Colorado Legal Ethics
I. CLIENT-LAWYER RELATIONSHIP
1.1:100 Comparative Analysis of Colorado Rule
¥ Primary Colorado References:
CO Rule 1.1
¥ Background References: ABA
Model Rule 1.1, Other Jurisdictions
¥ Commentary:
1.1:101 Model Rule Comparison
Colo.RPC 1.1 is identical to MR 1.1.
The Colorado Comment modifies and supplements the Comment to MR 1.1 in several respects. First, the Colorado Comment varies from the text of Model Rule Comment [2]; however, both comments make similar points, namely, (a) a lawyer should not accept employment in an area in which the lawyer is not qualified, (b) even an unqualified lawyer might become qualified with proper preparation, and (c) proper representation might require the lawyer to associate with other lawyers or other professionals. Second, under the heading "Maintaining Competence," the Colorado Supreme Court included three additional paragraphs to emphasize the duty of continuing legal education, improving the profession, developing competence in all matters undertaken, and high aspirations for professional endeavors.
1.1:102 Model Code Comparison
DR 6-101 is the Model Code counterpart to Colo.RPC 1.1. However, the Colorado Rule differs in approach from the DR. Rather than simply prohibiting attorney negligence (including neglect) in the handling of a legal matter (the approach taken by DR 6-101), Colo.RPC 1.1 affirmatively requires competence and more fully particularizes the elements of competent representation. The Committee Comment to Colo.RPC 1.1 notes that the drafters Òintegrated salutary provisions of the Ethical Considerations found in the Code into the Comments to 1.1.Ó
1.1:200 Disciplinary Standard of Competence
¥ Primary Colorado References:
CO Rule 1.1
¥ Background References: ABA
Model Rule 1.1, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 31:201, ALI-LGL ¤ 28, Wolfram
¤ 5.1
The standard of lawyer competence for disciplinary proceedings in Colorado is defined in multiple provisions of the Colorado Rules of Procedure Regarding Attorney Discipline and Disability Proceedings. CRCP 251.1(c) states:
Standards of Conduct. . . . On January 1, 1993, and thereafter, the conduct of attorneys licensed to practice law in the State of Colorado shall be governed by the Colorado Rules of Professional Conduct and the other rules or standards of professional conduct adopted from time to time by this Court.
Similarly, CRCP 251.5, Grounds for Discipline, insofar as competence, provides:
Misconduct by an attorney, individually or in concert with others, including the following acts or omissions, shall constitute grounds for discipline, whether or not the act or omission occurred in the course of an attorney-client relationship:
a. Any act or omission which violates the provisions of the . . . Colorado Rules of Professional Conduct.
However, this disciplinary rule also provides the catchall provision of Òunprofessional conductÓ:
The enumeration of acts or omissions constituting grounds for discipline is not exclusive, and other acts or omissions amounting to unprofessional conduct may constitute grounds for discipline.
Colo.RPC 1.1 is the defined competency ethical standard. Numerous disciplinary proceedings have been held on allegations of violations of Rule 1.1.
Commission of simple negligence in the practice of law
should not per se be an ethical violation, although Colorado courts have not
ruled on the issue. See generally Mallen & Smith, Legal Malpractice
¤ 1.9 (4th
See Section 1.1:320.
1.1:300 Malpractice Liability
¥ Primary Colorado References:
CO Rule 1.1
¥ Background References: ABA
Model Rule 1.1, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 301:101, ALI-LGL ¤ 71-76 ,
Wolfram ¤ 5.6
1.1:310 Relevance of Ethics Codes in Malpractice Actions
The Scope section of the Preamble, Scope and Terminology of the Colorado Rules of Professional Conduct states:
Violations of a Rule should not in and of itself give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The Rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability. Further, the purpose of the Rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a rule is a just basis for a lawyerÕs self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule. Accordingly, nothing in the Rules should be deemed to augment any substantive legal duty of lawyers or the extra-disciplinary consequences of violating such a duty.
This provision is the same as in ABA Model Rules, Preamble, at [18].
An ethical rule does not create a legal duty nor does breach
create a cause of action for legal malpractice per se. Olsen
and BrownÊv. City of Englewood, 889 P.2d 673, 676 (Colo. 1995) (ÒThese
rules are not designed to alter civil liability nor do they serve as a basis
for such liability.) See also BryantÊv. Hand, 404 P.2d 521,
522 (Colo. 1965) (decided under Colorado Canons of Ethics);
Miami IntÕl Realty Co.Êv. Paynter, 841 F.2d 348, 352-53 (10
However, in Miami IntÕl Realty Co. v.
Paynter, 841 F.2d 348 (10th
The court noted that although the expert witness for the plaintiff at the outset of his testimony did refer to the Code as a standard followed by Colorado attorneys, it was not presented as having the force and effect of a law nor that deviations from it constituted negligence per se. In concluding that it was not error to admit the testimony, the court noted that the testimony did not develop any fine distinctions as to the nature of defendantÕs conduct compared to the Code, as the conduct was gross under any standard. It seemed reasonable that it made no difference to the jury whether there was a Code or not. Thus, the use of the fact that the standard is defined by the Code as distinguished from the statement of the standard to prove the negligence of a lawyer may remain an undecided issue in Colorado.
1.1:320 Duty to Client
In order for a legal malpractice (negligence) action to state a claim, the lawyer must have owed a duty to the plaintiff. Mehaffy, Rider, Windholz & Wilson v. Central Bank Denver, N.A., 892 P.2d 230, 239 (Colo. 1995). The question of the existence of a duty is for the court. McCaffertyÊv. Musat, 817ÊP.2d 1039, 1042 (Colo. App. 1990), cert. denied, Oct.Ê7, 1991. See SectionÊ1.2:800, Identifying to Whom a Lawyer Owes Duties. With certain exceptions, a lawyer owes a duty only to his clients. Generally the lawyerÕs duty to a client exists only if within the scope of the attorneyÕs engagement. IntÕl Tele-Marine Corp. v. Malone & Associates, Inc., 845 F.ÊSupp. 1427 (D. Colo. 1994). See also Colo.RPCÊ1.2.
Determining the Existence of an Attorney Client Relationship.
An attorney-client relation is proven by evidence that the client sought and received the advice of a lawyer concerning the legal consequences of the clientÕs past acts or contemplated future actions. People v. Morley, 725 P.2d 510, 517 (Colo. 1986); Klancke v. Smith, 829 P.2d 464, 466 (Colo. App. 1991), cert. denied, May 18, 1992.
An attorney-client relationship is based upon contract, which may be express, or implied from the conduct of the parties. The parties must agree upon all essential terms of the relationship, as evidenced by the partiesÕ manifestations of mutual assent. The party asserting the relationship bears the burden of proof of the relationship. The existence of the relationship is for the jury to determine. IntÕl Tele-MarineÊCorp. v. MaloneÊ& Associates, Inc., 845 F.ÊSupp. 1427, 1431 (D.ÊColo. 1994); Klancke v. Smith, 829 P.2d 464, 466 (Colo. App. 1991), cert. denied, May 18, 1992.
The payment of legal fees by a person does not necessarily create an attorney-client relationship between the payer and the attorney. IntÕl Tele-Marine Corp. v. Malone & Associates, Inc., 845 F.Supp at 1433. Nor does absence of payment mean an attorney-client relationship has not been formed.
While the Colorado Supreme Court has held that an important factor in determining the existence of an attorney-client relationship is Òwhether the client believes that the relationship existed,Ó People v. Bennett, 810 P.2d 661, 664 (Colo. 1991), the Colorado federal district court has stated that a would-be clientÕs subjective state of mind in believing an attorney-client relationship has been created is generally irrelevant. IntÕl Tele-Marine Corp. v. Malone & Associates, Inc., 845 F. Supp. 1427, 1433 (D. Colo. 1994). The relationship may be implied where the attorney led the would-be client reasonably to expect that he was being represented. In such a circumstance, an objective standard applies to the reasonableness of the belief based upon the attorneyÕs conduct. Id. The relationship may be inferred from the actions of the parties. People v. Morley, 725 P.2d 510, 517 (Colo. 1986).
A partner of a partnership is not by reason of that fact a client of the attorney representing the partnership. ZimmermanÊv. Dan Kamphausen Co., 971 P.2d 236 (Colo. App. 1998), cert. denied, Feb.Ê16, 1999. See also SectionÊ1.2:200.
The attorney-client relationship and the duties attendant thereto continue unless and until the client clearly understands, or reasonably should understand, that the relationship is no longer to be depended on. PeopleÊv. Bennett, 810 P.2d 661, 664 (Colo. 1991).
Whether a duty of care to the plaintiff exists is a question
for determination by the court. Federal Deposit Insurance
Corp.Êv. Clark, 768 F.ÊSupp. 1402, 1407 (D.Colo. 1989), affÕd, F.D.I.C. v. Clark,
978 F.2d 1541 (10
Nature of the Duty Owed.
