2002); Sekulovski v. Bubev, No. 99 AP-1224, 2000 Ohio App. LEXIS 3553 (Franklin Aug. 8, 2000). Federal cases applying Ohio law have done likewise. See, e.g., Thompson v. Karr, 182 F.3d 918, 1999 U.S. App. LEXIS 16846 (6th Cir. 1999) (table); Supremacy Capital Co. v. Tri-Med Fin. Co., 165 F. Supp.2d 679 (S.D. Ohio 2001).
Further evidence that Arpadi should no longer be read as stating the law of Ohio on the entity issue is found in Ohio Rule 1.13 cmt. , which expressly states that "[t]he duties defined in this rule [with respect to an organization as client] apply equally to unincorporated associations." Since partnerships and limited partnerships are by definition unincorporated associations, a lawyer for such an association, under 1.13(a), represents the partnership, i.e., the entity, not the individual partners. See further discussion at sections 1.7:340 and 1.13:230.
Yet another effort by the legislature to make clear that general and limited partnerships are "entities" is found in the enactment of ORC 1775.01(G), effective October 12, 2006. This provision once again expressly states that "entity" means "[a]ny of the following organizations . . . [a]n unincorporated business or for profit organization, including a general or limited partnership." ORC 1775.01(G)(2)(d).
The "duty" issue: In December 1998 the Ohio legislature enacted ORC 1339.18 (effective March 22, 1999; renumbered ORC 5815.16, effective January 1, 2007), which would appear to have repudiated Elam and an unlimited reading of syllabus three of Arpadi. The section reads as follows:
(A) Absent an express agreement to the contrary, an attorney who performs legal services for a fiduciary, by reason of the attorney performing those legal services for the fiduciary, has no duty or obligation in contract, tort, or otherwise to any third party to whom the fiduciary owes fiduciary obligations.
(B) As used in this section, "fiduciary" means a trustee under an express trust or an executor or administrator of a decedent's estate.
(At about this same time, an ethical consideration, designed to deal with the perceived problem of conflicting multiple representation raised by the language in syllabus three of Arpadi extending the fiduciary's attorney-client relationship to those in privity with the fiduciary, was adopted by the Ohio Supreme Court, effective November 1, 1999. See former OH EC 5-16, which stated that a lawyer representing a fiduciary having fiduciary duties to third parties was not engaged in multiple representation, even if the fiduciary and the third parties had conflicting interests. As used in the ethical consideration, "fiduciary" included only a trustee under an express trust or an executor, administrator, or personal representative.")
A further attempt by the General Assembly to repudiate an unrestricted reading of Arpadi syllabus three occurred with the passage of Am. Sub. H.B. 301, effective October 12, 2006. See ORC 1701.921(A) (corporations); 1705.61(A) (limited liability companies); 1782.65(A) (limited partnerships). As to each of these entities, the relevant statutory language is that "[a]bsent an express agreement to the contrary," a lawyer "performing services for" the entity
owes no duty to, incurs no liability or obligation to, and is not in privity with the [constituents or creditors of the entity] by reason of performing services for the [entity].
Each of these provisions also has a subsection (B), which states the identical restrictions on duty, liability, privity, etc., regarding a lawyer performing services for the entity's constituents. Since Arpadi was a limited partnership case and since each of the provisions is identical in structure, we will quote only 1782.65(B) here. It states in relevant part:
Absent an express agreement to the contrary, a person . . . performing services for a general or limited partner or a group of general or limited partners of a limited domestic or foreign limited partnership owes no duty to, incurs no liability or obligation to, and is not in privity with the limited partnership, any other general or limited partners of the limited partnership, or the creditors of the limited partnership by reason of . . . performing services for the general or limited partner or group of general or limited partners.
This language in 1782.65(A) & (B) seems to directly repudiate the core holding in Arpadi that the lawyer for the general partner and the limited partnership can be liable or has a duty of care to the limited partners, even though the lawyer was not representing them. (This limitation of liability, at least with respect to corporations and limited liability companies and their constituants, is noted in Gary P. Krieder & F. Mark Reuter, Significant 2006 Amendments to Ohio Business Organization Statutes, Ohio Law., Jan./Feb. 2007, at 30, 31-32; no mention is made of the Arpadi conundrum.)
While the 2006 amendments to the Revised Code are too new to have generated any case law, the same cannot be said for the comparable provisions adopted in 1999. Nevertheless, with one exception, discussed in the last paragraph of this subsection, no case has cited ORC 1339.18 or OH EC 5-16, and subsequent decisions continue to cite Elam and Arpadi as good law on the duty point. See, e.g., Brinkman v. Doughty, 140 Ohio App.3d 494, 748 N.E.2d 116 (Clark 2000). In Brinkman, certain relatives of the deceased brought a malpractice action against the lawyers who had represented the executrix and who had pursued wrongful death claims. The wrongful death action was settled, but the Brinkman plaintiffs did not share in the proceeds. In the malpractice action, the trial court granted summary judgment for the defendant lawyers on the ground that plaintiffs were not in privity with the fiduciary for the estate, since their interests were potential only and not vested. The Second District Court of Appeals reversed. Relying on the Supreme Court's decisions in Elam and Arpadi, the court held that the executrix owed a fiduciary duty to all statutory beneficiaries under the wrongful-death statute; that being so, plaintiffs were in privity with the executrix and could sue the lawyers for the executrix for malpractice, because the lawyer's duty runs not only to the client but also to those to whom the client owed a fiduciary duty. ORC 1339.18 was not mentioned in the opinion. The Supreme Court denied review. 91 Ohio St.3d 1480, 744 N.E.2d 1194 (2001).
Two other court of appeals decisions quote and apply Arpadi syllabus three on the privity/fiduciary duty/ attorney-client relationship issue, LeRoy v. Allen, Yurasek & Merklin, 162 Ohio App.3d 155, 2005 Ohio 4452, 832 N.E.2d 1246 (Union); Euclid Retirement Village, Ltd. P'ship v. Giffin, 2002 Ohio 2710, 2002 Ohio App. Lexis 2788 (Cuyahoga), but neither run afoul of ORC 1339.18 or OH EC 5-16, since the fiduciaries in LeRoy and Euclid Village were, respectively, a majority shareholder and a limited partnership general partner, not a trustee of an express trust or an executor or administrator of a decedent's estate. [But see new ORC 1701.921 and 1782.65, discussed above.]
A unanimous Supreme Court in LeRoy, however, in no uncertain terms reversed the court of appeals on the privity issue, 114 Ohio St.3d 323, 2007 Ohio 3608, 872 N.E.2d 254. Pursuant to the Court:
The major flaw in the court of appeals' reasoning is that Arpadi found privity in a partnership situation specifically only as to "matters to which the fiduciary duty relates." Arpadi, 68 Ohio St.3d at 458, 628 N.E.2d 1335. The claims of LeRoy and Miller, however, are not such claims. A private transfer of stock does not, in and of itself, implicate any fiduciary duty on the part of a majority shareholder toward minority shareholders.
The transfer of stock that LeRoy and Miller challenge in this case is fundamentally different from the legal work at issue in Arpadi, in which the alleged legal malpractice that occurred was for legal representation specifically done regarding partnership matters. The transfer of stock was a purely private matter, personal to Mary Elizabeth Behrens, and was not done on behalf of Marysville Newspapers. For that reason, the legal work done by defendants regarding that transfer does not implicate the fiduciary duties discussed in either Arpadi or Crosby, the privity exception of Simon is clearly inapplicable, and LeRoy and Miller failed to state a valid claim under that exception. We reverse the judgment of the court of appeals on this issue.
Id. at paras. 27-28.
Thus, Arpadi was of no help to the LeRoy plaintiffs because its privity rule is limited to "matters to which the fiduciary duty relates," id. at para. 27, and the private transfer of stock at issue in LeRoy was not such a matter. Without a majority shareholder fiduciary duty to the minority shareholders relating to that transaction, the Court held that there was no privity between the majority and the minority, and without privity, there was no duty of care on the part of the lawyers for the majority shareholder to the nonclient minority shareholders. (Presumably, pursuant to the LeRoy analysis, the Arpadi privity rule would still lie if the lawyer's work is on a "matter to which the fiduciary duty relates.")
