March 27, 2019 – The Wisconsin Supreme Court has unanimously ruled that a legal malpractice claim for alleged negligent administration of an estate was properly dismissed while clarifying the law when third-party, non-clients bring malpractice claims.
Charles MacLeish had a one-page will when he died in 1984. Under the will, MacLeish left all his assets to his surviving spouse, Thelma, for her life. At Thelma’s death, any remaining assets were directed to a trust for the benefit of MacLeish’s four children.
The former partner of the lawyer who drafted the will administered the Charles MacLeish estate when Charles died, advising Thelma to claim full use of the federal estate tax marital deduction. Thelma claimed the federal marital deduction.
Thus, the Charles MacLeish estate was not subject to estate tax in 1984. Instead, the estate tax applied to Thelma’s estate – which included the assets that passed to her from Charles – when she passed away in 2008. The estate tax bill was about $261,000.
The lawyer who administered the Charles MacLeish estate subsequently became a member of Boardman & Clark LLP. Thus, the four MacLeish children filed a lawsuit against Boardman & Clark (Boardman) and the lawyer’s former firm, alleging legal malpractice in estate administration caused increased taxes and probate expenses.
Specifically, they argued that when Charles died in 1984, a trust should have been created to receive his assets, instead of transferring to Thelma directly. “The will of Charles MacLeish should have been construed to create a trust for the benefit of Thelma MacLeish for her lifetime” with a remainder to the children, they argued.
The complaint said the estate tax could have been avoided if the Charles McLeish estate had been construed in this way when Charles died in 1984.
Defending the action, Boardman said the Charles MacLeish will was clear: it did not call for a trust to be created for the benefit of Thelma. Thus, Boardman argued that the children could not maintain a legal malpractice claim under Wisconsin law.
The circuit court agreed with Boardman and dismissed the case on summary judgment, concluding Charles’s will “did not create a trust as a matter of law, nor did he intend to create a trust.” The MacLeish children appealed, and an appeals court affirmed.
Liability to Third-Party, Non-Clients?
In MacLeish v. Boardman & Clark LLP, 2019 WI 31 (March 26, 2019), the Wisconsin Supreme Court unanimously affirmed the appeals court, reviewing several aspects of the case to determine that the MacLeish children could not maintain the lawsuit.
First, the Supreme Court addressed whether the children had standing to bring a lawsuit for legal malpractice against the law firm that handled their father’s estate.
Joe Forward, Saint Louis Univ. School of Law 2010, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by email or by phone at (608) 250-6161.
The Supreme Court, in an opinion by Justice Ann Walsh Bradley, noted that in general, “an attorney cannot be held liable to a third party for any act committed within the scope of the attorney-client relationship.”
However, the court noted a limited exception for estate planning matters, first applied in Auric v. Continental Cas. Co., 111 Wis. 2d 507, 331 N.W.2d 325 (1983).
In that the case, an attorney failed to obtain the signature of a witness, invalidating the will. A beneficiary brought a negligence claim against the attorney.
The Supreme Court, in Auric, ruled that “the beneficiary of a will may maintain an action against an attorney who negligently drafted or supervised the execution of the will even though the beneficiary is not in privity with that attorney.”
Subsequent cases have determined that Auric is a narrow exception to the third-party standing rule, and a third-party beneficiary “must be able to establish that the attorney’s failure thwarted the decedent’s clear intent.”
The MacLeish children asked the Supreme Court to abandon the narrow Auric exception and adopt the Restatement (Third) of the Law Governing Lawyers, section 51, establishing the lawyer’s duty of care to non-clients. The Restatement establishes more situations in which a lawyer could be liable to a non-client.
But the Supreme Court declined.
“Adopting the Restatement as the MacLeish children urge would significantly change the general rule of attorney nonliability to non-clients,” Justice A.W. Bradley wrote.
“In the context of this case, adopting the MacLeish children’s position would result in the elimination of the specific requirement that a third-party beneficiary demonstrate that the testator’s clear intent was thwarted in order to proceed with a legal malpractice claim.”
For one, the court noted, rewriting the Auric exception could make attorneys liable even if they properly carry out a testator’s intentions.
“Holding attorneys accountable to a nebulous class of third parties who are likely to be more concerned with their own hopes of inheritance than testator intent further compromises the duty an attorney owes to the client,” Justice A.W. Bradley noted.
Under Auric, Boardman Prevails
The Supreme Court noted that it has not previously decided whether the Auric exception allows a third-party beneficiary to bring a legal malpractice action for negligent administration of an estate, as opposed to negligent drafting of a will.
The court confirmed that it does apply. “[T]he Auric exception to the rule of nonliability of an attorney to a nonclient applies to the administration of an estate in addition to the drafting and execution of a will,” Justice A.W. Bradley wrote.
Although the MacLeish children had standing to bring the suit, the court concluded that they did not meet the burden to prove negligent administration in this case.
That is, they could not show that their father’s testamentary intent was thwarted by Boardman’s alleged negligence, concluding the language of the will was unambiguous.
“The language cannot be construed to compel the creation of a trust either as a matter of administration or by its explicit text,” A.W. Bradley wrote.
“In other words, the will provides that Charles’s property be devised to Thelma’s exclusive control with no strings attached.”