ÒAn attorney owes his client a duty to employ that degree of knowledge, skill and judgment ordinarily possessed by members of the legal profession. There is no requirement that he be infallible. . . . Making a mistake is not negligence as a matter of law.Ó MeyersÊv. Beem, 712 P.2d 1092, 1094 (Colo. App. 1995); EadonÊv. Reuter, 361 P.2d 445 (Colo. 1961); CJI-Civ.3d 15.24. The question of whether an attorney has exercised a reasonable degree of care and skill generally is one of fact.
The lawyer has a duty to foresee and avoid when reasonably possible the risks that a reasonably prudent lawyer would foresee. First Interstate Bank of Denver, N.A.Êv. Berenbaum, 872 P.2d 1297 (Colo. App. 1993), cert. granted, MayÊ2, 1994, Stip. for dismissal granted, Aug.Ê15, 1994.
If language included within a document because of the acts or omissions of an attorney results in litigation [because, e.g. of ambiguity], even if the language is ultimately construed in favor of the client, then the question remains whether reasonably prudent attorneys should have foreseen that the likely result of its inclusion would be litigation.
872 P.2d at 1300, citing Temple Hoyne Buell Foundation v. Holland & Hart, 851 P.2d 192, 198 (Colo. App. 1992), cert. denied, May 10, 1993.
An error in professional judgment on an issue of unsettled law or a tactical decision is not negligence. MerchantÊv. Kelly, Haglund, Garnsey & Kahn, 874 F.ÊSupp. 300, 304 (D. Colo. 1995). Under this Òjudgmental immunityÓ rule, a court may determine, as a matter of law, that an attorney was not negligent based upon an error in professional judgment because the law was unsettled on the issue or the attorney made a tactical derision from among equally viable alternatives. For example, agreeing to have depositions read at trial rather than to have live testimony is a trial strategy decision. Morse v. People, 501 P.2d 1328 (Colo. 1972).
The lawyerÕs duty includes the exercise of independent professional judgment on behalf of his client. Astarte, Inc.Êv. Pacific Indus. Systems, Inc., 865 F.ÊSupp. 693 (D. Colo. 1994). See Colo.RPC 1.7. That duty is to act in the best interests of his client. Shriners Hospital for Crippled Children, Inc.Êv. Southard, 892 P.2d 417, 418 (Colo. App. 1994), cert. denied, April 10, 1995; KlanckeÊv. Smith, 829 P.2d 464, 466 (Colo. App. 1991), cert. denied, May 18, 1992. The duty continues throughout the attorney-client relationship, and that relationship continues unless and until the client clearly understands, or reasonably should understand, that the relationship is no longer to be depended upon. PeopleÊv. Bennett, 810 P.2d 661, 664 (Colo. 1991).
The measure of the attorneyÕs duty is at the time the task was undertaken. BoigegrainÊv. Gilbert, 784 P.2d 849, 850 (Colo. App. 1989), cert. denied, AprilÊ2, 1990.
The duty includes undertaking adequate preparation for the services provided. People v. Boyle, 942 P.2d 1199 (Colo. 1997). Inexperience generally is not an excuse for incompetent representation. Slane v. Rio Grande Water Conservation District, 115 F.R.D. 61, 62 (D. Colo 1987). Fulfillment of the competency requirement includes sufficient preparation to perform the tasks undertaken. People v. Moskowitz, 944 P.2d 76 (Colo. 1997); People v. Glaess, 884 P.2d 722 (Colo. 1994). Indeed, missing deadlines imposed by the court and by rules of procedure may violate the competency test. See People v. Fager, 925 P.2d 280 (Colo. 1996). Similarly, inadequate research for advice given may be a violation. People v. Aron, 962 P.2d 261 (Colo. 1998). The courts have not yet specifically addressed the effect of a clientÕs instruction or consent limiting the extent of research or investigation to be undertaken by the lawyer.
An attorneyÕs duty includes advising a client of all settlement offers, even when the attorney has been retained by an insurer, and to advise the client fully of settlement negotiations. MillerÊv. Byrne, 916 P.2d 566, 574 (Colo. App. 1995), cert. denied, May 20, 1996; ScognamilloÊv. Olsen, 795 P.2d 1357, cert. denied, Aug. 27, 1990. See SectionÊ1.4:200.
MillerÊv. Byrne, 916 P.2d 566 (Colo App. 1995), cert. denied, MayÊ20, 1996. was a civil action brought by the insured, and its assignee (plaintiff in the underlying action) against, inter alia, the attorneys hired by the insurer to defend the plaintiffs (defendant-insureds in the underlying case). The plaintiff-insureds asserted claims of malpractice and breach of fiduciary duty against the attorneys. The court held that an attorney, including one hired by the insurer to defend the insured, has a duty to communicate all offers of settlement received, regardless of the genuineness of the offer, as well as the ramifications of the settlement negotiations. The court cited Colo.RPC 1.4 and comments thereto. The Court stated that lack of genuineness and lack of bona fides of the settlement offer are not a complete defense to a breach of fiduciary duty claim premised on failure to communicate a settlement offer. Similarly, proof the genuineness and bona fides of a settlement offer are not an element of proof to such a claim. 916 P.2d at 574. However, the Court specifically did not address whether the failure of an attorney to communicate a settlement offer to a client who has no power of acceptance can give rise to a negligence or breach of fiduciary duty claim.
On the other hand, the Court agreed that evidence concerning the contents of the offer, its form, and any defects which affected the ability to accept it were relevant and admissible. To prove a claim for breach of fiduciary duty, a plaintiff must prove that he has incurred damages and that the defendantÕs breach was a cause of the damages sustained. ÒTo rebut such proof, . . . the attorneys would be entitled to show, among other things, that the offer could not have been effectively accepted without clarification because its terms were ambiguous or did not properly identify the parties that would be bound by any settlement contract created, or that communication of an acceptance would have been impossible. Such evidence is relevant and admissible because, absent proof that the settlement offer would have been accepted and would have resulted in an enforceable contract, . . . [the clients] would be unable to prove that conduct of the attorneys cause damages, or even that any damages were in fact incurred.Ó 916 P.2d at 575.
The duty of an attorney employed by a public entity appears to be no different than the duty of an attorney employed in the private sector. However, such an attorney might have limited immunity. Compare TrimbleÊv. City and County of Denver, 697 P.2d 716, 727 (Colo. 1985); LeukeÊv. Cain, 720 P.2d 152, 163 (Colo. 1986). See SectionÊ1.13:200.
In Federal Deposit Insurance Corp. v. Wise, 758 F.Supp. 1414 (D. Colo. 1991), the Court noted that some out-of-state cases hold that an attorney need only advise the client on matters for which he or she has been retained, while other cases hold that any attorney cannot discount his continuing fiduciary obligation to the client simply because he was not specifically or expressly retained as legal counsel for a particular transaction. While not deciding the issue, the Court said:
A noteworthy case is In re Consupak, Inc. 87 B.R. 529 (Bankr. N.D. Ill. 1988 . . . [which]held that an attorney should offer legal advice when (i) the client is unaware of potentially adverse legal consequences of a proposed course of action, and (ii) offering advice would be in the clientÕs best interest. Id. at 551; see also Johnson v. Miller, 596 F.Supp. 768, 773 (D. Colo. 1984). Thus, an argument can be made that a responsible attorney should not act as a passive observer, silently sitting by in the face of a clientÕs legally unacceptable decision.
758 F. Supp. at 1419. The Court also held that it could not be categorically stated that lawyers had no duty to investigate certain matters. Id.
Whether an attorney has fulfilled his duty usually will be measured through expert testimony. See Section 1.1:335.
Limitations on Scope of Duty.
Under Colo.RPC 1.1, Òcompetent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.Ó On its face, the standard appears to be whatever is Ònecessary for the representationÓ and is not mitigated by any lack of experience or expertise of the attorney or the desires of the client. Rather, what is required may be dictated by the representation undertaken.
Any attempt to limit representation by agreement of the client to a lesser standard than whatever is Ònecessary for the representationÓ (from the eyes of a third party and not the client), may be inappropriate. For example, CBA Abstract, First Inquiry, 24 Colo. Law. 2145 (1995), the lawyer was retained to defend three parties in business litigation involving a specialized area of commercial law. The lawyer advised the clients that although he was competent in trial work, he did not have the expertise in the specialized area of law that was involved, and needed to associate with counsel competent in that specialized area. The clients advised that they were presently short of funds, but intended to raise monies for a possible settlement. The clients instructed the lawyer to perform the absolute minimum necessary to defend the case.