(While it did not affect the result, it should be noted that the Court in LeRoy telescoped the Arpadi fiduciary duty/privity/duty-of-care analysis into one of fiduciary duty/privity only. Arpadi held that the general partner owes a fiduciary duty to the limited partners and "[a] fortiori [the limited partners] are in privity with the fiduciary such that an attorney client relationship established with the fiduciary extends to those in privity therewith regarding matters to which the fiduciary duty relates. Therefore, . . . the duty arising from the attorney-client relationship . . . must be viewed as extending to the limited partners as well." 68 Ohio St.3d at 458, 628 N.E.2d at 1339 (emphasis added); accord syllabus three. In LeRoy, it was privity, not "the duty arising from the attorney-client relationship," that the LeRoy Court held existed only as to "matters to which the fiduciary duty relates." 114 Ohio St.3d 323, at para. 27.)
Having decided the privity issue on the ground that "the legal activities in this case were inherently not ‘matters to which the fiduciary duty relates,'" id. at para. 30, and that such a relationship is a prerequisite to application of the Arpadi rule, the Court did not address defendants' alternative argument – that the court of appeals erred in extending the Arpadi duty of care rule to the close-corporation context by use of Crosby's language that the fiduciary duty owing in a close corporation is "similar" to that owed in a partnership because of their "fundamental resemblance." Id. at paras. 25, 30. Instead, "resolution of [this] issue by this court must await another day." Id. at para. 30. (In doing so, the Supreme Court referred to a Sixth Circuit case, Thompson v. Karr, 182 F.3d 918, 1999 U.S. App. LEXIS 16846 (6th Cir. 1999) (table), that the defendants "point out . . . expressly declined to employ Crosby in this way to extend the holding of Arpadi . . . ." Id. at para. 29 (ellipses added). While technically correct, the express declination was based on the fact that "[t]he courts of Ohio have not so far extended Arpadi to close corporations" and "it is the place of the Ohio courts, if not the Ohio legislature, and not this court sitting in diversity, to extend the fiduciary and professional duties of attorneys of close corporations to the corporations' minority shareholders" by means of the Arpadi analogy, as a matter of Ohio law. Thompson, at *26, 27. As we have seen, far from "extending" the Arpadi duties, "the Ohio legislature" has eliminated them, even if the Ohio courts have taken no notice of that fact to date.)
Finally, note that even the Supreme Court in LeRoy gives no indication of the existence of the legislature's assault on Arpadi. Arpadi is cited and discussed, its syllabi are quoted (see paras. 22 & 23), but there is not one word in LeRoy alluding to ORC 1782.65(B), in which, as discussed above, the duty of care to the limited partners, imposed by Arpadi on lawyers for a limited partnership and/or its general partner, is flatly repudiated. (Even though the operative facts in LeRoy occurred well before the 2006 enactments repudiating Arpadi, a footnote reference to the prospective demise of the Arpadi rule would not have been out of place.)
The lone case (the previously mentioned exception) in which ORC 1339.18 is cited does nothing to clarify Ohio law on this issue; if anything, it further muddles it. In Haller v. Wiles, Doucher, Van Buren & Boyle, No. 99CVA04-2975, 1999 WL 34828689 (C.P. Franklin July 13, 1999), the defendant lawyers for the administrator of an estate raised 1339.18 in support of their motion for summary judgment on a malpractice claim (which motion was granted on other grounds). They quite properly argued that with respect to the claim of the nonclient plaintiff the statute "provides immunity to an attorney who provides legal services for a fiduciary." The judge, however, without any basis or explanation, quite erroneously held that 1339.18 "applies to commercial transactions and the uniform commercial code," which of course it does not. (The title of Chapter 1339 is "Fiduciary Law.") So much for the one citation of ORC 1339.18. (For the record, as of January 1, 2007, this provision has been renumbered and is now found in Chapter 5815 at 5815.16, along with all of the other provisions formerly in Chapter 1339.) The summary judgment in Haller was affirmed at 2000 WL 739435 (App. Franklin June 8, 2000); the statute was not mentioned.
Liability to Nonclient Found or Supported Despite Absence of Privity
A significant case in the lawyer-liability-to-nonclient area is Orshoski v. Krieger, No. OT-01-009, 2001 Ohio App. LEXIS 5018 (Ottawa Nov. 9, 2001). Invoking 3 Restatement (Second) of the Law of Torts § 552 (1977) (liability imposed on one who, having a pecuniary interest in the transaction, negligently provides false information, given with the intent to guide another, that is justifiably relied upon by, and results in pecuniary loss to, the recipient), Orshoski reversed a OH Civ R 12(B)(6) dismissal based on the one-year malpractice statute of limitations and held that a lawyer can be held liable to a nonclient for negligent misrepresentation under §552, irrespective of the absence of privity and malice. There was no allegation of attorney malice, and the court expressly held that the plaintiff was not in privity with the lawyer's client. 2001 Ohio App. LEXIS 5018, at *7. The Ohio Supreme Court declined review. 94 Ohio St.3d 1488, 763 N.E.2d 1185 (2002).
The facts, as set forth in the complaint and accepted as true by the court, indicated that plaintiffs were interested in buying a lot in a subdivision with the intention of putting a prefabricated home on the lot. Prior to making the offer, they inquired of the subdivision's real estate agent (son of the owner-developer) whether a prefabricated house would pass muster under the subdivision's restrictive covenants. The son passed the question to his father, who in turn inquired of his lawyer, appellee John Kocher. Kocher, who had drafted the covenants, opined that such a home would not violate the pertinent restrictive covenant, and this advice was relayed to plaintiffs, who proceeded to buy the lot and put a prefab home on it. Of course, the prefab home was found to be in violation of the covenant (see Brooks v. Orshoski, 129 Ohio App.3d 386, 717 N.E.2d 1137 (Ottawa 1998)), and the instant case was filed against, among others, Kocher to recover the resulting economic damages.
As the appellate court stated, "the real issue here is whether appellants' tort claim of negligent misrepresentation against an attorney is a claim upon which relief can be granted," 2001 Ohio App. LEXIS 5018, at *7 -- as a consequence making the four-year statute of limitations, rather than the one-year malpractice statute, applicable. In concluding that such a claim is actionable, the court, in applying Restatement § 552, noted that a number of Ohio courts have invoked the section in the "business context, thereby eliminating any requirement of privity." Id. at *10. The court conceded that this rule has not been extended to attorneys, but noted that in no attorney case following the Scholler rule (no liability in the absence of privilege or malice) had the applicability of § 552 liability been raised. Agreeing with the lone dissent in Simon v. Zipperstein, 32 Ohio St.3d 74, 512 N.E.2d 636 (1987), to the effect that the "requirement of privity in a legal malpractice action should be put to a well-deserved burial," id. at 77-78, 512 N.E.2d at 639, and noting the limitations imposed by "[s]ection 552(a)" [sic 552(2)(a)], the court of appeals concluded that "the third party entitled to bring such a claim is thereby confined only to one directly affected by the attorney's misrepresentation and whose interest is identical to those of that attorney's client." 2001 Ohio App. LEXIS 5018, at *14 (bracketed material added).
While purporting to enumerate that the complaint had indeed alleged each of the prerequisites of a negligent misrepresentation claim, id., the court did not mention either the pecuniary interest requisite or its own "identical interest" test. As to the former, perhaps the seller's lawyer had an indirect pecuniary interest in the transaction; comment d to § 552 (3 Restatement (Second) of the Law of Torts § 552 cmt. d (1977)) would seem to indicate that this is sufficient. Nor did the court elaborate on its holding that a plaintiff's "interest [must be] identical to those of that attorney's client." (Ironically, it bears more than a passing likeness to the Scholler privity exception, which the Orshoski court was at pains to explain did not exist in the case before it.) The "identical interest" element is not found in § 552, and the court neither indicated its source nor explained how this requirement was satisfied by the allegations of the complaint. It is difficult to understand how the interest of the owner/developer (the client) in selling a lot in his subdivision could be "identical" to that of the potential buyer, particularly when, as noted above, the court had previously held that the potential buyer was not in privity with the owner/developer. Perhaps the court intended its "identical interest" test to mean identical merely with respect to the information conveyed - i.e., conveyed for the intended benefit of both the third party and the client, to facilitate the purchase and sale of the lot.
