TBJ February 2022
When is an attorney liable to a non-client?
Written by Jason Fulton
Lawyers must zealously represent their clients. No lawyer is surprised when his representation provokes an opposing party’s ire. Such actions can include filing lawsuits accusing opposing parties of scurrilous business practices or revealing embarrassing personal details. When do actions in service of a client’s interests cross the line leading to civil liability to a non-client?
Enter attorney immunity, which protects attorneys from civil liability to a non-client for actions taken in representation of one’s client. Over the past six years, the Texas Supreme Court has methodically refined the attorney immunity defense and clarified when an attorney can be held civilly liable to a non-client.
Under settled law, attorneys do not owe a professional duty of care to third parties who are damaged by a lawyer’s negligent representation of a client.1 The attorney immunity defense, a separate and more comprehensive defense, bars claims by third parties to ensure attorneys can engage in “loyal, faithful, and aggressive representation by attorneys employed as advocates.”2 Attorney immunity immunizes lawyers from civil liability “for actions taken in connection with representing a client in litigation.”3
No Fraud Exception to Attorney Immunity
Beginning in 2015 with Cantey Hanger v. Byrd, the Supreme Court issued a series of opinions blocking attempts to find exceptions to attorney immunity.4 In Cantey Hanger, a husband in a divorce action sued opposing counsel for fraud in connection with the opposing counsel’s preparation of documents to transfer an airplane awarded to his ex-wife in the divorce. The husband alleged opposing counsel conspired with his ex-wife to prepare fraudulent documents transferring an airplane to the wife from a company awarded to and solely controlled by the husband. The wife’s lawyers drafted the documents to be signed by the wife on behalf of the company even though she had no authority to sign for the company. The husband alleged that conspiring with a client to falsify documents and evade taxes was not part of the attorney’s duties in representing his client.
Under an attorney immunity framework, the court emphasized two limitations: First, attorney immunity offers no protection when the lawyer’s actions are outside “the kind of conduct in which an attorney engages when discharging his duties to his client.”5 As examples, the court cited cases holding attorneys liable for participating in fraudulent business schemes with clients, assisting clients in evading judgments through fraudulent transfers, or physically assaulting opposing counsel. Second, attorney immunity does not deprive courts of other powers to discourage litigation misconduct including sanctions, contempt, and attorney disciplinary proceedings.6
Cantey Hanger clarified prior decisions by holding that there was no general fraud exception to attorney immunity. Merely labeling conduct as “fraudulent” does not remove it from the scope of a lawyer’s duties to a client. Instead, the attorney’s burden in asserting the defense is to show that the alleged wrongful conduct is part of the discharge of duties to the client.7 The Supreme Court then held for the law firm, finding preparation of transfer documents was conduct within Cantey Hanger’s representation.
No Exception for Settlement Conduct
In 2018, in Youngkin v. Hines, the Supreme Court declined to carve out an exception to attorney immunity for settlement conduct.8 Attorney immunity barred a claim by a non-client that opposing counsel fraudulently negotiated a settlement knowing his clients did not intend to comply. As with Cantey Hanger, the conduct at issue was the type of conduct taken by attorneys and took place within a litigation context.
No Exception for Criminal Conduct
In 2020, in Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C., the Texas Supreme Court declined to carve out an exception to attorney immunity for allegations that opposing counsel engaged in “criminal conduct during the course of litigation.”9 The non-client claimed opposing counsel intentionally destroyed key evidence of her claims: truck brakes. The Supreme Court found that to allow evasion of the defense by labeling conduct as criminal would “significantly undercut” the protection.10 The court recognized that unrelated criminal conduct or intentional destruction of evidence would remain actionable. But the testing protocol the lawyer used to test the truck brakes were “paradigmatic functions of an attorney representing a client in litigation.”11 Since attorney immunity focuses on the “type of conduct, not whether that conduct was wrongful” attorney immunity shielded the lawyers from suit.12
Attorney Immunity Extends to Transactional Work
In 2021, in Haynes & Boone LLP v. NFTD, LLC, the Supreme Court provided a long-awaited holding beyond litigation and held that attorney immunity extended to “all adversarial contexts in which an attorney has a duty to zealously and loyally represent a client, including a business-transactional context.”13
Haynes & Boone performed legal services for a shoe company. When the company owners wanted to sell, Haynes & Boone prepared a business profile for prospective buyers that made false statements about the high value of the client entity’s intellectual property. The attorney knew his client had recently filed suit against its patent lawyers for rendering the patents worthless by missing deadlines. The buyers relied on the business profile and were never informed of problems with the patents. Ultimately, the buyer that relied on Haynes & Boone’s fraudulent profile asserted tort claims against the seller and Haynes & Boone. The 14th Court of Appeals in Houston held that attorney immunity did not extend to a business transaction.