The lawyer complied with the clientsÕ instructions and essentially undertook no work for over two years on the lawsuit. However, the clients failed to raise funds for the settlement. With trial three months away, the lawyer advised the clients that it was necessary to actively prepare the case for trial and to associate with co-counsel as to the specialized area of law. The clients still did not have funds to hire counsel, and instructed the attorney to forbear from putting in the work required to prepare the case for trial.
The issue presented to the CBA Ethics Committee was defined as follows:
Does the clientsÕ instruction to avoid incurring the expense of hiring co-counsel and preparing the case properly for trial constitute an impermissible limitation on the scope of the lawyerÕs representation because the lawyer is unable to provide competent representation at trial?
After analyzing Colo.RPC 1.1 and 1.2, the Committee concluded:
. . . Based upon the facts and circumstances presented in this case, that the lawyerÕs obligations to follow his clientsÕ instructions not to retain co-counsel or prepare for trial must yield to the lawyerÕs obligation to provide competent representation. Colorado Rules 1.1 and 1.2 do not permit the lawyer to continue to defend the lawsuit on the limited basis requested by the clients.
The Committee further determined that under Rule 1.16(a) the lawyerÕs withdrawal from the representation is mandatory because the lawyerÕs continued representation will result in violation of the rules since the clients will not authorize the lawyer to prepare for trial or to retain co-counsel . . . .
Of course, this is an abstract of a CBA Informal Opinion, and not that of any court. Nevertheless, it must be considered in circumstances where the client instructs the attorney to undertake representation less than providing Òthe legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.Ó
1.1:330 Standard of Care
An attorney generally is held to a negligence standard of care. See CJI-Civ. 3d 9:1. That standard is defined as an act which a reasonably careful attorney would not do or failing to do an act which a reasonably careful attorney would do. The conduct must be measured against what an attorney having and using the skill of attorneys practicing law at the same time would or would not have done under the same or similar circumstances. CJI-Civ. 3d 15:23. See SectionÊ1.1:320, supra.
ÒAn attorney owes his client a duty to employ that degree of knowledge, skill and judgment ordinarily possessed by members of the legal profession. There is no requirement that he be infallible. [Citations omitted.] Making a mistake is not negligence as a matter of law. [Citations omitted.]Ó MeyersÊv. Beem, 712 P.2d 1092, 1094 (Colo. App. 1995), 96. Providing services in areas in which the lawyer lacks sufficient experience is a violation of the rule. People v. Frank, 752 P.2d 539 (Colo. 1988)..
The standard of care is more than to be correct in the task undertaken; it may include the requirement that a reasonably prudent attorney must foresee and avoid for the client disputes and problems. First Interstate Bank of Denver, N.A.Êv. Berenbaum, 872 P.2d 1297, 1300 (Colo. App. 1993), cert. granted MayÊ2, 1994, Stip. for dismissal granted, Aug.Ê15, 1994; Temple Hoyne Buell FoundationÊv. Holland & Hart, 851 P.2d 192, 198 (Colo. App. 1992), cert. denied, May 10, 1993.
When an attorney is a specialist, perhaps a higher standard of care will be imposed. See generally CJI-Civ.3d 15.4, 15:22 and 23 (Notes on Use).
1.1:335 Requirement of Expert Testimony
Except in clear and palpable cases of legal malpractice, expert testimony is necessary to establish the standards of acceptable professional conduct from which the alleged deviation has occurred. ZickÊv. Krob, 872 P.2d 1290, 1294 (Colo. App. 1993), cert. denied, MayÊ2, 1994; McCaffertyÊv. Musat, 817 P.2d 1039, 1044, cert. denied, Oct.Ê7, 1991. Expert testimony is required to establish a claim by a former or inactive client that the attorney owed the client a duty and that the attorney breached that duty, as well as to prove negligent misrepresentation by an attorney. Crystal HomesÊv. Radetsky, 895 P.2d 1179, 1182 (Colo. App. 1995). Similarly, expert testimony is generally needed to establish the standard of a fiduciary duty. Id.
However, in cases in which the lawyerÕs lack of care is so obvious that the trier of fact can find negligence as a matter of common knowledge, expert testimony is not required. Thus, in clear and palpable cases of legal malpractice, expert testimony is not necessary to establish the standard of acceptable professional conduct from which an alleged deviation has occurred. ZickÊv. Krob, 872 P.2d 1290 (Colo. App. 1993), cert. denied, May 2, 1994; McCaffertyÊv. Musat, 817 P.2d 1039 (Colo. App. 1990), cert. denied, Oct. 7, 1997; BoigegrainÊv. Gilbert, 784 P.2d 849, 850 (Colo. App. 1989), cert. denied, April 12, 1990; McListerÊv. EpsteinÊ& Lawrence, P.C., 934 P.2d 844, 847 (Colo. App. 1997), cert. denied, MarchÊ31, 1997. Negligence such as permitting entry of default against a client or allowing the statute of limitations to run normally will not require expert testimony.
Matters in which expert testimony has been utilized include ScognamilloÊv. Olsen, 795 P.2d 1357, 1361 (Colo. App. 1990), cert. denied, Aug. 27, 1990, in which expert testimony was allowed to establish that if each of the three defendants had been represented by separate counsel, plaintiff would have settled with them. Instead, plaintiff suffered a much higher judgment.
In McListerÊv. Epstein & Lawrence, P.C., 934 P.2d 844, 847-48 (Colo. App. 1996), cert. denied, March 31, 1997, expert testimony was required to prove the standard of care for supervising attorneys in order to determine whether the defendant lawyerÕs conduct deviated from that standard.
Expert testimony was required to establish liability for breach of a confidential (fiduciary) relationship where the duties arising therefrom would be measured against standards applicable to attorneys. Crystal Homes, Inc.Êv. Radetsky, 895 P.2d 1179 (Colo. App. 1995).
The expert testimony requirement applies whether trial is to a judge or to a jury. However, in Zick v. Krob, 872 P.2d 1290 (Colo. App. 1993), cert. denied, May 2, 1994 the Court may have applied his own knowledge of the standard of reasonable care and excluded testimony of an expert witness. Expert testimony has also been admitted to establish the existence of an attorney client relationship. Crystal Homes, Inc. v. Radetsky, 895 P.2d 1179 (Colo. App. 1995).
1.1:340 Causation and Damages
To be entitled to recover for negligence, there must be
a duty owed by the lawyer defendant to the plaintiff, a breach of that duty
by the lawyer, and damages resulting to the plaintiff from that breach. McCaffertyÊv.
Musat, 817ÊP.2d 1039, 1042 (Colo. App. 1990), cert. denied, Oct.Ê7, 1997. A
lawyer is liable only for injury of which the lawyerÕs breach of a duty of due
care was a legal cause, as determined under the generally applicable principles
of causation and damages. However, the plaintiff ordinarily must prove that
the negligence arises out of its attorney client relationship in order to establish
malpractice. Mehaffy, Rider, Windholz & WilsonÊv. Central
Bank Denver, N.A., 892 P.2d 230, 239 (Colo. 1995), appeal after remand,
940 P.2d 1097 (Colo. App. 1997). See CJI-Civ.3d
15:22 and 9:1. Thus, a client establishes a
prima facie case upon evidence that the lawyer breached his duty of care, and
that the breach caused injury to the client. FlemingÊv. Lentz,
Evans, and King, P.C., 873 P.2d 38, 40 (Colo. App. 1994). Damages must
bear a casual connection to the alleged negligence. Federal
Deposit Insurance Corp.Êv. Clark, 768 F.ÊSupp. 1402 (D.Colo. 1989), affÕd, F.D.I.C.Êv.
Clark, 978 F.2d 1541 (10th
Case Within a Case.
To prove causation and damages in a legal malpractice suit based upon failure to pursue a claim, or mishandling a claim or defense, the client must prove that the unpursued claim would have been successful had the attorney actually litigated the claim, or that the claim or defense would have been successful but for the negligent handling. FlemingÊv. Lentz, Evans, and King, P.C., 873 P.2d 38, 40 (Colo. App. 1994). See Miller v. Byrne, 916 P.2d 566 (Colo. App. 1995), cert. denied, May 20, 1996.
If the client was a plaintiff in the civil action which the client alleges the attorney negligently prosecuted, the client (now plaintiff against defendant attorney) must prove that Òbut forÓ the negligent conduct, the plaintiff would have prevailed or obtained a more favorable result. This requirement results in the case within a case: in the malpractice action against the attorney the plaintiff client must litigate and prove his original claim (underlying claim) against the original defendant. See MorrisÊv. Geer, 720 P.2d 994 (Colo. App. 1986). MillerÊv. Byrne, 916 P.2d 566, 579 (Colo. App. 1995), cert. denied, May 20, 1996.
Similarly, if the client was the defendant in the original (underlying) action, and lost, the client plaintiff must prove that in the underlying case he would have prevailed but for the negligence of his attorney. CoonÊv. Ginsberg, 509 P.2d 1293, 1295 (Colo. App. 1973).