Compare Altier v. Valentic, 2004 Ohio 5641, 2004 Ohio App. LEXIS 5083 (Geauga), finding Orshoski inapposite because plaintiff did not assert that he relied on the attorney's representations, "nor does he claim that his interest is, in any way, identical to that of [the lawyer's] client . . . ." Id. at para. 35 (dismissal of negligent representation claim affirmed). Accord Brady v. Hickman & Lowder Co., LPA, 2004 Ohio 4745, 2004 Ohio App. LEXIS 4307 (Cuyahoga) (reliance on Orshoski "misplaced"; plaintiff could not establish "that her interests are identical to Hickman's clients" id. at para. 23 -- in fact, their interests were adversarial, not identical, id. at n.10).
While the analysis does not proceed along privity/no privity lines (indeed, Scholler v. Scholler is not even cited), the decision of the Ohio Supreme Court in Biddle v. Warren General Hospital, 86 Ohio St.3d 395, 715 N.E.2d 518 (1999), would appear to be a case in which liability of a law firm was left open, despite the absence of privity. Although the main thrust of the opinion dealt with the recognition of an independent tort for unauthorized disclosure of confidential medical information and the defendant hospital's potential liability thereunder, an ancillary holding in the case (a putative class action brought on behalf of the hospital's affected patients) was that a third party (here the hospital's law firm) that induces such conduct can also be held liable; the requisites for such third-party liability do not turn on the existence or absence of privity. See id. at 395, 715 N.E.2d at 519-20 (syllabus three). Summary judgment for both hospital and law firm was held to have been improperly granted, and the case was remanded for consideration of class-certification issues.
No Liability to Nonclient Based on Lack of Privity
Debtor and creditor: Noth v. Wynn, 59 Ohio App.3d 65, 571 N.E.2d 446 (Hamilton 1988) (an attorney who represented a lender in connection with a real-estate transaction was immune from liability to the purchasers for the alleged failure to disclose the title restrictions because the undisputed evidence showed that the client and the third party had a debtor-creditor relationship and were not in privity with each other).
Fraud: In the course of holding that fraud allegations against attorneys by nonclients were insufficient for failure to allege that the defendants committed the allegedly wrongful acts for their own personal gain, the court acknowledged the Scholler rule requiring privity or malice, but made no real analysis of whether either was present. DiPaolo v. DiVictor, 51 Ohio App.3d 166, 555 N.E.2d 969 (Franklin 1988).
Invasion of privacy: In a suit against the attorneys defending plaintiffs' former lawyers against a malpractice claim, plaintiffs (the Hahns) alleged that the defendant-attorneys (Satullo and his firm, Reminger & Reminger) disclosed private information contained in the Hahns' bank credit file. Assuming this to be so, the Tenth District Court of Appeals held that there could be no recovery under the Scholler rule because "at the time of the alleged disclosure, plaintiffs were not in privity with Satullo's clients, plaintiffs' former attorneys against whom plaintiffs brought suit." Hahn v. Satullo, 156 Ohio App.3d 412, 2004 Ohio 1057, 806 N.E.2d 567, at para. 65 (Franklin).
Malpractice; class action: Plaintiffs sued attorneys for malpractice for erroneously opining that a program was not a sale of securities under Ohio law. Plaintiffs did not register the program as a securities sale and sold the program to over 400 purchasers. A cease-and-desist order was issued by the Ohio Division of Securities. Plaintiffs sought class certification on behalf of the purchasers; the trial court denied certification. The court of appeals affirmed, holding that the class members could not maintain a malpractice action against defendants because the class members were not in privity with the plaintiffs. Columbus Consol. Agency, Inc. v. Wolfson, 70 Ohio App.3d 467, 591 N.E.2d 385 (Franklin 1990) (applying Scholler rule).
Malpractice; corporate directors: Inasmuch as on the facts presented there was no privity between corporate directors and the corporation, the attorneys for the corporation (but not for the directors) were not liable to the directors for failure to inform them of possibility of personal liability arising out of corporation's nonpayment of sales taxes. Hile v. Firmin, Sprague & Huffman Co., L.P.A., 71 Ohio App.3d 838, 595 N.E.2d 1023 (Hancock 1991) (Scholler applied).
Malpractice; divorce proceedings: Since an attorney who represents the wife in a matrimonial action does not automatically represent the interests of a minor child of the marriage, the wife cannot successfully maintain a malpractice action against the attorney on behalf of the child based on allegations that the attorney negligently negotiated and prepared the child-support provisions of a separation agreement. Scholler v. Scholler, 10 Ohio St.3d 98, 462 N.E.2d 158 (1984). In such a case, in the absence of allegations that the attorney acted maliciously, the child is not, as he must be, in privity with the attorney's client (the wife) because "it cannot be said that the interests of the wife in negotiating a separation agreement to achieve a fair division of marital assets are concurrent with the interests of the child to receive support." Id. at 104, 462 N.E.2d at 164. See Strauch v. Gross, 10 Ohio App.3d 303, 462 N.E.2d 433 (Franklin 1983) (attorney for plaintiff's former spouse in dissolution of marriage proceeding not liable to plaintiff for malpractice where the plaintiff was neither the attorney's client nor in privity with his client; no duty owing by attorney to plaintiff in such circumstances, whether the attorney's conduct was negligent or intentional). [Query whether intentional malicious conduct would require a different result; malicious conduct not discussed by the court. See "Liability to Nonclient Found or Supported Based on Malicious Conduct" infra. Plaintiff pleaded malicious conduct, but filed no affidavit or other evidence in opposition to the attorney's successful motion for summary judgment, which was affirmed on appeal.]
Malpractice; embezzlement by client: In American Express Travel Related Services Co. v. Mandilakis, 111 Ohio App.3d 160, 165, 675 N.E.2d 1279, 1282 (Cuyahoga 1996), the Eighth District Court of Appeals held: "Absent any evidence of privity between [the client] and American Express [or First Data, the plaintiffs here] or malice by [the client's attorney], we conclude that there is no basis to apply these exceptions to the general rule that attorneys are not liable to non-client third parties for legal malpractice." (bracketed material added). Former OH DR 7-102(B)(1), which placed a duty on an attorney to disclose a client's fraud to a defrauded third party (which duty with respect to fraud on any person was not adopted as part of Ohio Rule 3.3(b); see section 3.3:700), was held not to give rise to actionable civil liability to nonclient third parties, as opposed to disciplinary action, for its violation. Thus, the attorney could not be liable under a legal malpractice theory to companies from which the client embezzled funds, based on the lawyer's failure, once he learned of the embezzlement, to ask the client to stop the scheme or to notify the companies. The Mandilakis case is also discussed in sections 1.1:370 and 4.1:300.
Malpractice; estates and trusts: As noted above, ORC 1339.18 (now renumbered as ORC 5815.16) purports to eliminate any duty of a lawyer for a fiduciary (defined to include a trustee of an express trust and an executor or administrator of decedent's estate) to those to whom the fiduciary owes fiduciary obligations. As also noted above, however, this statute has thus far been ignored by the courts. This state of affairs requires that the pre-statute case law on privity in the estates and trusts context must still be consulted.
