When does malpractice liability occur within Arizona’s estate law?

This article continues our discussion of liability zones within Arizona’s Estate and Probate law. We will eventually cover the main zones of liability: (A) Malpractice, (B) Ethical Duty Violations, and (C) Breaching Of Fiduciary Duties.

Here, we discuss the liability of Attorney Malpractice within Arizona Estate Law.

Attorneys risk malpractice liability when they do not follow the statutory scheme of estate law.  One example is meeting the requirements of executing a valid Will, such as having enough valid witnesses and properly signed by testator.^[1]  In addition, there are many issues of Will drafting. Like whether the document effectively conveys the testator’s intent^[2] or the challenge of drafting specific clauses, like penalty clauses, and many other questionable practices.^[3]

(A) Attorney Malpractice within Arizona’s Estate and Probate Law

This section first lays out the elements of a malpractice claim.  Next, and following the order of proving a malpractice claim within this regime, is the issue of privity.  The last part of this section covers specific errors that lead to falling below the standard of care and open the door to a legal malpractice claim against estate planning attorneys.

To sue for malpractice in Arizona courts, a plaintiff must show “(1) the attorney’s duty of reasonable care to the complainant, (2) the attorney’s failure to meet the standard of care,  (3) that complainant’s injury was caused by the attorney’s failure to exercise due care and (4) actual losses suffered.”^[4]  The court decides whether the attorney owes a duty to the foreseeable plaintiff as a matter of law,^[5] while the jury decides the remaining three elements as matters of fact.^[6]

(1) Elements of Attorney Malpractice for Arizona’s Estate Liability Claims

Here, we’re going to deal with attorney malpractice more broadly, as opposed to getting into each element. First, let’s make a few introductory remarks.

Estate Planning Attorney Malpractice as Deterrent and Remedy for Cost Sharing

The attorney in the Strobel case was saved from malpractice when the court applied equity to cure a mistake.^[7] In that case, the attorney appealed and asked the court to apply equity and give effect to a defective instrument.^[8]  Legal malpractice liability motived the lawyer to spend the expense of asking the court to fix his mistake, showing the court’s equity, but also showing how legal malpractice is also a tool that motivates attorneys to use caution and to spend their own resources to fix a mistake, effectively sharing in the costs.

Before discussing the specific acts of how attorney negligence injures plaintiffs in the estate context, it is important to know when lawyers owe a duty to the plaintiff. This brings us to the concept of privity.  

(2) The Privity Rule as Applied to Malpractice Claims within Arizona Estate Liability

The first issue in any estate planning legal malpractice case is whether the lawyer owes a duty of reasonable care to a foreseeable plaintiff. Estate planning attorneys owe a duty of undivided loyalty to their clients when drafting Wills and other instruments necessary to effectively carry out the client’s intent. The client is the Testator and Principal in the relationship. 

It is a sensitive subject when people are left out of an inheritance. They want to take their frustration out on someone and suing the drafting attorney seems like a natural response.^[9] The main issues arise when there is room to debate the testator’s intent. However, there is no issue when the testator’s intent is clear because the law governing the right to dispose property at death favors a testator’s intent over any squabble.^[10]

The old privity rule is “that only those in privity with the drafting lawyer have standing to sue for negligent drafting of a will or trust.”^[11] States have loosened their stance over the years, where “[f]or the most part states may be divided into three distinct groups: (1) states that allow a broad cause of action; (2) states following the ‘Florida-Iowa rule’; (3) and ‘strict privity’ states.”^[12] The broad approach comes from a California case that balances a number of factors.^[13] The Florida-Iowa rule comes from DeMaris v. Asti^[14] and Schreiner v. Scoville.^[15] The main emphasis of both approaches with an exception to privity is having a “foreseeability of injury to the intended beneficiary.”^[16] A plaintiff must simply show the attorney “failed to effectuate the testator’s intent.”^[17]