The case within a case requirement was applied in Miller v. Byrne, 916 P.2d 566, 579 (Colo. App. 1995), cert. denied, May 20, 1996. In Miller v. Byrne, the insureds brought suit against, inter alia, the attorneys retained by the insurer to defend the insureds in the underlying case. The insureds alleged malpractice and breach by the attorneys of their fiduciary duty in failing to inform the insureds of a settlement offer. The defendants in the underlying case offered to settle for the $100,000 policy limit. The insurance company was willing to pay $95,000, and the insureds testified they would have been willing to contribute $5,000 personally.
The Court held that the plaintiff-insureds must first prove that there would have been a settlement, but for the failure to communicate the settlement offer to the insureds: If that were not proven, the defendant lawyers could not be liable as there could be no damages suffered by the insureds, and indeed, no proof of causation.
If the trier of fact finds that the claims would have been settled but for the failure to communicate the offer, since the plaintiff-insureds had settled the claims of the plaintiff in the underlying case, a second case within a case must be tried: whether the plaintiff in the underlying case would have won, and the amount of the judgment that would have been recovered. 916 P.2d at 579. Only if the plaintiff in the underlying case would have been awarded a judgment can the lawyer be held liable. Id.
Damages.
The damages that may be recoverable are the same as the damages recoverable under the same theories as alleged in other circumstances. Generally, the damages are the difference in clientÕs position but for the lawyerÕs negligence. MorrisÊv. Geer, 720 P.2d 994, 998 (Colo. App. 1986). Subject to proof, damages may include loss of net profits. RobertsÊv. Holland & Hart, 857 P.2d 492, 497 (Colo. App. 1993), cert. denied, Aug.Ê30, 1993. Damages can include the cost of correcting the attorneyÕs error. Id. at 498. Similarly, damages can include the fees paid to the attorney for the services performed negligently; however, a client cannot recover fees for work that was performed competently. Id. It appears that a client cannot recover fees paid for non-negligent work that may have been of no value because of the negligence, since claimantÕs other damages are premised upon receiving the benefits of the services properly performed. Id. at 499.
A lawyer sued for improperly settling plaintiffÕs personal injury case is not entitled to a deduction from damages of the percentage of the ÒproperÓ recovery reflecting the contingent fee the plaintiff would have to pay the attorney had the proper recovery been obtained. McCaffertyÊv. Musat, 817 P.2d 1039, 1045 (Colo. App. 1990), cert. denied, Oct. 7, 1991.
1.1:350 Waiver of Prospective Liability [see 1.8:910]
An agreement prospectively limiting a lawyerÕs liability to a client is unethical, unless permitted by law and then only if required procedural steps are followed. See Colo.RPC 1.8(h). However, Colorado has no ÒlawÓ affirmatively permitting such limits on liability. In PeopleÊv. Foster, 716 P.2d 1069 (Colo. 1986), the Supreme Court considered a clause inserted by an attorney in a stock purchase agreement between two major shareholders which released the lawyer Òfrom any liability and/or claims which may arise as a result of the herein transaction.Ó The Court affirmed the disciplinary hearing board conclusion that the clause constituted an attempt by the lawyer to exonerate himself or limit his liability for malpractice in violation of the then Code of Professional Responsibility DR 6-102(A) and CRCP 241.6 (now 251.6). It is anticipated the same result would be reached under Colo.RPC 1.8(h).
1.1:360 Settlement of Client's Malpractice Claim [see 1.8:920]
In CBA Formal Opinion 56 (MarchÊ22, 1980, addenda issued 1995 and 1998), the Committee opined that it was unethical under DRÊ7-105 and ECÊ7-21 for an attorney to condition a settlement of a malpractice claim upon the withdrawal by the plaintiff of a grievance filed against the lawyer. This conclusion was reaffirmed under the Colo. RPC in 1995, referring to Colo.RPC 4.5 and others. The 1998 Addendum noted that by the adoption of CRCPÊ251.3(c)(11) the Supreme Court had established a grievance mediation process in which relatively minor grievances filed against lawyers by former clients in appropriate circumstances, may be resolved and dismissed pursuant to written Mediation Agreement signed by the lawyer, former client, and mediator. The Addendum expressed that as a part of the mediation of the grievance, the resolution of threatened or pending civil disputes, including legal fee and malpractice disputes between the lawyer and former client was appropriate, encouraged, and ethical. No statement was made, however, as to whether a grievance could be resolved in the course of resolution of the malpractice claim - with or without a mediator.
CBA Formal Op. 85, Release and Settlement of Legal Malpractice Claims (1990, addenda in 1995 and 1998), defines when a lawyer may negotiate and enter into a release and settlement agreement of a clientÕs legal malpractice claim against the lawyer. This opinion states that such a release and settlement could be entered into by a lawyer only if all of the following conditions are met:
(1) The lawyer must disclose to the client the facts and circumstances underlying the clientÕs potential malpractice claim against the lawyer and the nature and extent of the claim;
(2) The lawyer must advise the client, preferably in writing, to retain independent counsel to represent the client in the negotiation in consummation of the settlement and release;
(3) The terms of the settlement and release must be fair and reasonable; and
(4) The settlement and release can relate only to past, and not future, conduct of the lawyer.
The Committee further notes that if the attorney-client relationship still exists at the time the settlement is contemplated, and if both lawyer and client desire that the attorney continue to represent the client thereafter, the lawyer should carefully consider whether, under the circumstances, the lawyer can ethically negotiate a settlement and release of a past malpractice claim without first withdrawing from the representation. The Committee further concluded that the lawyer may not engage in conduct intended to conceal the facts and circumstances relating to the clientÕs potential malpractice claim against the lawyer, and may not insist on a release from liability or an agreement to arbitrate a malpractice claim as a prerequisite to the lawyerÕs returning papers and property the client is entitled to receive, or to the lawyerÕs completing the employment or providing additional legal services for the client, or to the lawyerÕs withdrawal from the representation.
Lastly, the Committee reaffirmed its earlier CBA Formal Op. 56, Settlement of Lawyer Malpractice, Withdrawal of Grievance Complaint (1980, addendum issued 1995), stating that a lawyer cannot require a client to refrain from filing or to withdraw a grievance as a condition of settling a dispute with a client.
An agreement purporting to settle a claim by a client or former client against a lawyer is voidable by the client or former client if the client or former client was not adequately informed and was not independently represented, or if the client or former client was subjected to improper pressure by the lawyer.
The 1995 Addendum to Formal Op. 95 reaffirms the conclusion under the Colo.RPC citing, inter alia, RuleÊ1.8(h) (prohibiting prospective limitations on a lawyerÕs liability to a client for malpractice unless otherwise permitted).
The 1998 Addendum to Formal Op. 95 acknowledges the propriety of settlement of legal fee and malpractice claims of a former client, as a part of a grievance mediation. See Formal Op. 56, discussed above.
1.1:370 Defenses to Malpractice Claim
Generally, the same defenses are applicable to professional liability claims as are applicable to the legal theories of the claims for relief in other contexts.
Statutes of Limitation.
The statute of limitations for a malpractice (negligence) claim against a lawyer is two years. CRS ¤Ê13-80-102(1)(a).
CRS ¤Ê13-80-108 defines when the causes of action accrues, thereby commencing the running of the statute. The statute for legal malpractice (negligence) commences to run at the time the client discovers, or through the use of reasonable diligence should have discovered, the negligent act of the attorney. JacobsonÊv. Shine, 859 P.2d 911, 913 (Colo. App. 1993), cert. denied, Feb. 7, 1994.
Generally, the statute begins to run at the time the client knows, or through reasonable diligence should have known both the injury and its cause. CRS ¤Ê13-80-108(1). MillerÊv. Byrne, 916 P.2d 566, 582 (Colo. App. 1995), cert. denied, May 20, 1996. Such a determination is normally a question of fact. However, if the evidence clearly shows the date that the client discovered or should have discovered the negligent conduct and damage, the issue may be determined as a matter of law. The focus is on a plaintiffÕs knowledge of facts that would put a reasonable person on notice of the general nature of damage and that the damage was caused by the wrongful conduct of an attorney. Uncertainty as to the precise extent of damage does not delay the accrual of a claim. Broker House IntÕl., Ltd.Êv. Bendelow, 952 P.2d 860, 863 (Colo. App. 1998). While the date of discovery is normally a question of fact for the trier of fact (judge or jury), where the undisputed facts establish that the plaintiff discovered or reasonably should have discovered the negligent conduct by a particular date, the court may rule as a matter of law. The client need only have the knowledge of facts which would put a reasonable person on notice of the general nature of damage that it has suffered and that this damage was caused by wrongful conduct of the attorney, - not of the legal theories upon which an action might be brought.
