May 20, 2015
Authored by: Luke Lantta
There is seemingly a line – at least under Florida law – that will not yet be crossed in the expanding world of third parties who purportedly owe duties to trust beneficiaries. In Walther v. Kane (unpublished), the United States Court of Appeals for the Eleventh Circuit affirmed a federal district court’s ruling that, under Florida law, an attorney retained to represent only the trustee does not owe a fiduciary duty to the beneficiaries of the trust. This decision stands in contrast to the trend in jurisdictions, including Florida, to chip away at the privity requirement when it comes to legal malpractice claims against estate planning attorneys.
Lawyers representing Florida trustees can rest a little easier for two reasons. First, although unpublished, a federal appellate court has plainly found that no fiduciary duty is owed to trust beneficiaries by a lawyer representing the trustee. Second, perhaps unintentionally, this opinion may help undermine arguments that a fiduciary exception to the attorney-client privilege exists in Florida based on a “beneficiary as the real client” argument. Under the “beneficiary as the real client” argument, it is argued that the trustee’s lawyer serves the beneficiaries’ interests and, thus, communications between the trustee and its lawyer should be provided to the beneficiaries. But, if the trustee’s lawyer owes no fiduciary duties to the trust beneficiaries, then how could the beneficiaries be the lawyer’s “real clients” when providing legal advice to the trustee?
One important caveat, however: in a footnote, the court noted that the plaintiffs “failed to plainly and prominently argue in their initial brief that they were intended third-party beneficiaries of the legal services contract” between the lawyer and the trustee and, thus, they abandoned that argument. This third party beneficiary argument has gained some traction in other jurisdictions when it comes to the drafting of a will or trust. That is, the beneficiaries allege that they are intended third party beneficiaries of the drafting lawyer’s representation of the grantor or testator. It is unclear in this decision whether the argument would have been persuasive under the facts of this case or in the context of a lawyer representing a trustee (as opposed to a grantor or testator).