Pursuant to that case law, a distinction is drawn between situations in which the beneficiary's interest is vested and those in which it is not. Vested beneficiaries are viewed as being in privity with the fiduciary of the estate and hence can bring malpractice actions against the fiduciary's attorney. E.g., Elam v. Hyatt Legal Servs., 44 Ohio St.3d 175, 541 N.E.2d 616 (1989). Beneficiaries whose interests have not yet vested are not in privity and, in the absence of malice, cannot recover against the attorney in malpractice. See, e.g., Simon v. Zipperstein, 32 Ohio St.3d 74, 512 N.E.2d 636 (1987) (per curiam) (no privity with testator because potential beneficiary's interest not vested); Lewis v. Star Bank, N.A., 90 Ohio App.3d 709, 630 N.E.2d 418 (Butler 1993) (potential beneficiaries of revocable inter vivos trust are not in privity with settlor and therefore cannot sue settlor's attorney for malpractice in allegedly failing to provide certain estate-planning and tax advice prior to settlor's death; court, reconciling Simon and Elam, notes that Elam involved lawyer error made after death of testator, when plaintiff-beneficiary's rights were fully vested, whereas negligence in Simon occurred prior to testator's death). Likewise, in Smith v. Brooks, No. 76564, 2000 Ohio App. LEXIS 4167 (Cuyahoga Sept. 14, 2000) (summary judgment for defendant attorneys affirmed), the court held that appellant children and grandchildren were only potential beneficiaries when the alleged malpractice occurred – because testator's wife had complete control over the funds in testator's estate, "appellants had no entitlement to anything; thus, since their interest had not vested, they had no privity." Id.at *18. A similar result was reached in Dykes v. Gayton, 139 Ohio App.3d 395, 744 N.E.2d 199 (Franklin 2000), where the court of appeals affirmed a dismissal in a suit by intended beneficiaries under a will against the lawyer preparing the will, who neglected to obtain the statutorily required signature of one of the two attesting witnesses. As a result, the will was not admitted to probate. Citing Scholler and Simon v. Zipperstein (but not Elam) as controlling authority, the court concluded that the trial court was correct in holding that the failure to allege privity with the decedent was fatal. See also DiPaolo v. DiVictor, 51 Ohio App.3d 166, 555 N.E.2d 969 (Franklin 1988) (stating Scholler rule requiring nonclient plaintiffs to show privity or malice, but no analysis of whether either was present).
Against the backdrop of these decisions finding no privity, particularly Simon v. Zipperstein, the more recent, and important, decision in Shoemaker v. Gindlesberger, 118 Ohio St.3d 226, 2008 Ohio 2012, 887 N.E.2d 1167, must be considered. In Shoemaker, the defendant-lawyer, at the request of his client, effected a real estate transfer of a farm owned by the client to one of her sons. (The lawyer, Gindlesberger, also drafted her will and two codicils, apparently leaving the estate assets to her three children equally.) After the client, Mrs. Schlegel, died in 2003, the other two children found that estate assets would have to be sold to pay taxes on the transfer of the farm. They sued the lawyer for malpractice and alleged negligence in preparation of the document transferring the farm and in failing to advise their mother of the tax consequences.
The lower courts ruled for Gindlesberger because of the lack of any attorney-client relationship or privity between the beneficiaries and their mother. In the Supreme Court the beneficiaries argued that Simon should be overruled and that beneficiaries ought to be able to maintain an action for malpractice against the attorney, "even though the beneficiary is not in privity with the attorney's client." Id. at para. 7. The Supreme Court affirmed, with Chief Justice Moyer concurring, joined by two other justices.
The starting point in the Court's analysis was the Scholler rule, pursuant to which "attorneys in Ohio are not liable to a third party for the good faith representation of a client, unless the third party is in privity with the client for whom the legal services were performed." Id.para. 9. Citing the result in Simon, the Court said "[t]he same applies here -- the appellants were not in privity with their mother, the client, because they were only potential beneficiaries to her will and their rights as beneficiaries did not vest until her death." Id. at para. 10.
In making their assault on the privity rule, appellants advanced two public policy arguments -- first, that the "antiquated" Ohio privity rule is the minority rule; second, that "an attorney who drafts a will for a client is aware that his or her professional competence affects not only the cient but also those whom the client intends to benefit from the will." Id. at para. 13. The majority opinion counters with three public policy arguments of its own: the privity rule protects the attorney's duty of loyalty and effective advocacy for the client, without threat of third-party lawsuits that might compromise the representation; without the privity rule, attorneys could have conflicting duties and divided loyalties; and without it there would be "unlimited potential liability for the lawyer." Id.at paras. 14-15. (At this point the Court also invoked Rule 1.7 cmt.  to the effect that principles of loyalty and independent judgment underlie the conflict-of-interest rules; the Court reads this as "underscore[ing] the need to ensure that a lawyer is not liable to parties who are not in privity with the lawyer's client." Id. at para. 16.). For these reasons, "[w]e decline the appellant's invitation to relax our strict privity rule." Id. at para. 17. In the process, the majority noted that it is not necessarily so that the privity rule does not allow a remedy for a wrong and cited cases from other jurisdictions suggesting that the estate or personal representative might stand in the shoes of the testator. "This may well be a solution to the problem, but it is a question for another day." Id. [But query whether it was not a question presented in the case at bar, inasmuch as one of the appellants was the executor of the estate; perhaps appellants did not pursue this line of argument.] Almost as an afterthought, the majority notes the important fact that
[i]n this case, the basis for extending liability is even more tenuous because the increased tax liability to the estate arose from the transfer of the . . . farm, not from the decedent's will.
Id. at para. 19.
It is this final point that is at the core of Chief Justice Moyer's concurrence:
Under the [appellants'] proposed exception, an attorney could be liable to his client's beneficiaries for negligence in connection with a large and loosely defined group of transactions; the appellants do not present compelling reasons for creating such a broad exception to the privity rule. Nevertheless, I write separately to distinguish the exception proposed by the appellants in this case and the one considered in Simon v. Zipperstein (1987), 32 Ohio St.3d 74, 512 N.E.2d 636, to acknowledge that, in a case with different facts, there would be compelling reasons for adopting the exception we rejected in Zipperstein.
Id. at para. 23. After noting that there is no case authority anywhere supporting the broader exception advanced by appellants, that that rule provides no limitation on its scope, and that damage to the beneficiaries in such a case is less foreseeable than it is in a will-drafting case, the Chief Justice cites to courts in "many states" that have allowed beneficiaries to sue for mistakes in preparing a will. His principal ally, however, is Justice Brown, who argued in his dissent in Zipperstein that no real conflict of interest exists in such a situation. The Chief Justice agrees and quotes Justice Brown's language that makes the point forcefully – if the lawyer, whose job it is to draft a will that carries out the client's intentions, fails to do so, "‘with the result that an intended beneficiary receives less than the client desired, surely the client, if he or she were still alive, would want the intended beneficiary to bring an action against the attorney.'" Id. at para. 31 (emphasis in original). Chief Justice Moyer is also persuaded that there is a "strong need for attorney accountability in preparing wills" and that it serves no purpose to continue the strict privity rule for lawyers when it has been abrogated concerning the malpractice liability of other professionals, such as accountants and architects. Id. at para. 33. Given the Chief Justice's opinion, one might not want to bet the farm on the continued longevity of the holding in Simon v. Zipperstein.
Since deciding Shoemaker, the Supreme Court has "affirmed on the authority of Shoemaker" the case of Peleg v. Spitz, 2007 Ohio 6304, 2007 Ohio App. LEXIS 5534 (Cuyahoga), aff'd, 118 Ohio St.3d 446, 2008 Ohio 3176, 889 N.E.2d 1019. The Peleg decisions are interesting because, first, the court of appeals, after affirming summary judgment for the defendant attorneys on plaintiff's malpractice claim for want of privity, duly noted various other appellate decisions questioning the existing standing/privity rule with respect to potential beneficiaries seeking to sue a lawyer who had allegedly breached the duty of care in preparing a will. And, according to the Eighth District Court of Appeals, "[a] similar argument exits with respect to trusts." 2007 Ohio 6304, at para. 24 (the plaintiff in Peleg was a potential beneficiary under an irrevocable trust reserving to the settlor the power to change beneficiaries). Second, the Supreme Court affirmance was unanimous, thus indicating that Chief Justice Moyer's Shoemaker concurrence, which questioned the viability of the Simon no-privity rule in the will context, would not be extended to testamentary trusts, despite the court of appeals' suggestion that a "similar argument exists with respect to trusts."
It is also interesting that, if both the Moyer view were to prevail and ORC 1339.18 were to be recognized and enforced, then the law of Ohio would do an about-face on both fronts – malpractice suits by vested beneficiaries against lawyers for fiduciaries, permitted under Elam because privity was present, would be precluded by the statute, and suits by nonvested beneficiaries against lawyers for testators, precluded under Simon because privity was absent, would be permitted.