Once a client becomes aware of the attorneyÕs negligence and incurs damage in the form of legal fees to ameliorate the impact of that negligence, the client has suffered injury for the purposes of accrual of a legal claim. In MillerÊv. Byrne, 916 P.2d 566 (Colo. App. 1995), cert. denied, May 20, 1996, In JacobsonÊv. Shine, 859 P.2d 911, 913 (Colo. App. 1993), cert. denied, Feb. 7, 1994, the Court held that the statute of limitations for legal malpractice Òcommences to run at the time the client discovers, or through the use of reasonable diligence, should have discovered the negligent act of the attorney.Ó Furthermore, once a plaintiff becomes aware of her attorneyÕs negligence, and damage in the form of legal fees incurred to ameliorate the impact of that negligence, she has suffered injury for purposes of the accrual of a legal claim.
When the cause of action against the lawyer is for breach of contract, the statute of limitations is three years. CRS ¤Ê13-80-101(a). Actions for negligent misrepresentation and for breach of fiduciary duty must be brought within three years. CRS ¤Ê13-80-101(c) and (f). The statute commences when the defrauded person has knowledge of facts which, in the exercise of proper procedure and diligence, would enable the person to discover the fraud perpetuated against that person. There is a presumption that a corporation has knowledge of what is in its files and records. First Interstate Bank of Denver, N.A.Êv. Berenbaum, 872 P.2d 1297 (Colo. App. 1993), cert. granted May 2, 1994, Stip. for dismissal granted, Aug.Ê15, 1994.
Tolling of Statute of Limitations.
The statute is not tolled by the pendency and outcome of an appeal. JacobsonÊv. Shine, 859 P.2d 911, 193 (Colo. App. 1993), cert. denied, Feb. 7, 1994. Colorado rejects the continuous representation rule pursuant to which the statute of limitations is tolled during the period the lawyer continues to represent the client on the particular matter. House IntÕl., Ltd.Êv. Bendelow, 952 P.2d 860, 863 (Colo. App. 1998); MorrisÊv. Geer, 720 P.2d 994, 998 (Colo. App. 1986). The burden is on the plaintiff to show that the statute has been tolled. First Interstate Bank of Denver, N.A.Êv. Berenbaum, 872 P.2d 1297 (Colo. App. 1993), cert. granted MayÊ2, 1994, Stip. for dismissal granted, Aug.Ê15, 1994.
Comparative Negligence.
ColoradoÕs Comparative Negligence Statute, CRS ¤Ê13-21-111, provides that plaintiffÕs contributory negligence does not bar its recovery of damages unless it is 50% or more of the cause of plaintiffÕs damages. Rather, plaintiffÕs contributory negligence as a percentage of the total negligence (of the parties to the litigation) causing the damages reduces plaintiffÕs recovery proportionately.
ColoradoÕs comparative negligence statute applies to professional
liability claims founded in negligence. See ScognamilloÊv.
Olsen, 795 P.2d 1357 (Colo. App. 1990), cert. denied, Aug. 27, 1990; Federal
Deposit Ins. Corp.Êv. Clark, 768 F.ÊSupp. 1402, 1410 (D. Colo. 1989), affÕd,
F.D.I.C. v. Clark, 978 F.2d 1541 (10
The Court of Appeals has given as examples of comparative negligence evidence that the client:
1)ÊÊfailed to supervise, review, or inquire as to the representation;
2)ÊÊrefused to follow advice or instructions;
3)ÊÊfailed to provide the attorney with essential information;
4)ÊÊfailed to minimize damages caused by the attorneyÕs negligence; or
5)ÊÊinterfered with the attorneyÕs representation.
Id. (taken from Mallen & Smith, Legal Malpractice ¤ 20.2 (1996)) The negligence must relate to the injury alleged to have been caused by the attorneyÕs negligence and must relate to the attorneyÕs representation.
A plaintiffÕs recovery is barred by his contributory negligence
only if his fault is higher than the fault of all defendants combined. CRS
¤ 13-21-111.5; Federal Deposit Ins. Corp.Êv. Clark,
768 F. Supp. 1402, 1409 (D. Colo. 1989), affÕd, F.D.I.C. v. Clark, 978 F.2d
1541 (10th
Contribution.
Historically, Colorado followed the joint and several liability rule: Each joint tortfeasor was liable for 100% of the damages caused by all of the tortfeasors, even though one tortfeasorÕs ÒcontributionÓ for plaintiffÕs damages may have been relatively insignificant. With some exceptions (such as indemnity claims), prior to 1977 if one tortfeasor paid damages for which all of the defendant joint tortfeasors were liable, the paying tortfeasor had no recourse against other nonpaying joint tortfeasors. However, in 1977, the no contribution rule was changed by the adoption of the Contribution Act, CRS ¤Ê13-50.5-102. This statute applies Òwhere two or more persons become jointly or severally liable in tort for the same injury to person or property or for the same wrongful death.Ó In that circumstance there is a right of contribution among them, based upon their relative responsibility for the plaintiffÕs damages. This statute is applicable to malpractice claims, McLister v. Epstein & Lawrence, P.C., 934 P.2d 844, 846 (Colo. App. 1996), cert. denied, March 31, 1997. By its terms it applies to liability Òin tortÓ and therefore should apply to certain legal theories that may be asserted against lawyers in addition to malpractice.
Subsection (7) provides that the contribution statute does not apply to breaches of trust or other fiduciary obligations. However, this provision has been, in effect, repealed by the passage of the Pro Rata Liability Statute. See ÒPro Rata LiabilityÓ and ÒJoint and Several Liability,Ó infra, this section.
The importance of this contribution statute was greatly diminished by the passage of the Pro Rata Liability Statute.
Pro Rata Liability.
In 1986, Colorado passed a Pro Rata Liability Statute. CRS ¤ 13-21-111.5. This statute applies by its terms to Ònegligence or faultÓ, and therefore applies to malpractice claims. In addition, it applies to breach of fiduciary duty claims, Miller v. Byrne, 916 P.2d 566, 580 (Colo. App. 1995), cert. denied, May 20, 1996, and probably to negligent misrepresentation and breach of contract claims. (Pro Rata Liability Statute applies to Ònegligence or faultÓ rather than to the narrower concept of ÒnegligenceÓ or ÒtortÓ. Id. at 577; Harvey v. FarmerÕs Insurance Exchange, _____ P.2d _______, 1998 WL 679864 (Colo. App. 1998) (Ò. . . the word ÔfaultÕ as it appears in the statute was intended to include a broad range of blameworthy conduct, including intentional tort.Ó).
Under this statute, a defendant may designate responsible nonparties: persons or entities who the defendant asserts breached a duty owed to plaintiff, causing all or part of plaintiffÕs damages. The jury determines total damages of the plaintiff, and assigns a percentage responsibility (the total being 100%) to the parties and any designated nonparty. Generally, a defendant is liable only for that percent of plaintiffÕs damages assigned to it (and generally none if the plaintiff is responsible for 50% or more of his own damages). A defendant may designate a nonparty as responsible for all or a portion of plaintiffÕs damages, but only if that nonparty owed a duty recognized by the law to the plaintiff. MillerÊv. Byrne, 916 P.2d 566, 578 (Colo. App. 1995) cert. denied, May 20, 1996.
In most instances, the Pro Rata Liability Statute has eliminated the need for contribution: Under the Pro Rata Liability Statute, Ò . . . no defendant shall be liable for an amount greater than represented by the degree or percentage of the negligence or fault attributable to such defendant . . . .Ó However, there does not appear to be any prohibition against a defendant after an adverse judgment pursuing a contribution claim against a person not designated as a responsible nonparty. See Benson, ÒApplication of the Pro Rata Liability, Comparative Negligence and Contribution Statutes,Ó 23 Colo. Law. 1717, 1723-24 (1994).
Under the statute, joint liability may be imposed on two or more persons who consciously conspire and deliberately pursue a common plan or design to commit a tortious act. Such persons have a right of contribution among themselves. CRS ¤ 13-21-111.5(4).
Joint and Several Liability.
CRS ¤ 13-21-111.5 eliminated joint liability of defendants where a claim is founded on Ònegligence or faultÓ, except for where Òtwo or more persons who consciously conspire and deliberately pursue a common plan or design to commit a tortious act.Ó In Resolution Trust Corp. v. Heiserman, 898 P.2d 1049 (Colo. 1995), in response to questions certified by the United States District Court for the District of Colorado, the Colorado Supreme Court held that:
A. Joint and several liability may be imposed on two or more persons (lawyers and officers/directors) pursuant to the Pro Rata Liability Statute, CRS ¤ 13-21-111.5(4), where the alleged Òtortious actÓ [the commission of which is the object of the conspiracy or common plan or design] is based on negligence, gross negligence, negligence per se, breach of fiduciary duty of due care, or breach of fiduciary duty of loyalty. Imposition of joint liability is not limited to intentional conduct.
