Opinion ID: 888148
Heading Depth: 2
Heading Rank: 2

Heading: Redies v. Addy

Text: ¶12 Meanwhile, on or about July 9, 2001, Donald L. Harris (Harris), Redies' counsel at the time, notified Addy and Cosner of a complaint he was prepared to file on Redies' behalf. Among other things, Harris identified claims for negligence due to Addy and Cosner's failure, promptly after Redies' bicycling accident, to establish a trust to protect and preserve her estate. He also indicated that Redies preferred to resolve this matter without filing a lawsuit if that is possible. ¶13 As it turns out, the parties were unable to negotiate a resolution, and Redies ended up filing a complaint in January 2002. The course of events during the period beginning in July 2001 and ending in December 2002in particular, ALPS's refusal to settle Redies' claims against Addy both before and after she filed her complaintformed the basis of her present unfair trade practices action against ALPS. Thus, it is necessary to set forth, in some detail, a number of the parties' communications and court filings during this period. Because negotiations over Redies' negligence claim against Cosner are not relevant to the issues before us (notably, he was not named in the complaint she ultimately filed), the ensuing discussion focuses solely on the exchanges pertaining to Redies' claims against Addy. ¶14 On receipt of Harris's letter, Addy immediately notified ALPS, which undertook an investigation into the merits of Redies' claims. The record discloses a number of communications between ALPS and Addy and between ALPS and Harris, as well as research on Harris's part, during the latter half of 2001. In October, Harris obtained a professional opinion on whether a self-sufficiency trust ( see §§ 53-18-101 to -105, MCA, and Admin. R. M. 37.2.501 to .513) could and should have been established following Redies' bicycling accident to conserve her assets. He was advised that, given Redies' disabling brain injury, her substantial medical bills, and her lack of health insurance, the establishment of a self-sufficiency trust would have qualified her for Medicaid while preserving her assets in a trust. He was further advised that income from the trust could have been used to supplement any needs not met by Medicaid or SSI (e.g., spending money, additional food and clothing, health services not otherwise covered, recreational needs). ¶15 Harris enclosed a copy of this report with a settlement demand to ALPS dated October 10, 2001. At the outset of his demand letter, he reiterated that Ms. Redies hopes to settle her claims against Mr. Addy . . . without litigation. He then articulated the theory behind those claims: Under the circumstances that existed immediately following Redies' bicycling accident, Addy should have promptly recommended the establishment of a self-sufficiency trust for Redies. Lawyers, in particular, are obligated to know about the laws which are relevant to their client's case. . . . To diligently represent Ms. Redies, . . . [Addy] had a duty to do sufficient research to learn about the Montana Self Sufficiency Trust statutes. As a result of Addy's failure to do so, Redies' estate was quickly depleted and [s]he now lives in poverty. ¶16 After receiving Harris's settlement demand, ALPS commissioned its own professional evaluation of Redies' claims. Among other things, the authors of the December 4, 2001 evaluation provided to ALPS discussed a possible statute of limitations defense and questioned whether Redies could have qualified as a beneficiary under the self-sufficiency trust provisions. They also questioned whether Redies could even bring this action against Addy, and they disputed the damages figures recited in the settlement demand. Ultimately, they concluded that sufficient questions exist as to the issue of liability so that we believe it is not reasonably clear. At this point, unless the Plaintiff is willing [to] agree to a resolution of the case for an amount far below what their current demand is, we believe that a settlement conference would be of little value. ¶17 Of particular significance in the case at hand is the analysis of whether Redies could even bring the action against Addy. While positing, initially, that absent a direct attorney-client relationship between [Redies] and [Addy], no action should be allowed, the authors of the evaluation went on to caution as follows: As you know, however, there have been challenges in the past as to this privity requirement. Most of the erosion of the concept has occurred in connection with beneficiaries of wills being allowed to sue the attorney for the testator. To our knowledge, Montana has not decided the issue of whether a protected person might be able to sue the attorney of the conservator. Clearly, she could sue the conservator. Presumably, the conservator would have a right over against his attorney. Thus, our court may short circuit that process by simply finding that the relationship between the protected person and the conservator's attorney was close enough to allow suit. Given these considerations, they concluded as follows: We do not put a great deal of stock in this privity defense, but it represents yet another problem the Plaintiff is going to experience in prosecuting her claim. Given sufficient time and effort, we believe that defense can be circumvented. ¶18 Within a week of receiving the foregoing report, ALPS notified Harris that it believed the case was defensible for the reasons stated in the December 4, 2001 evaluation and that it was rejecting Redies' settlement offer. Accordingly, Redies filed a complaint on January 2, 2002, stating negligence and breach of fiduciary duty claims against Addy. ¶19 Addy (represented by ALPS) answered the complaint and, on or about March 18, 2002, filed a motion for summary judgment. In his motion, Addy maintained that proof that an attorney-client relationship existed is [e]ssential to a malpractice action; that his only attorney-client relationships in this matter were with Cosner and Uerling; and that no attorney-client relationship exists or ever has existed between Plaintiff Redies and Defendant Addy. Acknowledging that [s]ome courts, in very limited situations, have extended the duty of an attorney to certain non-clients, he noted that this Court suggested this possibility in Rhode v. Adams, 1998 MT 73, 288 Mont. 278, 957 P.2d 1124. He then argued that if this Court were confronted with the question of whether an attorney owes a duty to a nonclient, we would adopt the multi-factor balancing test set forth in Trask v. Butler, 872 P.2d 1080, 1083 (Wash. 1994), and conclude that an attorney retained by a conservator has no duty to the protected person. (We acknowledged the Trask balancing test in Rhode but found it inapplicable to the factual scenario before us. See Rhode, ¶ 17.) ¶20 On May 23, 2002, the District Court, Judge Baugh presiding, denied Addy's motion on the ground that factual and legal issues regarding the existence of an attorney-client relationship between Addy and Redies existed. It is not clear what negotiations between the parties, if any, immediately followed, but on or about October 11, 2002, Redies filed a motion for pretrial ruling asking the court to find, as a matter of law, that Addy owed her a duty of care when he rendered legal advice to Cosner concerning the management of her estate. Judge Baugh granted this motion on November 21, 2002, reasoning that application of the Trask factors to the present case shows that Mr. Addy owed a duty to Ms. Redies when he rendered legal advice to the conservator, Mr. Cosner. In addition, the court determined that Redies was an intended beneficiary of Addy's advice to Cosner in light of § 72-5-427(3)(w), MCA. [3] Shortly thereafter, the parties settled the suit.