Another aspect of lawyer liability to nonclients in the trusts and estates area was treated in Hosfelt v. Miller, No. 97-JE-50, 2000 Ohio App. LEXIS 5506 (Jefferson Nov. 22, 2000). In Hosfelt, the defendant-attorneys were allegedly negligent in giving estate-planning advice to a widow and in the administration of the husband's estate, with the result that the widow's estate had to pay a substantial sum in federal estate taxes that could have been avoided. The suit, brought by the administrator of the widow's estate (not by her beneficiaries), was dismissed on summary judgment by the trial court on the ground that, pursuant to Simon v. Zipperstein, the beneficiaries were only potential beneficiaries and thus not in privity with the client (the widow) for whom the legal services were rendered. The appellate court reversed. Seeing the case in a completely different light, the Seventh District Court of Appeals agreed with appellant that this was an action by the legal representative of the widow's estate, not by the beneficiaries, to preserve estate assets, that the malpractice claim held by the widow survives her death, and that the legal representative is the proper party to bring such a claim.
See also the Firestone v. Galbreath litigation, which raised the question of lawyer liability for tortious interference with expectancy of inheritance. In an opinion reported at 976 F.2d 279 (6th Cir. 1992), the Sixth Circuit held that the malpractice claim failed for want of privity between the plaintiff beneficiaries of an inter vivos trust and the settlor (their grandmother) with respect to services performed by the grandmother's attorney before her death. The court of appeals disposed of all issues in the case save one -- whether Ohio recognized a cause of action for intentional interference with expectancy of inheritance, and, if so, who has the right to bring the action. The Sixth Circuit certified the issue to the Ohio Supreme Court, which ruled that the tort is recognized in Ohio and that "any person" who can prove the elements of the tort has the right to maintain the action. Firestone v. Galbreath, 67 Ohio St.3d 87, 88, 616 N.E.2d 202, 203 (1993). Based on the Supreme Court's certification decision, the Sixth Circuit reversed the district court's holding that there was no such tort in Ohio and remanded for factual development and disposition of the issue. Firestone v. Galbreath, 25 F.3d 323 (6th Cir. 1994). On remand, Judge Graham granted the attorney-defendant's motion for summary judgment and held that plaintiff provided no evidence creating a genuine issue of material fact as to any of the following essential elements of the tort: intentional interference, tortious conduct, or reasonable certainty of realization of the expectancy but for the conduct of defendants. Firestone v. Galbreath, 895 F. Supp. 917 (S.D. Ohio 1995).
Query whether Firestone renders irrelevant one of the two alternative requisites for nonclient suits against lawyers as set forth in Scholler – privity. The Ohio Supreme Court did not address (and was not asked) against whom the intentional interference tort might be asserted. Even if the plaintiff were in privity, however, it would not be dispositive for purposes of this tort; each of the five elements as set forth by the Supreme Court, 67 Ohio St.3d at 88, 616 N.E.2d at 203, would still have to be established. As the district court noted on remand, plaintiff at most alleged negligence or malpractice, neither of which is available to a nonclient in the absence of privity, and mere negligence or malpractice by the attorney is not enough to satisfy the tort at issue. 895 F. Supp. at 932. There must be intentional and tortious conduct, such as actual fraud, duress, or undue influence. These elements are akin to the other prong of the Scholler rule — that an attorney is not immune from suit by a third party if the attorney acted with malice.
Malpractice; claim by nonclient insurer: In Swiss Reinsurance Am. Corp. v. Roetzel & Andress, 163 Ohio App.3d 336, 2005 Ohio 4799, 837 N.E.2d 1215 (Summit), the defendant lawyers had been retained by the insurance company to defend a doctor in the underlying medical malpractice action. The doctor (together with the lawyer retained to defend him) disagreed with the insurer on whether the case should be settled or tried. After the retained lawyer was replaced, the insurer agreed to settle the case after two days of trial. The insurer then sued the lawyer for malpractice. The trial court granted summary judgment for the defendant lawyer and his firm; the court of appeals affirmed. After unsuccessfully arguing that it was a client of the lawyer, the insurance company further argued that it had standing to pursue the litigation because it was in privity with the doctor client. In holding that the insurance company was not in privity with the doctor, the Ninth District Court of Appeals stated the issue in terms of "whether the parties' interests are the same, such that representing the client is equivalent to representing the party alleging privity with the client." Id. at para. 27 (citing Scholler). Because the interests of the doctor and the insurance company diverged on the settlement issue - the doctor wanted the case settled within policy limits; the insurance company refused - there was no mutuality of interest and hence no privity.
Malpractice; lawyers for malpractice defendant: Plaintiff/appellant hired law firm Y to represent him in an underlying wrongful discharge/age discrimination case. Y missed the statute of limitations. Y's insurance carrier referred the potential malpractice claim against Y to law firm Z. Plaintiff sued Y for malpractice and, in an amended complaint, added Z as a malpractice defendant as well. The trial court granted summary judgment to Z, and the court of appeals affirmed. On the privity issue, the court held that there was no privity because plaintiff and the appellees (firm Z) "did not share a mutual interest. The interest of the attorney-client relationship between appellant and [Y] was to prosecute appellant's claims against K-Mart. The interest of the attorney-client relationship between [Y] and appellees [Z] was to protect [Y] against appellant's potential malpractice claim. Appellant did not share an interest in protecting [Y] from malpractice liability. Appellant's interest in retaining [Y] and the [Y] defendants' interest in retaining [Z] could not have been more diverse." McGuire v. Draper, Hollenbaugh & Briscoe Co., L.P.A., 2002 Ohio 6170, 2002 Ohio App. LEXIS 6003, at para. 63 (Highland).
Malpractice; merger transactions: Law firm represented surviving corporation in merger with a corporation set up by a parent corporation solely for the purpose of the merger, after which the surviving corporation became a wholly-owned subsidiary of the parent. All shares of the survivor were exchanged for $44 million in common stock of the parent. Although entitled to participate, certain redeemed shareholders of survivor had been overlooked by law firm. The overlooked shareholders sued the parent corporation and won, and the parent sued the law firm for malpractice. In reversing a jury verdict for the parent and entering judgment for the firm, the Eighth District Court of Appeals in Medpartners, Inc. v. Calfee, Halter & Griswold, L.L.P., 140 Ohio App.3d 612, 748 N.E.2d 604 (Cuyahoga 2000), held that, while the firm represented and owed a duty to the surviving corporation, it had no attorney-client relationship with the parent and thus could not be liable in malpractice. Nor was it liable to the parent as a nonclient third party, in the absence of allegations (or evidence) that the parent was in privity with the firm's client or that the law firm had acted maliciously.
Malpractice; transfer of stock in closely held corporation: See LeRoy v. Allen, Yurasek & Merklin, 114 Ohio St.3d 323, 2007 Ohio 3608, 872 N.E.2d 254, discussed at "Developments in Ohio subsequent to Elam and Arpadi," this section supra.
Negligent representation: Plaintiff's attempt to overcome lack of attorney-client relation with defendant lawyers by pleading that the lawyers' representation of their client (not the plaintiff) was negligent failed for, inter alia, lack of allegations of privity with the client, who was in a position adverse to plaintiff. The appellate court therefore affirmed the trial court's grant of defendants' motion for judgment on the pleadings. Brady v. Hickman & Lowder Co., L.P.A., 2003 Ohio 5649, 2003 Ohio App. LEXIS 5034 (Cuyahoga).
Specific performance: Lowe v. Eyler, 23 Ohio Misc.2d 11, 491 N.E.2d 405 (C.P. Clermont 1985) (complaint for specific performance by A and B against C and D and the attorneys for C and D; attorneys' motions to dismiss granted for, inter alia, want of privity).
Workers' compensation: An employer's attorney did not owe any duty to a workers' compensation claimant, and claimant was not in privity with employer so as to render the employer's attorney liable to the claimant with respect to the disallowance of the claimant's workers' compensation claim. Taylor v. Microdot, Inc., 79 Ohio App.3d 485, 607 N.E.2d 855 (Cuyahoga 1992).