B. Joint and several liability under CRS ¤ 13-21-111.5(4) may be based upon evidence of a course of conduct from which a tacit agreement to act in concert may be implied.
Thus, a conscious conspiracy can occur without any intentional wrongdoing, and can be based upon evidence of a course of conduct from which a tacit agreement to act in concert may be implied. There must implicitly be an agreement that defendants consciously conspired or deliberately pursued a common plan or design that resulted in a tortious act, as distinguished from intended a tortious act. ÒWhile there must be a conscious a deliberate decision to pursue a common plan or design, the actors need not have a Ôspecific intentÕ to commit a tortious act to be subject to joint liability under Section 13-21-111.5(4).Ó 898 P.2d at 1057. The conspiracy need not be shown to have been entered into for the specific purpose of injuring the person damaged.
No Assignment.
A legal malpractice claim cannot be assigned. RobertsÊv. Holland & Hart, 857 P.2d 492, 495 (Colo. App. 1993), cert. denied, Aug.Ê30, 1993. This prohibition probably extends not only to negligence claims, but also to breach of contract and breach of fiduciary duty theories. Id.
Failure to Mitigate Damages.
This defense was recognized in Federal
Deposit Insurance Corp.Êv. Clark, 768 F.ÊSupp. 1402, 1412 (D.Colo. 1989), affÕd,
FDIC v. Clark, 978 F.2d 1541 (10th
No Implied Warranty of SuccessÑMistake of Judgment.
Unless an attorney states or agrees otherwise, an attorney by agreeing to act in a professional capacity for a client does not warrant or promise success and therefore is not responsible for a lack of success or a mistake of judgment, unless it results from the negligence of the attorney. CJI-Civ.3d 15:24. See discussion of SectionÊ1.1:320, supra.
1.1:380 Liability to Client for Breach of Contract, Breach of Fiduciary Duty, and Other Liabilities
Historically the liability of a lawyer to a client has been premised in negligence, which is commonly denominated as a malpractice cause of action: A lawyer fails to perform as a reasonably prudent lawyer would perform. However, the law has long recognized, with increasing emphasis, other causes of action/legal theories of a lawyerÕs liability to the client. Each of them has potential benefits to the plaintiff to use in lieu of the standard malpractice claim.
Breach of Contract
The failure to adhere to the authority granted by a client in preparing a legal instrument may constitute breach of contract; negligent advice as to the legal effect is a tort. See BadisÊv. Martinez, 819 P.2d 551, 554 (Colo. App. 1991), affÕd in part and revÕd in part on other grds, 842 P.2d 245 (Colo. 1992). When the violation or wrong is a violation of a duty imposed by law, the court has treated this under tort law and not under contract law, even if the contract expressly or impliedly imposes the same duty upon the lawyer.
An attorneyÕs implied warranty of care in the performance
of his undertaking is treated as a standard tort claim for malpractice, at least
where there is no specific provision in the contract. Federal
Deposit Ins. Corp.Êv. Clark, 768 F.ÊSupp. 1402, 1411 (D.Colo. 1989), affÕd,
F.D.I.C. v. Clark, 978 F.2d 1541 (10th
Colorado rejects the proposition that attorney malpractice
claims sound alternatively in contract or in tort. There is overlap, however,
in that whether an attorney-client relationship exists requires a general contract
analysis, while whether the attorney exercised that duty of care arising out
of that relationship sounds in tort. If a contract claim were to be recognized,
it must be based on a specific provision in the contract. Generally, an implied
duty of care arises from the parties irrespective of contract and the ÒbreachÓ
of that duty is a tort. Federal Deposit Ins. Corp.Êv. Clark,
768 F.ÊSupp. 1402, 1410-1411 (D.Colo. 1989), affÕd, F.D.I.C. v. Clark, 978 F.2d
1541, 1551-1552 (10th
Breach of Warranties
While an attorney may implicitly or explicitly warrant
that he will exercise reasonable care, it is a hybrid of the standard tort claim
for malpractice and is treated as such. Federal Deposit Insurance
Corp.Êv. Clark, 768 F.ÊSupp. 1402, 1411 (D.Colo. 1989), affÕd, F.D.I.C. v. Clark,
978 F.2d 1541, 1551 (10
Breach of Fiduciary Duty
See CJI-Civ.3d 15:20. Colorado recognizes a breach of fiduciary duty cause of action by a client against its attorney. See BadesÊv. Martinez, 819 P.2d 551, 554 (Colo. App. 1991), affÕd in part and revÕd in part on other grds, Martinez v. Bades, 842 P.2d 245 (Colo. 1992), citing Mallen & Smith, Legal Malpractice ¤¤Ê7, 8.4, 8.7 and 11.1; see also BoatrightÊv. Derr, 919 P.2d 221 (Colo. 1996); Miller v. Byrne, 916 P.2d 566 (Colo. App. 1995), cert. denied, May 20, 1996.
However, a plaintiff cannot advance a breach of fiduciary duty claim if duplicative of a malpractice (negligence) claim, such as when the breaches were grounded on the lawyerÕs alleged negligence and lack of due diligence. Moguls of Aspen, Inc.Êv. Faegre & Benson, 956 P.2d 618 (Colo. App. 1997). A confidential fiduciary relationship is not established simply by the existence of the attorney-client relationship. See Crystal Homes, Inc.Êv. Radetsky, 895 P.2d 1179, 1182 (Colo. App. 1995); Martinez v. Badis, 842 P.2d 245, 251-252 (Colo. 1992).
Colorado defines the duties of a fiduciary as:
One who is acting as a fiduciary for another must act with the utmost good faith and loyalty on behalf of and for the benefit of that person.
CJI-Civ.3d 26.3.
The elements of a breach of fiduciary duty claim are:
(1) The defendant was a lawyer for the plaintiff.
(2) The defendant lawyer was acting as a fiduciary for the plaintiff.
(3) The plaintiff suffered injury, damage or loss.
(4) The defendant lawyerÕs breach of fiduciary duty was the cause of plaintiffÕs injuries, damages or losses.
CJI-Civ.3d 26.1.
Factors relevant to determining whether the attorney is a fiduciary with respect to the subject matter include:
(1) The degree of control the lawyer exercised over the subject matter;
(2) The extent to which the plaintiff placed trust and confidence in the lawyer in dealing with the subject matter;
(3) The level of expertise which the plaintiff possessed in his own dealings with the subject matter; and
(4) Any other relevant considerations.
CJI-Civ.3d 26:2.
Fraud
Colorado recognizes a fraud cause of action against an attorney when the requisite circumstances exist. See Mehaffy, Rider, WindholzÊ& WilsonÊv. Central Bank Denver, N.A., 892 P.2d 230 (Colo. 1995), appeal after remand, 940 P.2d 1097 (Colo. App. 1997). The traditional definitions of fraud, negligent misrepresentation, and concealment are applicable.
Outrageous Conduct
The tort is defined in CJI-Civ.3d 23:3. It does not appear that there are any reported Colorado decisions applying the tort to a lawyer.
Negligent Referral
A lawyer is not liable to a client for negligence of another lawyer to whom he refers the client unless the lawyer failed to ensure reasonable care in the selection of the other lawyer. CJI-Civ.3d 15:25. No cases have been reported involving negligent referral.
Negligent Misrepresentation
This theory was recognized in ZimmermanÊv. Dan Kamphausen Co. 971 P.2d 236 (Colo. App. 1998), cert. denied, Feb.Ê16, 1999, as to an opinion letter issued by a lawyer to a non-client. See also Mehaffy, Rider, Windholz & Wilson v. Central Bank Denver, N.A., 892 P.2d 230, 235-236 (Colo. 1995). See SectionÊ1.1:420.
Other Causes of Action
Plaintiffs have unsuccessfully sought to sue a lawyer on theories of violation of rules of civil procedure, RICO violations, malicious prosecution, intentional interference with marital contractual relationship, violation of Uniform Marriage Act, and outrageous conduct, although under appropriate facts the claims might be upheld. Weiszman v. Kirkland & Ellis, 732 F.Supp. 1540 (D. Colo. 1990); Lapuyade and Crona, ÒTheories of Recovery Against Counsel in Estate Planning/Administration,Ó 26 Colo. Law. 35 (Dec. 1997).
1.1:390 Liability When Non-Lawyer Would Be Liable
A lawyer is subject to the same liabilities as a non-lawyer, his status or activity as a lawyer not providing immunity or excuse. For example, a lawyer may be fully liable for embezzlement, misappropriation, or theft.