Arizona’s Privity Rule

Arizona has a partial privity rule similar to the Florida-Iowa rule.^[18] We do not have a case that opens the door wide open to intended beneficiaries, but we do have cases that extend the attorney’s duty when representing fiduciaries. For instance, in Wetherill v. Basham, current Vice Chief Justice John Pelander^[19] ultimately concludes, “the attorney who represented the co-settlor in preparing the amendment owed no duty to Wetherill, the disinherited beneficiary, with whom he had no attorney-client relationship and whose interest was directly adverse to his client’s.”^[20] Where the trial court in Strobel exercised its equitable powers to fix a defective instrument, the trial court in Wetherill chose not to use its equitable powers to fix the defective instrument, but instead applied the Restatement to give the surviving spouse Power of Attorney over the decedent’s trust.^[21] Of course the disinherited daughter sues the attorney for malpractice by arguing that the attorney owes her a duty. Although the attorney’s duty extends to the client’s ward,^[22] it does not extend to beneficiaries of the client’s ward.^[23]  Similarly, although it sounds like Witherill agrees with the dicta,^[24] it distinguishes Shano, because the daughter is not an intended beneficiary.  The conclusion is that “neither Shano nor Fickett established or recognized any duty an attorney owes to nonclients who are not, at least derivatively, intended beneficiaries of the attorney-client relationship.”^[25]

In Arizona, attorneys can limit possible plaintiffs by effectuating their client’s intent, where attorneys do not owe a duty to those a client explicitly disinherited. This responsibility of clearly conveying our client’s intent presents a danger that you need to be aware of. While attorneys must take special care to make their client’s intent explicit, being effective with intent on a defective instrument is also inviting malpractice. This means the goal of making our client’s intent effective is best combined with also making sure the instrument is effective.

(3) Specific Facts that Trigger Attorney Malpractice (Negligence) within Estate Planning

Estate planning lawyers can fail to meet their standard of care in many ways. Important examples include (but are not limited to): (a) drafting errors, (b) improper revocation of wills, (c) issues relating to clients with diminished capacity, (d) negligence in representing fiduciaries who cause harm, or (e) statute of limitations issues. Ethical rule violations also trigger possible malpractice claims in estate planning, such as when conflicts of interest causes injury, but that zone of liability will be discussed in a future article.

(a) Arizona Estate Planning Attorney Drafting Issues that Trigger Possible Liability

Drafting errors can render a will ineffective, resulting in intestacy.^[26]  Arizona is a strict compliance state, where wills and trusts are only valid upon meeting statutory elements.^[27] The most obvious oversight is a will lacking at least two witness signatures.^[28] Attorneys risk malpractice if a testamentary instrument is invalid because of his negligence and the foreseeable beneficiary is not able to take. While those looking to take under intestacy are foreseeable beneficiaries by default, foreseeable beneficiaries are explicit within invalid wills. If the will is invalid, the probate estate passes through intestacy and the intended beneficiary has nothing but a malpractice suit. Also, since people taking through intestacy are foreseeable beneficiaries by default, there is a general fear of large groups having standing to sue estate lawyers for malpractice.^[29] This is likely the motivation for penalty clauses that leave small amounts as long as the person doesn’t challenge the will.

(b) Improper Revocation of Wills can Trigger Malpractice

There is also the issue of malpractice over improper revocation of wills.  Similar to drafting original wills, there are requirements for revoking previous wills.^[30] Intended beneficiaries of the second will can fail to take if the first will is not properly revoked, leaving them with nothing but a legal malpractice suit.

(c) Issues that can Arise and Trigger Liability when Helping Clients with Diminished Capacity

Next, there is the issue of attorneys drafting for clients with diminished capacity. While only clients with sound mind can make a will or trust,^[31] attorneys are not required to test a client’s capacity because that would go against the policy of treating clients with diminished capacity as normal clients.^[32] The issue is whether the attorney should have known, being “reasonably alert to indications that the client is incompetent or is subject to undue influence.”^[33] If an attorney should have known, and then proceeds with drafting for a client that lacks capacity, there is a viable claim that the attorney acted with negligence, and should be responsible for any harms that came after.

(d) Arizona Estate and Probate Attorneys have Potential Dangers when Representing Fiduciaries

In addition, attorneys representing fiduciaries risk liability in several ways.  First, lawyers representing fiduciaries, such as guardians or personal representatives, also owe a derivative duty to the third party—those owed a duty by the fiduciary.^[34] In Arizona’s famous Fickett case, the attorney representing a guardian was not acting for the best interest of the ward when the attorney should have done something about the guardian’s abuse.  Namely, the guardian was stealing money from the ward. The attorney has a duty to the ward and risks liability if he should have known of the guardian’s breach. Lawyers have specific duties of care when representing Personal Representatives, such as how to go about possible Will Contests.^[35]

(e) Statute of Limitations Issues within Arizona’s Estate Law that Risk Liability

The last issue in this malpractice section is regarding statutes of limitation.  Legal malpractice has a two-year statute of limitation.^[36] “A claim for legal malpractice accrues when: (1) the plaintiff knows or reasonably should know of the attorney’s negligent conduct; and (2) the plaintiff’s damages are ascertainable, and not speculative or contingent.”^[37] However, incompetency tolls the statute of limitations.^[38] Estate planning attorneys also risk tolling through continuous representation,^[39] where it is good practice to have a letter closing representation until the client is ready to resume.