Liability to Nonclient Found or Supported Based on Malicious Conduct
Abuse of process: The elements of abuse of process are: (1) a legal proceeding has been set in motion in proper form and with probable cause; (2) the proceeding has been perverted to attempt to accomplish an ulterior purpose for which it was not designed; and (3) direct damage resulted from the wrongful use of process. Yaklevich v. Kemp, Schaeffer & Rowe Co., L.P.A., 68 Ohio St.3d 294, 626 N.E.2d 115 (1994) (syllabus one). Yaklevich, the leading Ohio abuse-of-process decision, was a lawyer vs. law firm case. For a variety of reasons, we have concluded that Yaklevich and its progeny are more appropriately discussed in 1.1:510, rather than here. First, even though Yaklevich involved lawyer liability to a nonclient – the subject of the Scholler rule – Scholler is not even cited. Second, there is nothing in the rule set forth in the Yaklevich syllabus (or anywhere else in the body of the opinion) that even mentions "malice"; it is injected only by the plaintiff's complaint. Third, the Court's footnote 2 (quoting W. Page Keeton, et al., Prosser on Torts 898 (5th ed. 1984)), also suggests that malice is not an integral element of the tort. See 68 Ohio St.3d 298 n. 2, 626 N.E.2d at 118 n.2: "‘there is no liability [for abuse of process] where the defendant has done nothing more than carry out the process to its authorized conclusion, even though with bad intentions'" (bracketed material and emphasis added). Perhaps a case can be made that malice is implicit in the second Yaklevich element – perverting the proceeding to accomplish an ulterior purpose – and one Ohio federal case has read the law in a manner consistent with this analysis. See Luciani v. Schiavone, C-1-97-272, 2001 U.S. Dist. LEXIS 25918 (S.D. Ohio Jan. 2, 2001), where, after defendants injected Scholler immunity as a defense, the court found that under Zipperstein bad faith is tantamount to malice and that, inasmuch as a lawyer seeking to obtain relief from a court powerless to grant it is acting in bad faith, defendants were not entitled to summary judgment because plaintiffs may establish that the lawyer-defendants acted maliciously "when they perverted the Ohio proceeding by seeking relief that the Ohio court could not grant." Id. at *19. Nevertheless, we believe this tort, as invoked against lawyers, is more appropriately discussed in section 1.1:520 infra.
Conversion: The Scholler immunity rule was held not to apply in a case in which the nonclient sued lawyers for an estate; the complaint alleged that they participated in a wrongful taking of property belonging to the plaintiff, the deceased's widow. Carrocia v. Carrocia, 21 Ohio App.3d 244, 486 N.E.2d 1263 (Cuyahoga 1985). Reversing the trial court's grant of summary judgment based on the one-year malpractice statute of limitations, the court of appeals held that the four-year statute for conversion (ORC 2305.09) applied and remanded for further proceedings. In the court's view, the complaint sufficiently alleged malice or bad faith to take the case out of the general rule of lawyer immunity to third persons established in Scholler.
Compare Moffitt v. Litteral, 2002 Ohio 4973, 2002 Ohio App. LEXIS 5000 (Montgomery), where the court affirmed summary judgment for the defendant lawyer on plaintiff's conversion claim because, under Scholler, the lawyer was not in privity with the plaintiff and acted, not with malice, but on the basis of his good-faith belief, even though that belief turned out to be erroneous.
Libel and slander - Qualified privilege: Lawsuits against lawyers for defamation typically fall into two categories — those in which the lawyer may have a qualified privilege to publish the matter in question and those in which the lawyer may be absolutely privileged to do so. See Bigelow v. Brumley, 138 Ohio St. 574, 37 N.E.2d 584 (1941), for a comparison of the two privileges and an extensive discussion of absolute privilege. As is more fully set forth in section 1.3:390 supra, absent malice, the qualified privilege protects the speaker from liability for statements made in good faith in the discharge of a public or private duty or in the conduct of her own affairs in matters where her interest is concerned, with publication to appropriate persons only, e.g., Gruenspan v. Seitz, 124 Ohio App.3d 197, 705 N.E.2d 1255 (Cuyahoga 1997), whereas the absolute privilege protects the speaker in four traditional categories: (1) statements made in legislative and (2) judicial proceedings, (3) official acts of executive officers of a state or nation, and (4) acts done in the exercise of military authority.
In the former instance, qualified privilege, the rule fits within the Scholler mold -- the privilege applies to statements made by a lawyer in furtherance of the client's, the lawyer's, or the public's interests and the lawyer cannot be held liable to nonclients unless the statement was made with actual malice, that is, with knowledge of its falsity or with reckless disregard of its truth or falsity. See A&B-Abell v. Columbus/Central Ohio Bldg. & Constr. Trades Council, 73 Ohio St.3d 1, 651 N.E.2d 1283 (1995) (nonlawyer defendant). There were two Ohio qualified privilege cases found involving lawyers as defendants. In the first, Michaels v. Berliner, 119 Ohio App.3d 82, 694 N.E.2d 519 (Summit 1997), the court reversed a grant of summary judgment for the defendant attorneys because plaintiff, also an attorney, had brought forth evidence showing that a genuine issue of fact existed regarding the presence of actual malice. See id. at 90-92, 694 N.E.2d at 524-25. The second case, Krakora v. Gold, No. 98 CA 141, 1999 Ohio App. LEXIS 4699 (Mahoning Sept. 28, 1999), is discussed in this section infra under the heading "No Liability to Nonclient Based on Absence of Malicious Conduct" and in section 1.1:510.
The latter instance, absolute privilege for lawyer statements made in a judicial proceeding, applies a special rule not covered by Scholler; see discussion this section infra under the heading "No Liability to Nonclient even if Conduct Is Malicious." A comprehensive review of the lawyer's absolute privilege is set forth in section 1.1:510.
Malicious prosecution: In a decision the dissent termed a "judicial aberration," the Ohio Supreme Court in Border City Savings & Loan Ass'n v. Moan, 15 Ohio St.3d 65, 472 N.E.2d 350 (1984) (per curiam), reversed the ruling of the two lower courts sustaining defendant attorneys' OH Civ R 12(B)(6) motions to dismiss for failure to state a malicious prosecution claim upon which relief could be granted. Relying heavily on its then-recent decision in Scholler v. Scholler, 10 Ohio St. 98, 462 N.E.2d 158 (1984) (decided after both courts below had ruled), the majority concluded that the complaint was sufficient to withstand the motions to dismiss:
Scholler establishes that an attorney may be liable to third persons if the attorney acts maliciously. Further, appellant's complaint does allege intentionally inflicted harm as a result of the numerous lawsuits commenced by appellees. It will be incumbent upon appellant to establish that these lawsuits were instituted maliciously, without probable cause, and, as a general rule, were terminated in appellant's favor. Nonetheless, it does not render appellant's complaint fatally defective and subject to dismissal that each element of this cause of action was not set forth in the complaint with crystalline specificity.
Id. at 66, 472 N.E.2d at 352 (citing to OH Civ R 8(A)(1), requiring only "a short and plain statement of the claim that the pleader is entitled to relief"). In a persuasive dissent, two justices argued that the complaint did not state an actionable claim for malicious prosecution and therefore had been properly dismissed. The dissenting justices noted that the allegations of the complaint satisfied only the first of the four elements of a malicious prosecution claim --  malicious institution of the prior claim -- "and do not allege or even give rise to an inference that the remaining three essential, designated elements exist, namely  lack of probable cause,  termination of the prior proceedings in [the malicious prosecution] plaintiff's favor, and  seizure of the person or property of [the malicious prosecution] plaintiff." 15 Ohio St.3d at 68, 472 N.E.2d at 352-53 (bracketed material added). The dissenters thought Scholler irrelevant, since it was not a malicious prosecution case. In three subsequent decisions, two of which did not involve lawyers as parties, the Supreme Court reconfirmed that all four factors, including the controversial seizure-of-plaintiff's-person-or-property requisite, are "essential elements [that] must be alleged by the plaintiff" in an action for malicious civil prosecution in Ohio. Robb v. Chagrin Lagoons Yacht Club, Inc., 75 Ohio St.3d 264, 264, 662 N.E.2d 9, 10 (1996) (syllabus); accord Crawford v. Euclid Nat'l Bank, 19 Ohio St.3d 135, 139, 483 N.E.2d 1168, 1171 (1985). The third decision, Kelly v. Whiting, 17 Ohio St.3d 91, 477 N.E.2d 1123 (1985), a lawyer case decided after Border City, did not turn on the presence or absence of malice; it is discussed in section 3.1:400. It should also be noted that in another case not involving lawyers as parties, the Ohio Supreme Court established that the seizure of person or property is not a necessary element of the tort of malicious criminal prosecution. Trussell v. Gen. Motors Corp., 53 Ohio St.3d 142, 559 N.E.2d 732 (1990).
