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

Heading: ALPS's Privity of Contract Defense

Text: ¶82 In Addy's brief in support of his motion for summary judgment in the underlying suit, ALPS relied on two theories: privity of contract and the Trask test. With respect to the former, it took the position that where the plaintiff is not in privity of contract with the defendant, she may not recover damages for the defendant's negligent performance of the contract. Translated to the case at hand: Because Redies was not in privity with Addy, whose contract to provide legal services (under this third-party theory) was with Cosner, she could not recover damages for his allegedly negligent performance of that contract (advising Cosner to pauperize Redies instead of recommending the establishment of a self-sufficiency trust). According to ALPS, Mr. Addy acted as attorney for Mr. Cosner, the Conservator and Ms. Uerling, the Guardian. That was the extent of his attorney-client relationships in this matter. ¶83 Yet, twenty years before ALPS relied on this defense to Redies' claims against Addy, we observed that [t]his Court was a pioneer in abolishing privity as a requirement for recovery in a personal injury or wrongful death case. Hawthorne v. Kober Const. Co., Inc., 196 Mont. 519, 523, 640 P.2d 467, 469 (1982) (citing Brandenburger v. Toyota Motor Sales, U. S. A., Inc., 162 Mont. 506, 513 P.2d 268 (1973)). We further stated: We have not felt permanently bound to archaic legal concepts no matter how deeply rooted they may be. We view privity to be a concept having proper application in the area of contract law. There seems to be no sound public policy argument for extending its application to tort. Hawthorne, 196 Mont. at 523, 640 P.2d at 469 (emphasis added). We then went on to adopt the following rule enunciated in Prosser, The Law of Torts § 93, at 622, 623 (4th ed., West 1971): [B]y entering into a contract with A, the defendant may place himself in such a relation toward B that the law will impose upon him an obligation, sounding in tort and not in contract, to act in such a way that B will not be injured. The incidental fact of the existence of the contract with A does not negative the responsibility of the actor when he enters upon a course of affirmative conduct which may be expected to affect the interests of another person. . . . . . . . [T]here are situations in which the making of the contract creates a relation between the defendant and the promisee, which is sufficient to impose a tort duty of reasonable care. By the same token, there are situations in which the making of a contract with A may create a relation between the defendant and B, which will create a similar duty toward B, and may result in liability for failure to act. [Emphasis added, footnote omitted.] See Hawthorne, 196 Mont. at 523-24, 640 P.2d at 470 (quoting the foregoing text from Prosser, The Law of Torts § 93). ¶84 Consistent with Hawthorne, we have rejected the privity of contract defense in a variety of contexts. See, e.g., Tynes v. Bankers Life Co., 224 Mont. 350, 359-60, 730 P.2d 1115, 1121 (1986) (insurer liable in tort to insured's father, notwithstanding the absence of privity (quoting Prosser's rule)); Thayer v. Hicks, 243 Mont. 138, 149, 793 P.2d 784, 791 (1990) (accountant liable to third parties who he knows intend to rely upon his work product); Jim's Excavating Service v. HKM Assoc., 265 Mont. 494, 502, 506, 878 P.2d 248, 253, 255 (1994) (project engineer or architect liable to third parties who foreseeably may rely on the information supplied by the engineer or architect (quoting Prosser's rule)); Turner v. Kerin & Associates, 283 Mont. 117, 125-26, 938 P.2d 1368, 1373-74 (1997) (engineering firm liable to any party who holds or succeeds to a security interest in the property serviced by the firm (quoting Prosser's rule)). ¶85 Thus, by 2001, it was firmly established in our caselaw that the requirement of privity of contract to maintain an action in tort had been abolished. Indeed, in Jim's Excavating we rejected the defendant's privity argument precisely because