1.1:400 Liability to Certain Non-Clients
¥ Primary Colorado References:
CO Rule 1.1
¥ Background References: ABA
Model Rule 1.1, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 71:1101, ALI-LGL ¤ 73, Wolfram
¤ 5.6
Generally, absent conduct that is fraudulent, malicious or intentionally wrongful, a lawyer is not liable for malpractice (professional negligence) to non-clients. Mehaffy, Rider, Windholz & WilsonÊv. Central Bank Denver, N.A., 892 P.2d 230, 240 (Colo. 1995), appeal after remand, 940 P.2d 1097 (Colo. App. 1997). In order to prove a malpractice claim, the plaintiff must prove the existence of an attorney-client relationship between the complaining party and the lawyer. Id. at 239. See also, FlemingÊv. Lentz, Evans, and King, P.C., 873 P.2d 38 (Colo. 1994); SchmidtÊv. Frankewich, 819 P.2d 1074, 1077 (Colo. App. 1991), cert. denied, Oct. 28, 1991. The existence of the attorney-client relationship is defined as an element of the legal theory of legal malpractice. The basis for this rule includes Òthe protection of the attorneyÕs duty of loyalty to and effective advocacy for his or her client; the nature of the potential adversarial relationships between the attorney and third parties; and the attorneyÕs potential for unlimited liability if his duty of care is extended to third parties.Ó GloverÊv. Southard, 894 P.2d 21, 23-24 (Colo. App. 1994), cert. denied, April 24, 1995.
Generally, an attorney is liable on any legal theory to a non-client for professional errors only upon a finding of fraud, negligent misrepresentation or malicious conduct by the attorney. Mehaffy, Rider, Windholz & WilsonÊv. Central Bank Denver, N.A., 892 P.2d 230, 235 (Colo. 1995) appeal after remand, 940 P.2d 1097 (Colo. App. 1997). This limitation recognizes the potential liability of an attorney to an unforeseeable and unlimited number of third parties, as well as the adversarial nature of litigation. Id., citing MontanoÊv. Land Title Guarantee Co., 778 P.2d 328, 330-31 (Colo. App. 1989). See KlanckeÊv. Smith, 829 P.2d 464 (Colo. App. 1991), cert. denied, May 18, 1992; First Interstate BankÊof Denver, N.A. v. Berenbaum, 872 P.2d 1297, 1301 (Colo. App. 1993), cert. granted, MayÊ2, 1994, Stip. for dismissal granted Aug.Ê15, 1994.
A lawyer can be held liable to nonparties for negligent misrepresentation. This theory, based upon principles of tort law, independent of any principle of contract law, may be available even to a party to a contract. Mehaffy, Rider, Windholz & WilsonÊv. Central Bank Denver, N.A., 892 P.2d, 235-36 (Colo. 1995), appeal after remand, 940 P.2d 1097 (Colo. App. 1997). Colorado has adopted the SectionÊ552, Restatement (Second) Torts (1977) definition of Ònegligent misrepresentation.Ó CJI-Civ. 3d 9:3B defines the elements of negligent misrepresentation causing a financial loss in a business transaction as: that defendant gave false information to the plaintiff in the course of defendantÕs profession for the guidance or use of the plaintiff in a business transaction; that defendant was negligent in obtaining or communicating the information but gave that information with the intent or knowing that the plaintiff would act or decide not to act in reliance on the information; and that plaintiff relied upon the information supplied by the defendant and that reliance caused damage to the plaintiff.
Various attempts by non-clients to establish the liability of the lawyer for legal services outside the exceptions discussed above have been rejected by the courts. For example, where a lawyer representing a corporation filed a procedurally defective motion in the corporationÕs bankruptcy proceedings, resulting in the corporationÕs creditor being allowed to proceed against the corporationÕs shareholders, the shareholders did not have a claim for relief against the lawyer. Schmidt v. Frankewich, 819 P.2d 1074 (Colo. App. 1991), cert. denied, Oct. 28, 1991. See also Klancke v. Smith, 829 P.2d 464 (Colo. App.) (attorney for mother in suit for wrongful death of husband not liable to children for distributing proceeds to client when children entitled to a portion of the proceeds). See also Durfee, ÒThird Party Malpractice Claims Against Real Estate Lawyers,Ó 13 Colo. Law. 996 (1984).
1.1:410 Duty of Care to Certain Non-Clients
Despite the general rule that the duty of an attorney is solely to his client and not to a third party, see section 1.1:400, a lawyerÕs duty to exercise reasonable care extends to non-clients who are the intended beneficiaries of the lawyerÕs service or who the lawyer reasonably understands will rely on his work at the request of the client.
With respect to reliance of a nonclient on opinions of an attorney, see Section 1.1:420.
Estate and Trust Planning.
Beneficiaries of estates or trusts present a special situation. Generally, in Colorado an attorney has no duty to beneficiaries or potential beneficiaries of estates or trusts. For example, in BrooksÊv. First National Bank of Denver, 596 P.2d 1220 (Colo. App. 1979), the court held that the beneficiaries of a trust failed (1) to allege facts which established a duty owed by the attorney for the trustees to the beneficiaries (but did not state what facts, if any, might establish such a duty), and (2) to allege facts which established Òfraud or malice, without which there is no liability to a third party,Ó citing WeigelÊv. Hardesty, 549 P.2d 1335 (Colo. App. 1976).
In Shriners HospitalÊfor Crippled Children, Inc. v. Southard, 892 P.2d 417 (Colo. App. 1994), cert. denied, April 10, 1995, the beneficiaries of trust settlorÕs will sued settlorÕs attorney for malpractice for failure to ascertain the mental capacity of the settlor to execute an amendment to the trust instrument so as to have trust assets distributed to persons other than the then beneficiary and for failure to determine whether the settlor was being subjected to undue influence. The court rejected plaintiffÕs contention that an alleged intended third party beneficiary of the will had standing to sue the settlorÕs attorney for malpractice. The court noted that exceptions allowing third party claims against a lawyer were limited to fraudulent, malicious or intentional misconduct and negligent misrepresentation. The court noted that plaintiff alleged simple negligence, and did not allege that the trust agreement did not affect settlorÕs dispositional intent. Therefore, the lawyerÕs duty of care did not extend to the third parties. However, in GloverÊv. Southard, 894 P.2d 21 (Colo. App. 1994), cert. denied, April 24, 1995, the court in dictum added to the no duty language the qualifier Òso long as the document [drafted] accurately reflects the testatorÕs intent.Ó However, the court was unclear as to the theory a disappointed potential beneficiary might assert. 894 P.2d at 24.
Fraud, Negligent Misrepresentation or Malicious Conduct.
A lawyer is liable to non-clients for his fraud, negligent misrepresentation or malicious conduct. See Section 1.1:400.
1.1:420 Reliance on Lawyer's Opinion [see also 2.3:300]
See discussion under 1.1:410, Duty of Care to Certain Non-Clients.
An attorney who provides an opinion at his clientÕs request, with knowledge that it is intended for the benefit of and intended reliance by a third person, can be liable to that third person for negligent misrepresentation. Crystal Homes, Inc.Êv. Radetsky, 895 P.2d 1179 (Colo. App. 1995); Mehaffy, Rider, Windholz & WilsonÊv. Central Bank Denver, N.A., 892 P.2d 230 (Colo. 1995), affirming 865 P.2d 862 (Colo. App. 1993).
As discussed above, in Colorado a lawyerÕs liability to non-clients may usually be based only upon fraud or negligent misrepresentation. In Mehaffy, Rider, Windholz & WilsonÊv. Central Bank Denver, N.A., 892 P.2d 230 (Colo. 1995), appeal after remand, 940 P.2d 1097 (Colo. App. 1997), the Colorado Supreme Court affirmed that liability for negligent misrepresentation can attach to an attorney who issues an opinion that contains material misstatements of fact when the opinion is issued on behalf of a client for the purpose of inducing a non-client to purchase municipal notes or bonds. In that decision, the Court acknowledged that a legal malpractice claim could not be asserted by a non-client, but applied the negligent misrepresentation theory of Section 552 of Restatement (Second) of Torts (1997) to the lawyerÕs conduct. The Court noted that this remedy was available when money is lost due to misrepresentation in a business transaction. It must be shown that the defendant supplied false representation to others in a business transaction and failed to exercise reasonable care or competence in obtaining or communicating information upon which the other parties justifiably relied. The Court further noted that the theory is applied only where the lawyer knows that its representation will be relied upon by a non-client for business purposes. The Court rejected the lawyerÕs contention that they could not be liable for negligent misrepresentation because their opinion letters express opinions of law. 940 P.2d at 236. The Court affirmed that the misrepresentation must be of a material fact that presently exists or has existed in the past, and held that the opinion letters were mixed statements of law and fact that might constitute misrepresentations of material fact. Mehaffy involved the attorneys for the town preparing opinion letters at the request of the Town to give to the Bank which was interested in purchasing a bond issuance by the Town. The opinion stated that a lawsuit asserting that the Town Council had failed to make certain findings of fact required by statute had not been made was without merit, and the notes were validly issued. Bank then purchased the Town bonds. Ultimately, the bonds were invalidated.