In addition to Border City, a number of court of appeals cases involving lawyers find or support liability based on malicious conduct. Unlike Border City, however, these decisions have consistently applied the four-part test. E.g., Dever v. Lucas, 174 Ohio App.3d 725, 2008 Ohio 332, 884 N.E.2d 641 (each element sufficiently alleged; 12(B)(6) dismissal reversed); Shore, Shirley & Co. v. Kelley, 40 Ohio App.3d 10, 531 N.E.2d 333 (Cuyahoga 1988) (upholding jury verdict against defendant attorney; $ 15,000,000 counterclaim, filed by attorney with malice and without probable cause in prior action and dismissed therein, caused cancellation of claimant accounting firm's malpractice insurance and other damages). Accord Butts v. Bjelovuk, 129 Ohio App.3d 134, 717 N.E.2d 381 (Cuyahoga 1998) (summary judgment for defendant attorney reversed; court found that conflicting evidence created genuine issue of material fact as to defendant's malice and lack of probable cause in bringing eviction action against plaintiff and that plaintiff had satisfied the other two elements of the tort (termination of prior action in her favor and seizure of her property through garnishment of her bank account)); Cipriani v. Stephanoff, No. 56250, 1990 Ohio App. LEXIS 114 (Cuyahoga Jan. 11, 1990) (summary judgment for defendant attorney reversed; question of fact whether attorney acted in good faith or maliciously in having Cipriani's driver's license improperly suspended in attempt to enforce prior judgment in favor of her client); Petrey v. Simon, 19 Ohio App.3d 285, 484 N.E.2d 257 (Hamilton 1984) (summary judgment for defendant attorney reversed; seizure of property prong satisfied as a result of wrongful attachment of wages in action as to which plaintiff had no notice or opportunity to defend; genuine issue of fact existed as to malice and good faith factors; Scholler applied). See Pollack v. Kanter, 68 Ohio App.3d 673, 589 N.E.2d 443 (Cuyahoga 1990) (malicious criminal prosecution case decided one month before Trussell came down; reversing OH Civ R 12(B)(6) dismissal of complaint alleging that defendant lawyers forwarded to prosecutors letter written by plaintiff lawyer, as a result of which plaintiff was arrested and indicted for extortion, which indictment was later nolled; allegations that indictment secured by perjured testimony sufficient to infer malice and lack of probable cause).
Finally, one should be aware that the Ohio Supreme Court in Yaklevich v. Kemp, Schaeffer & Rowe Co., L.P.A., 68 Ohio St.3d 294, 626 N.E.2d 115 (1994), an abuse of process case, also discussed the tort of malicious prosecution. Malicious prosecution is further discussed in section 1.1:520.
Malpractice: LeRoy v. Allen Yurasek & Merklin, 162 Ohio App.3d 155, 2005 Ohio 4452, 832 N.E.2d 1246 (Union) (reversal of grant of motion to dismiss in favor of defendant lawyers; allegation of collusion sufficient under malice exception permitting suits against nonclients). In affirming on this point, 114 Ohio St.3d 323, 2007 Ohio 3608, 872 N.E.2d 254, the Supreme Court expressly approved the appellate court's application of the rule of Simon v. Zipperstein, 32 Ohio St.3d 74, 76-77, 512 N.E.2d 636, 638 (1987), given the presence in the LeRoy complaint of the "‘special circumstances such as fraud, bad faith, collusion, or other malicious conduct which would justify departure from the general rule.'" 114 Ohio St.3d 323, at paras. 32-33 (quoting Simon).
Various state-law tort claims: In Vector Research, Inc. v. Howard & Howard Attorneys, P.C., 76 F.3d 692 (6th Cir. 1996), plaintiffs sued a competitor and the competitor's attorneys for actions taken in connection with a search and seizure issued in the competitor's copyright action against plaintiffs in the case at bar. The corporate plaintiff sued for trespass, conversion, abuse of process, and malicious use of civil process. The individual plaintiffs, employees of Vector, sued for invasion of privacy, abuse of process, and malicious use of civil process. The trial court granted the attorneys' motion to dismiss for failure to state a claim on which relief could be granted. Reversing, the Sixth Circuit held that while under Ohio law attorneys generally enjoy immunity from liability to third persons for acts performed in good faith and with the knowledge of their clients, there is no immunity where the attorneys acted maliciously (citing Scholler). The court found that malice had been sufficiently alleged to survive a motion to dismiss.
No Liability to Nonclient Based on Absence of Malicious Conduct
Abuse of process: The abuse-of-process cases are discussed in section 1.1:520.
Interference with business relationship: In Altier v. Valentic, 2004 Ohio 5641, 2004 Ohio App. LEXIS 5083 (Geauga), the court affirmed summary judgment for defendant/lawyer on plaintiff's interference-with-business claim, because qualified privilege was applicable and there was no showing that the communications at issue were made with actual malice.
Interference with parental relationship and fraud: Sprouse v. Eisenman, 2005 Ohio 463, 2005 Ohio App. LEXIS 487 (Franklin) (no malice where attorney, allegedly falsely and misleadingly, had in good faith told plaintiffs (the birth father and his family) that her clients (the birth mother and her family) were still considering parenting options shortly before the birth mother put the baby out for adoption).
Invasion of privacy: In a suit against the attorneys defending plaintiffs' former lawyers against a malpractice claim, plaintiffs alleged that the attorneys disclosed private information contained in plaintiffs' bank credit file. Assuming this to be so, the Tenth District Court of Appeals held that there could be no recovery under the Scholler rule because "plaintiffs failed to show malice to prevent application of qualified immunity as a bar to plaintiffs' invasion of privacy claim." Hahn v. Satullo, 156 Ohio App.3d 412, 2004 Ohio 1057, 806 N.E.2d 567, at para. 62 (Franklin).
Libel and slander - Qualified privilege: As noted above, there are two Ohio defamation/qualified privilege cases involving lawyers as defendants. The first, Michaels v. Berliner, is discussed supra in this section under the heading "Liability to Nonclient Found or Supported Based on Malicious Conduct." The second is Krakora v. Gold, No. 98 CA 141, 1999 Ohio App. LEXIS 4699 (Mahoning Sept. 28, 1999) (pre-litigation letter from counsel to opposing counsel found not to have been made with malice and therefore protected by qualified privilege). See also Gruenspan v. Seitz, 124 Ohio App.3d 197, 705 N.E.2d 1255 (Cuyahoga 1997), a defamation action, where the court found a qualified privilege existed for statements made in a medical malpractice action by a doctor/expert witness to the judge (who did not hear the case; it was transferred to a visiting judge for trial) about a lawyer who was the plaintiff in the defamation action against the doctor and had been plaintiff's attorney in the underlying medical malpractice action. Accord Gugliotta v. Morano, 161 Ohio App.3d 152, 2005 Ohio 2570, 829 N.E.2d 757 (qualified privilege protected statements to Better Business Bureau by former client about lawyer/plaintiff).
