The State of Estate Legal Malpractice Following Schneider
November 15, 2011 Posted By Ruth A. Kavanagh Complex Litigation
In June 2010, the New York Court of Appeals rendered a controversial decision in Estate of Schneider, 15 N.Y.3d 306, 907 N.Y.S.2d 119 (2010), wherein the Court overturned long-standing precedent that the fiduciaries of an estate had no standing to bring a legal malpractice action against a decedent’s estate-planning attorney. In Schneider, the Court held that the personal representative of a decedent’s estate had the capacity to maintain a malpractice action against an attorney for negligently causing the estate to incur enhanced tax liability. The Court stated that the decedent’s estate essentially stood in the shoes of the decedent and thus, privity, or a relationship approaching privity, existed between the personal representative of the estate and the estate-planning attorney. While the Court limited its holding to the fiduciaries and declined to extend a cause of action to the decedent’s beneficiaries, the decision nonetheless raised serious concerns amongst estate-planning practitioners.
Yet, despite endless articles and commentary on the case, only two subsequent New York cases have actually cited to Schneider.
In Leff v. Fulbright & Jaworski, LLP, et.al., 911 N.Y.S.2d 320 (1st Dept. 2010), the decedent’s wife filed a malpractice action against the decedent’s estate-planning attorneys alleging that they failed to properly advise the decedent as to a separation agreement, which required him to leave half of his probated estate to his son. In citing to Scneider, the 1st Department held that even though the estate-planning attorneys represented the decedent’s wife in her estate planning, she was not in privity with them with regard to her late husband’s estate. Thus, the lack of such privity barred her legal malpractice claim.
In a very recent decision out of the United States District Court in the Northern District of New York, defendant/third-party plaintiff Keybank National Association (“Keybank”), the trustee of the Patricia A. Gallagher Charitable Remainder Trust (“Trust”), brought a Third-Party Complaint against the attorney drafters of the Trust for negligence. See Gallagher v. Keybank Nat. Assoc., 2011 WL 4436176 (Sept. 22, 2011). Citing to Schneider, the Court held that liability for an attorney’s malpractice extends only to parties in privity with the defendant attorney. As Keybank had no attorney-client or contractual relationship with the third-party defendant attorneys, the Court dismissed the Third-Party Complaint.
As such, since the Schneider decision nearly one and a half years ago, estate-planning practitioners continue to have little guidance as to the full impact of this case. Thus, the state of estate legal malpractice remains in flux with numerous questions that remain post-Schneider, including issues regarding the statute of limitations of such malpractice actions.
Nevertheless, Schneider highlights the obligations of both the estate-planning attorney and the client to gather all familial and financial information from the outset. It also highlights the importance of full-disclosure by the client, not only during the initial client meeting, but throughout the representation, so that the estate-planning practitioner has all of the necessary information to provide the best estate plan for the client.