^[1] See A.R.S. § 14-2502

^[2] See id. at (B); see also § 14-1102(B)(2); see also In re Estate of Shumway, 198 Ariz. 323, 326, ¶ 7 (2000).

^[3] See Shumway, at 328, ¶ 14 (Penalty clauses work a forfeiture, which is disfavored in the law).

^[4] See Matter of Strobel, 149 Ariz. 213, 216 (1986).  

^[5] See Wetherill v. Basham, 197 Ariz. 198, 207, ¶ 33 (App. 2000) (“The question of [the attorney’s] duty presents a legal issue subject to our de novo review”).

^[6] See Gipson v. Kasey, 214 Ariz. 141, 143 (2007).

^[7] Id. at 220.

^[8] Id. at 217.

^[9] See Wetherill, at 200, ¶ 1 (disinherited daughter brought suit).

^[10] See Shumway, at 326.

^[11] MALPRACTICE LIABILITY: PRIVITY RULE AND DISCOVERY RULE, 2001 WL 945920, 1; see also Nat’l Sav. Bank of D.C. v. Ward, 100 U.S. 195, 200, 25 L. Ed. 621 (1879) (“the general rule is that the obligation of the attorney is to his client and not to a third party, and unless there is something in the circumstances of this case to take it out of that general rule, it seems clear that the proposition of the defendant must be sustained”).

^[12] Bradley E.S. Fogel, Estate Planning Malpractice Special Issues in Need of Special Care, Prob. & Prop., July/August 2003, at 20 (2003).

^[13] See Lucas v. Hamm, 56 Cal. 2d 583, 588 (1961) (“whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors … the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury, and the policy of preventing future harm”); see also Simpson v. Calivas, 139 N.H. 1, 4 (1994) (“The critical issue … is whether an attorney who drafts a testator’s will owes a duty of reasonable care to intended beneficiaries. We hold that there is such a duty”).

^[14] 426 So. 2d 1153, 1154 (Fla. Dist. Ct. App. 1983).

^{[15] 410 N.W.2d 679 (Iowa 1987).}

^[16] Simpson, at 5.

^[17] Id.

^[18] See Paradigm Ins. Co. v. Langerman Law Offices, P.A., 200 Ariz. 146, 153, ¶ 24 (2001).

^[19] The case has authority regardless, but it perhaps stands out a little more now.

^[20] Wetherill, at 200, ¶ 1.

^[21] Id. at 204, ¶ 18.

^[22] See Fickett v. Superior Court of Pima County, 27 Ariz. App. 793, 795 (1976).

^[23] Wetherill, at 208, ¶ 35.

^[24] See id., at 208, ¶ 36 (it’s clearly dicta but this part of the opinion gets as close to recognizing an attorney’s duty extends to intended beneficiaries without actually saying it does).

^[25] Id. (saying it doesn’t extend to the unintended is not the same as saying it does extend to intended beneficiaries because we don’t have that case yet, although it’s good practice to avoid being that case).

^[26] See § 14-2101.

^[27] See § 14-2502 and § 14-10402.

^[28] See § 14-2502.

^[29] See Martin D. Begleiter, Attorney Malpractice in Estate Planning-You’ve Got to Know When to Hold Up, Know When to Fold Up, 38 U. Kan. L. Rev. 193 (1990).

^[30] See § 14-2507.

^[31] See § 14-2501 and § 14-10402(A).

^[32] See AZ ST S CT RULE 42 RPC ER 1.14

^[33] See Logotheti v. Gordon, 414 Mass. 308, 311 (1993).

^[34] E.g. Matter of Estate of Shano, 177 Ariz. 550, 554 (App. 1993); see also Fickett, at 795.

^[35] See Mullin v. Brown, 210 Ariz. 545, 550, ¶ 15 (App. 2005) (Attorney liable for $2 million for failure to bring a claim of undue influence).

^[36] See Kiley v. Jennings, Strouss & Salmon, 187 Ariz. 136, 139 (App. 1996); see also § 12-542.

^[37] Kiley, at 139.

^[38] See id.; see also § 12-502.

^[39] See O’Neill v. Tichy, 19 Cal. App. 4th 114, 120 (1993).