Sunday, September 11, 2005

And You Believed Me?

Are you concerned about third-parties, not in privity and outside of the attorney-client relationship, relying upon your advice to their own detriment? Maybe you should be.

Without going into too much detail about the underlying case, the South Florida law firm of Gunster Yoakley is being sued by three foreign companies that filed third-party malpractice claims on the basis that the firm damaged them by failing to disclose crucial information related to a debt offering.

According to the Palm Beach Daily Business Review: "In general, legal malpractice can be alleged against an attorney or law firm by a party that retained the lawyer's or law firm's services. But in March, the Florida Supreme Court held that a third party that relied on the lawyer's professional services - even if those services were rendered on behalf of another - can sue if the lawyer failed to exercise due diligence and proper care and thereby damaged the third party. In Cowan Liebowitz & Latman, P.C., et al. v. Donald Kaplan, the Supreme Court permitted creditors of an insolvent corporation to sue the lawyers who represented the corporation. The creditors accused the lawyers of failing to disclose material information in private placement memoranda for the sale of shares in the soon-to-be-insolvent company, Medical Research Industries Inc."

As a consequence of the Kaplan decision, Florida has now become a testing-ground for a drastic broadening of the traditional notion that a claim for malpractice by virtue of negligence can only exist where there is privity or an attorney-client relationship. Although the Florida Supreme Court went to great lengths to insist that the precedent established in the Kaplan decision would be limited to specific facts it has nonetheless thrust the Courts into an area where they previously were hesitant to venture.

How do you envision this new precedent and the lawsuit against Gunster Yoakley will impact small and solo practitioners in Florida?

Do foresee an increase in the cost of malpractice liability coverage for small and solo practitioners?

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