Opinion
No. CV-06-1727-PHX-FJM.
September 21, 2006
ORDER
The court has before it defendant Proskauer Rose, LLP's ("Proskauer") motion to dismiss (doc. 6), plaintiff's response (doc. 17), and Proskauer's reply (doc. 21).
I
Robert Kravitz ("plaintiff') was employed as the executive director of the Arizona Chapter of the American Jewish Committee ("AJC"). A dispute arose regarding plaintiff's continued employment with AJC, and the parties entered into settlement negotiations to resolve the details of plaintiff's separation from employment. AJC and plaintiff were both represented by counsel during the negotiations — plaintiff by Stinson Morrison Hecker LLP, and AJC by defendant Proskauer. On or about August 4, 2005, the parties reached an agreement regarding the basic terms of the separation. On August 5, 2005, Proskauer agreed to prepare the settlement documents, including, according to plaintiff, a joint public statement explaining the circumstances of plaintiff's departure.
On August 15, 2005, plaintiff informed Proskauer that the joint statement had to be prepared no later than August 16, 2005, as an article regarding plaintiff's departure would be reported in a local newspaper on the next day. Amended Complaint ¶ 118. Proskauer, however, did not produce the settlement documents as requested. Plaintiff contends that as a result of Proskauer's failure to timely prepare the settlement documents, the newspaper printed a misleading and disparaging account of plaintiff's departure from employment, resulting in, among other things, injury to plaintiff's reputation and ability to obtain employment. Id. ¶ 128.
Plaintiff now asserts a claim for legal malpractice against Proskauer, arguing that once Proskauer agreed to prepare the settlement documents on behalf of both parties, it owed a duty of care to plaintiff, which it then breached. The issue presently before us is whether Proskauer may be held liable to a nonclient for professional negligence.
II
A lawyer owes a duty of care to a nonclient when and to the extent that:
(a) the lawyer knows that a client intends as one of the primary objectives of the representation that the lawyer's services benefit the nonclient;
(b) such a duty would not significantly impair the lawyer's performance of obligations to the client; and
(c) the absence of such a duty would make enforcement of those obligations to the client unlikely.Paradigm Ins. Co. v. Langerman Law Offices, 200 Ariz. 146, 153, 24 P.3d 593, 600 (2001) (quoting Restatement (Third) of the Law Governing Lawyers § 51(3) (1998)). A lawyer's duty to a nonclient arises only if the nonclient is an "intended beneficiary" of the lawyer's services. Wetherill v. Basham, 197 Ariz. 198, 208, 3 P.3d 1118, 1128 (Ct.App. 2000). To impose a duty in favor of someone other than an "intended beneficiary" would offend public policy by "plac[ing] an attorney in a position where his own interests would conflict directly with his client's interests." Lewis v. Swenson, 126 Ariz. 561, 564, 617 P.2d 69, 72 (Ct.App. 1980). Therefore, it is generally held that "an adverse party is not an intended beneficiary of the adverse counsel's client." Id.; see also Wetherill, 197 Ariz. at 208, 3 P.3d at 1128 (refusing to impose upon a lawyer a duty of care to a nonclient whose interests are "directly adverse" to those of the lawyer's client).
In Paradigm Ins., 200 Ariz. at 154, 24 P.3d at 601, the Arizona Supreme Court considered whether a lawyer hired by an insurer to represent an insured also owed a duty of care to the insurer. Finding that "a special relationship exists between the insurer and the counsel it assigns to represent its insured," the court concluded that the lawyer owed a duty of care to both the insurer and the insured. Id. However, the court limited its holding to situations where "the interests of insurer and insured coincide." Id. In other words, the duty to a nonclient does not arise when a "conflict or significant risk of conflict" exists.Id. at 155, 24 P.3d at 602. Here, there is there no "special relationship" between the parties, and moreover plaintiff acknowledges that he is "a non-client who was directly adverse to Proskauer's client." Response at 10.
The undersigned participated and concurred in the opinion. See 200 Ariz. at 155, 24 P.3d at 602.
Plaintiff's reliance on Kremser v. Quarles Brady, L.L.P., 201 Ariz. 413, 36 P.3d 761 Ct. App. 2001), is unavailing under the facts of this case. In Kremser, the defendant law firm expressly agreed to file security documents, with the "primary objective" of benefitting the nonclients. Id. at 418, 36 P.3d at 766. The court noted this was a "rare circumstance" where there was "no resulting conflict," which would "impair the lawyer's performance of obligations to the client." Id. at 417-18, 36 P.3d at 765-66. In the present case, however, there is nothing to suggest that Proskauer agreed to prepare the draft settlement agreement other than for the benefit of its own client. In fact, Proskauer eventually prepared the draft documents containing language favorable to its own client and objectionable to plaintiff, which ultimately led to a breakdown in the settlement negotiations. Amended Complaint ¶ 116. As an adverse party, plaintiff was not an intended beneficiary of Proskauer's services. Thus Proskauer owed him no duty. Accordingly, plaintiff has failed to state a claim for legal malpractice. IT IS THEREFORE ORDERED GRANTING Proskauer's motion to dismiss (doc. 6). The action shall proceed only against the remaining defendant.