it ignored the established law in Montana abolishing the requirement of privity of contract to maintain an action in tort. Jim's Excavating, 265 Mont. at 502, 878 P.2d at 253 (emphasis added). And attorney malpractice actions were no exception. In Rhode v. Adams, 1998 MT 73, 288 Mont. 278, 957 P.2d 1124, we observed that an attorney may owe a duty to someone other than his or her client, at least in nonadversarial contexts. See Rhode, ¶¶ 12-17. This observation was consistent with our adoption of Prosser's rule in Hawthorne (though we did not cite Prosser in Rhode ), and it confirmed that privity of contract is not required to maintain a malpractice action against an attorney. ¶86 It is not surprising, therefore, that none of the authorities proffered by ALPS in the underlying action supports the argument that privitynotwithstanding our consistent and repeated rejections of the concept in Hawthorne, Tynes, Thayer, Jim's Excavating, Turner, and Rhode was, nevertheless, still required to maintain an attorney malpractice action. ALPS cited Grenz v. Prezeau, 244 Mont. 419, 798 P.2d 112 (1990), in Addy's motion for summary judgment, for the proposition that [e]ssential to a malpractice action is proof that an attorney-client relationship existed. On appeal, ALPS cites Stott v. Fox, 246 Mont. 301, 805 P.2d 1305 (1990), and Carlson v. Morton, 229 Mont. 234, 745 P.2d 1133 (1987), for the same proposition. But Grenz, Stott, and Carlson do not stand for a rule that a plaintiff must have privity of contract with the defendant-attorney in order to maintain a malpractice action. ¶87 To the contrary, we stated in Carlson that [i]n any professional negligence action, the plaintiff must prove that the professional owed him a duty, that the professional failed to live up to that duty, thus causing damages to the plaintiff. Carlson, 229 Mont. at 238, 745 P.2d at 1136 (emphasis added). Quoting some of this language from Carlson in Merzlak v. Purcell, 252 Mont. 527, 830 P.2d 1278 (1992), we explained as follows: Attorney malpractice is professional negligence. In order to recover in a professional negligence action, the plaintiff must prove that the professional owed him a duty, and that the professional failed to live up to that duty, thus causing damages to the plaintiff. Merzlak, 252 Mont. at 529, 830 P.2d at 1279 (emphasis added) (quoting Lorash v. Epstein, 236 Mont. 21, 24, 767 P.2d 1335, 1337 (1989), in turn quoting Carlson, 229 Mont. at 238, 745 P.2d at 1136); accord Hauschulz v. Michael Law Firm, 2001 MT 160, ¶ 11, 306 Mont. 102, ¶ 11, 30 P.3d 357, ¶ 11 (To recover damages in a legal malpractice claim, a plaintiff must establish each of the following elements: first, that the professional owed him a duty of care ; . . . . (emphasis added) (citing Merzlak, 252 Mont. at 529, 830 P.2d at 1279)). ¶88 Thus, our statement in Grenz, 244 Mont. at 426, 798 P.2d at 116, and Stott, 246 Mont. at 305, 805 P.2d at 1307, that a plaintiff in a legal malpractice action must establish that an attorney-client relationship existed was not a resurrection of the long-discarded requirement of privity of contract. Rather, it was another way of stating that the plaintiff must establish that the defendant owed her a duty of care. Notably, ALPS effectively conceded this point in the underlying action. Immediately after asserting in Addy's summary judgment motion that [e]ssential to a malpractice action is proof that an attorney-client relationship existed, ALPS went on to explain as follows:  Put another way, the Plaintiff must establish that the professional owed him a duty of care. (Emphasis added, citing Hauschulz. ) Therefore, the flaw in ALPS's position that Addy had no duty to Redies (because he was retained by Cosner) was the mistaken premise that attorney-client relationship means privity of contract. To the contrary, as our then-existing caselaw established, the requirement of privity to maintain an action in tort had been abolished. Accordingly, a defense that used the long-discarded concept of privity as a template was not a reasonable basis in law for contesting Redies' third-party theory.