The Supreme Court traced the long history of attorney immunity, recognizing exceptions in other jurisdictions arose out of third-party beneficiary theory, foreseeability, or the reasonableness of third-party reliance.14 In Texas, the court had established a “bright-line privity rule which denies a cause of action to all beneficiaries whom the attorney did not represent.”15 But the court acknowledged it had blurred those lines in McCamish, Martin, Brown & Loeffler v. F.E. Appling Ints.16 In McCamish, the court held that non-clients could sue a lawyer for negligent misrepresentation in some non-litigation circumstances, including, for example “drafting warranty deeds, title certificates, offering statements and memoranda, and annual reports.”17 Attorney liability was appropriate notwithstanding the lack of privity where a lawyer was manifestly aware and intended that the non-client rely on the lawyer’s representation.18 But non-client reliance was not justifiable when the attorney’s conduct occurred in an adversarial context.19
The court concluded that attorney immunity barred non-client claims “when the claim is based on conduct that (1) constitutes the provision of “legal” services involving the unique office, professional skill, training, and authority of an attorney and (2) the attorney engages in to fulfill the attorney’s duties in representing the client within an adversarial context in which the client and the non-client do not share the same interests and therefore the non-client’s reliance on the attorney’s conduct is not justifiable.”20 This test protected covered conduct outside of litigation.21 Although business transactions lack the safeguards of court sanctions and contempt, the court found that non-clients would likely sue the business counterparty, who could, in turn, sue their attorney for indemnification for damages caused by the attorney’s conduct.22
The Limits of Attorney Immunity
The same day it decided Haynes & Boone LLP v. NFTD, LLC, the Supreme Court also decided Landry’s, Inc. v. Animal Legal Defense Fund, rejecting the application of attorney immunity.23 In that case, a radio station owner interviewed Landry’s, who owned the Houston Aquarium, about the white tigers kept there. The radio station then informed Animal Legal Defense Fund, an animal rights law firm, that the aquarium’s white tigers were mistreated. ALDF, in conjunction with another law firm, prepared a notice of suit against Landry’s for mistreating the tigers. ALDF simultaneously disseminated press releases and social media posts publicizing the notice letter and its allegations. But before ALDF could file suit, Landry’s sued ALDF and the law firm for defamation and other claims.
The Supreme Court held attorney immunity did not protect the lawyers’ actions from a defamation claim. Citing heavily to its decision in Cantey Hanger, and as also articulated in Haynes & Boone LLP v. NFTD, LLC, the court held that the notice letter itself was protected because it involved “the office, professional training, skill, and authority of an attorney.”24 But the court held that anyone, including non-lawyers such as press agents, could publicize allegations to the media via press releases and social media. There was nothing “particular to ‘the office, professional training, skill, and authority of an attorney’ about sending out press releases or disseminating potentially defamatory allegations through the media.”25 Therefore, those actions, even if practiced by an attorney on behalf of a client, remained actionable.26 That lawyers often engage in publicizing allegations or that publicity would further a representation was irrelevant. “Some conduct by attorneys remains actionable ‘even if done on behalf of a client.’”27 Publicizing the allegations was “not the actions of lawyers acting in the lawyerly capacity to which immunity attaches.”28 The court reversed in part and remanded the case to the court of appeals.
The Supreme Court’s decisions expanded attorney immunity to all adversarial encounters provided the actions in question are clearly legal services. TBJ
JASON FULTON is a partner in the Dallas office of Diamond McCarthy where he handles commercial litigation with a focus on complex financial transactions and claims involving legal, accounting, and other professionals.