In Zimmerman v. Dan Kamphausen Co., 971 P.2d 236 (Colo. App. 1998), cert. denied, Feb.Ê16, 1999, a non-client asserted a negligent misrepresentation claim against a lawyer. At the request of his client, the lawyer had issued an opinion letter to a third party seller of real property to the effect that the client partnership was properly constituted, that it had the legal power to execute a guaranty of a note and performance obligations thereunder, and that one partner was authorized to sign the guaranty on behalf of the partnership. The real estate contract and promissory note subsequently were guaranteed by the partnership. The court first noted that Ò[a]n attorney owes a duty to a third party to whom he issues an opinion letter or to other persons that the attorney expects will rely upon such a letter.Ó 971 P.2d at 240. Here, the letter had been written in response to the sellerÕs request for assurance that the real estate debt could be guaranteed by the assets of the partnership. The letter expressly stated that the Òpartnership has the power to execute and deliver the Guaranty Agreement . . . and execution and delivery of the Guaranty Agreement, by [partner] on behalf of the partnership is authorized under the Partnership Agreement.Ó The lawyer sought to have the claim dismissed on the grounds that the letter was simply a series of legal opinions as distinguished from representations of fact upon which a negligent misrepresentation claim could be premised. The court accepted the letter as being representations of fact.
See generally, Crystal Homes, Inc.Êv. Radetsky, 895 P.2d 1179 (Colo. App. 1995); Anderson, ÒThe AttorneyÕs Liability to Third Parties: An Update,Ó 25 Colo. Law. 61 (1996); ÒMalpractice Claims After Mehaffy: The Exposure Grows,Ó 24 Colo. Law. 1321 (1995).
1.1:430 Assisting Unlawful Conduct [see also 1.2:600-1.2:630]
Colo.RPC 1.2(d) provides:
A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but the lawyer may discuss the legal consequences of any proposed course of action with a client and may counsel or assist a client to make a good-faith effort to determine the validity, scope, meaning or application of the law.
In addition to the above strictures, Colo.RPC 8.4 generally prohibits a lawyer from engaging in criminal or dishonest conduct.
Aiding a nonlawyer in the unauthorized practice of law is an ethical violation. PeopleÊv. Macy, 789 P.2d 188, 189 (Colo. 1990).
1.1:440 Knowledge of Client's Breach of a Fiduciary Duty [see also 1.13:520]
See Colo.RPC 1.2(d) and (e); 1.6; 3.3; 4.1.
1.1:450 Failing to Prevent Death or Bodily Injury
No Colorado appellate court has ruled on a lawyerÕs violation of Colo.RPC 1.6(b) which requires a lawyer Òto reveal informationÊ.Ê.Ê. to the extentÊ.Ê.Ê. necessary to prevent the client from committing an act that would result in death or serious bodily injury.Ó
1.1:500 Defenses and Exceptions to Liability
¥ Primary Colorado References:
CO Rule 1.1
¥ Background References: ABA
Model Rule 1.1, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 301:1001, ALI-LGL ¤¤ 76, 78,
Wolfram ¤ 5.6
Generally, a lawyer has the same defenses to claims against him that are common to defendants in negligence claims.
1.1:510 Advocate's Defamation Privilege
Colorado has two privileges relevant to a lawyerÕs statements. CRS ¤Ê19-3-309 protects from liability the making in good faith of a report pursuant to the ChildrenÕs Code. The common law privilege protects a person from liability for defamation for any communication Òmade bona fide upon any subject matter in which the party communicating has an interest, or in reference to which he has a duty .Ê.Ê. if made to a person having a corresponding interest or dutyÊ.Ê.Ê.Ó WiggerÊv. McKee, 809 P.2d 999, 1008 (Colo. App. 1990), cert. denied, April 15, 1991.
ÒAt attorney at law is absolutely privileged to publish defamatory matter concerning another in communications preliminary to a proposed judicial proceeding, or in the institution of, or during the course and as a part of, a judicial proceeding in which he participates as counsel, if it has some relation to the proceeding.Ó Club Valencia Homeowners AssÕn, Inc.Êv. Valencia Associates, 712 P.2d 1024 (Colo. App. 1985). Colorado has adopted the concept of Restatement (Second) Torts and the comments thereto. The purpose of the privilege is to afford litigants the utmost freedom of access to the courts to preserve and defend their rights or to protect attorneys during the course of their representation of clients.
In order to be privileged, the matter must have been made in reference to the subject matter of the proposed or pending litigation, although it need not be strictly relevant to any issue involved in it. ÒThe pertinence required is not technical legal relevancy, but rather a general frame of reference in relation to the subject matter of the litigation.Ó Club Valencia Homeowners AssÕn, Inc.Êv. Valencia Associates, 712 P.2d 1024, 1027 (Colo. App. 1985). The privilege embraces anything that possibly may be relevant. The maker of the statement and the recipient must be involved in and closely connected with the proceeding. It extends not only to statements during trial, but to steps taken prior to trial such as conferences and other communications preliminary to the proceedings. All doubts must be resolved in favor of relevancy or pertinence. Id.
This privilege has also been recognized under federal law.
Ball Corp.Êv. Xidex Corp., 967 F.2d 1440, 1444 (10th
The privilege applies not only to judicial proceedings, but also to boards and commissions that are quasi-judicial. WaltersÊv. Linhof, 559 F.ÊSupp. 1231 (D.ÊColo. 1983). This privilege extends to legislative proceedings. LiningerÊv. Knight, 226 P.2d 809, 813 (Colo. 1951). It extends to pleadings filed in the course of judicial proceedings, ShipleyÊv. Howard, 519 P.2d 1230, 1231 (Colo. App. 1974), as well as statements made by attorneys concerning the other attorney in the course of judicial acts or semi-judicial proceedings. RennerÊv. Chilton, 351 P.2d 277 (Colo. 1960).
However, the privilege does not exist if the requisite elements of the privilege are not proven, or if the speaker was motivated by express malice. The question of whether the privilege exists is one of law for the court, but whether the privilege was abused by express malice is for the jury. See WilliamsÊv. Burns, 463 F.ÊSupp. 1278, 1283 (D. Colo. 1979).
1.1:520 Wrongful Use of Civil Proceedings; Abuse of Process; False Arrest
In WehrÊv. McCutchen, 784 P.2d 846 (Colo. App. 1989), the counterclaim asserted that plaintiffÕs claim was an abuse of process. The court held that litigation claims were immunized under the First Amendment to the United States Constitution, unless the defendant showed all of the following:
a. That the petitioning activities are devoid of factual support, or supportable in fact, have no cognizable basis in law.
b. The primary purpose of the petitioning activities is to harass the other party or to effectuate some other improper objective.
c. The petitioning activities have the capacity to have an adverse effect on the legal interests of the other party.
Colorado recognizes the legal theories of abuse of process, malicious prosecution, and abuse of a privilege to arrest. See CJI-Civ.3d 17:1, et seq.; 17.10, et seq. and 21:19. There do not appear to have been any reported decisions involving legal theories and an accused lawyer.
1.1:530 Assisting Client to Break a Contract
Colorado recognizes the legal theories of tortious interference with contract and tortious interference with prospective business advantage. See CJI-Civ.3d 24:1, et seq. There do not appear to be any reported decisions involving a lawyerÕs advice as constituting interference.
1.1:600 Vicarious Liability [see 5.1:500]
¥ Primary Colorado References:
CO Rule 1.1
¥ Background References: ABA
Model Rule 1.1, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 91:201, ALI-LGL ¤ 79, Wolfram
¤ 5.6
A lawyer who refers a client to another professional person for professional services is liable for the negligence of that other professional only if the lawyer failed to exercise reasonable care in selecting the other professional person. CJI-Civ.3d 15:25.
A lawyer as an employer is vicariously liable for the acts of his employees and agents within the scope of their employment. Cf. Grease Monkey IntÕl, Inc.Êv. Montoya, 904 P.2d 468, 473 (Colo. 1995).
Each partner in a law general partnership is liable for the acts and omissions of all partners and employees. CRS ¤Ê7-60-113, 115(i). ZimmermanÊv. Dan Kamphausen Co., 971 P.2d 236 (Colo. App. 1998), cert. denied, Feb.Ê16, 199, WilliamsÊv. Burns, 463 F.ÊSupp. 1278, 1282 (D. Colo. 1979). See In re S&D Foods, Inc., 144 B.R. 121 (Bankr. Colo. 1992). The Colorado pro rata liability statute does not abrogate this liability. HughesÊv. Johnson, 764 F.ÊSupp. 1412, 1413 (D. Colo. 1991).
Colorado permits law firms to practice as professional corporations, limited liability companies, limited liability partnerships, registered limited liability partnerships or joint stock companies, thus eliminating much of the vicarious liability of the individual lawyers.