Malicious prosecution: Where the evidence clearly discloses that the prior actions (one civil, one criminal) filed by defendant attorneys against plaintiff were instituted in good faith and without malice, there is no liability for malicious civil or criminal prosecution. Woyczynski v. Wolf, 11 Ohio App.3d 226, 464 N.E.2d 612 (Cuyahoga 1983) (summary judgment for attorneys affirmed). (Woyczynski was disapproved by the Ohio Supreme Court in Trussell v. General Motors Corp., 53 Ohio St.3d 142, 559 N.E.2d 732 (1990), insofar as it implied that seizure of person or property is an element of malicious criminal prosecution. Id. at 146, 559 N.E.2d at 736.) Accord Tilberry v. McIntyre, 135 Ohio App.3d 229, 733 N.E.2d 636 (Cuyahoga 1999) (defendant attorneys had good faith basis to seek sanctions in the underlying federal action, even though sanctions award subsequently reversed; summary judgment for attorney defendants affirmed). (Although the granting of a motion to dismiss by defendant lawyers was affirmed in Kelly v. Whiting, 17 Ohio St.3d 91, 477 N.E.2d 1123 (1985), the affirmance was premised on the absence of the third and fourth elements of the tort -- successful termination of prior proceeding and seizure of plaintiff's person or property; the malice element was not a factor in the decision.) Malicious prosecution is further discussed at sections 1.1:520 and 3.1:400.
Malpractice: The court in Medpartners, Inc. v. Calfee, Halter & Griswold, L.L.P., 140 Ohio App.3d 612, 748 N.E.2d 604 (Cuyahoga 2000), reversed a jury verdict for plaintiff where there was no allegation (or evidence) that the firm had acted maliciously. See further discussion of the case this section supra at "No Liability to Nonclient Based on Lack of Privity."
The court likewise found an absence of malice in affirming summary judgment for defendant law firm in McGuire v. Draper, Hollenbaugh & Briscoe Co., L.P.A., 2002 Ohio 6170, 2002 Ohio App. LEXIS 6003 (Highland). In so holding, the court found no evidence of conduct exhibiting "hatred, ill will, or a spirit of revenge." Id. at para. 66. The court further rejected appellant's argument that violation of ethical rules - assuming such occurred - demonstrates malice. See further discussion this section supra at "No Liability to Nonclient Based on Lack of Privity."
Negligent misrepresentation: Plaintiff's effort to avoid the consequences of having no attorney-client relationship with defendant lawyers was unavailing because such a claim requires either privity with the lawyers' client or malice by the lawyers. In addition to failing the privity test, plaintiff's complaint did not allege that the lawyers acted maliciously. The trial court's grant of defendants' motion for judgment on the pleadings, pursuant to OH Civ R 12(C), was affirmed. Brady v. Hickman & Lowder Co., L.P.A., 2003 Ohio 5649, 2003 Ohio App. LEXIS 5034 (Cuyahoga).
Specific performance: In Lowe v. Eyler, 23 Ohio Misc.2d 11, 491 N.E.2d 405 (C.P. Clermont 1985), the plaintiffs sought specific performance of a real estate contract and named as defendants both the sellers and their attorneys. On motions to dismiss by the attorneys, the court granted the motions and held, inter alia, that the complaint failed to state a claim upon which relief could be granted against the attorney defendants "insofar as the complaint fails to allege that either attorney acted maliciously." Id. at 12, 491 N.E.2d at 407.
Workers' compensation: An attorney for an employer was not liable to a workers' compensation claimant who was not in privity with the employer, with respect to the disallowance of the claimant's workers' compensation claim, absent any evidence of malicious conduct by the attorney. Taylor v. Microdot, Inc., 79 Ohio App.3d 485, 607 N.E.2d 855 (Cuyahoga 1992).
No Liability to Nonclient even if Conduct Is Malicious
Libel and slander - Absolute privilege: One area that does not fit the Scholler rule of lawyer liability to a nonclient for malicious conduct is the absolute privilege defense afforded by the law of defamation to otherwise libelous or slanderous statements. Pursuant thereto, an attorney in a judicial proceeding is immune from liability to both parties and nonparties so long as the statement in question bears some reasonable relation to the proceeding, irrespective of whether the lawyer acted with actual malice.
A full discussion of the absolute privilege as it applies to lawyers is found at section 1.1:510.
Rule 11 violation: This is another example of deviation from the usual outcome under the Scholler formula for determining whether an attorney may be liable to nonclients. The court in Bales v. Hack, 31 Ohio App.3d 111, 509 N.E.2d 95 (Clark 1986), rejected the husband's argument for liability premised on the wife's attorney's alleged violation of OH Civ R 11 in filing groundless counterclaim allegations in the underlying divorce action. The court concluded that, while an OH Civ R 11 violation might subject the attorney to disciplinary action, it does not "bestow upon the wounded party a civil action for damages." 31 Ohio App.3d at 114, 509 N.E.2d at 99 (citing and following Border City Sav. & Loan Ass'n v. Moan, 15 Ohio St.3d 65, 67 n.1, 472 N.E.2d 350, 352 n.1 (1984), which held that the language of OH Civ R 11 "does not provide the basis for a civil action against the attorney who violates this rule."). Accord Goff v. Ameritrust Co., Nos. 65196, 66016, 1994 Ohio App. LEXIS 1916 (Cuyahoga May 5, 1994); Mitchell v. Whitaker, 33 Ohio App.3d 170, 514 N.E.2d 937 (Cuyahoga 1986); see Gordon Food Serv., Inc., 76 Ohio App.3d 105, 601 N.E.2d 131 (Lucas 1991). Note that, unlike the usual outcome under Scholler, this result would follow even if the attorney acted maliciously. The Bales allegations, which were dismissed for failure to state a claim upon which relief can be granted, were that homosexuality as a ground for divorce had been included in the counterclaim for the sole purpose of damaging the husband. Nor in Border City did allegations of malicious institution of suit deter the Court from rejecting the attempt to ground a civil action on violation of OH Civ R 11. See further discussion of attempting to ground a civil action on violation of OH Civ R 11 at the end of section 3.1:400.
Ohio Rule 1.2(d) states that "[a] lawyer shall not counsel a client to engage, or assist a client, in conduct the lawyer knows is illegal or fraudulent." See section 1.2:600. If the client insists that the lawyer engage in such conduct, the lawyer must withdraw. Ohio Rule 1.16(a)(1). See section 1.16:230. If the client "persists in a course of action involving the lawyer's services that the lawyer [does not know but] reasonably believes is illegal or fraudulent," the lawyer may withdraw. Ohio Rule 1.16(b)(2). See section 1.16:320. The lawyer is also obligated to disclose facts (including information protected by Rule 1.6) where necessary to avoid assisting a client's illegal or fraudulent conduct. Ohio Rule 4.1(b). See section 4.1:300.
In Arpadi v. First MSP Corp., 68 Ohio St.3d 453, 628 N.E.2d 1335 (1994), the Supreme Court reversed the lower courts' grant and affirmance of summary judgment in favor of the defendants, an attorney and his law firm who represented a limited partnership and its general partner, in a malpractice action brought against them by the limited partners. One of the bases underlying the Court's holding — that the duty of due care owed by attorneys in providing legal services to the limited partnership and it general partner extends to the limited partners as well — was that the general partner was a fiduciary with respect to its dealings with the limited partners.
The limited partnership was formed to acquire and develop an apartment complex and to convert the apartments for resale as condominium units. Prior to investing, the limited partners received a private placement memorandum ("PPM"), which solicited investments in the partnership venture. One of the inducements in the PPM was a formula for releasing individual apartments from the mortgage liens, in order to permit the sale and transfer of the units. After the limited partners invested, Jankel (the general counsel, president and director of the general partner) and the outside attorney attempted to have the release provisions incorporated into the purchase agreements. The mortgagees, however, refused to agree. The subsequent purchase agreement omitted any reference to the release provisions, and this omission was not disclosed to any of the limited partners. The limited partners contended that the absence of the release provisions caused the project to fail and become bankrupt. The Court specifically noted that the drafting of the purchase agreement was done by the general partner's attorney "with the approval of Jankel," the general partner's principal. 68 Ohio St.3d at 456, 628 N.E.2d at 1337. The case was remanded for disposition of the issues of breach of duty, causation, and damages.
See further discussion of Arpadi this section supra at "Liability to Nonclient Found or Supported Based on Privity."
There appear to be no Ohio cases on point.