Opinion of the Court by Chief Justice MINTON.
The trial court dismissed this legal malpractice and breach of fiduciary duty case by granting summary judgment in favor of the defendant-attorney who argued that he owed no legal duty to a minor on whose behalf he had filed and settled a personal injury case. The defendant-attorney asserted that no attorney-client relationship existed between the minor and him because the minor's next friend and statutory guardian retained him to pursue the minor's tort claim. On discretionary review, we hold that an attorney pursuing a claim on behalf of a minor does have an attorney-client relationship with the minor. And that relationship means that the attorney owes professional duties to the minor, who is the real party in interest.
Gary Ryan Stewart suffered severe injuries in a car accident in which his father and brother were killed. He was a minor
After her appointment as guardian, Backus settled all tort claims for $1.3 million. Backus and Branham allocated one-half of the total settlement to Stewart and the other half to Backus, individually, and to Stewart's deceased brother's estate. After deducting expenses, apparently Branham paid the net proceeds for Stewart's claims to Backus as Stewart's guardian. Backus apparently never filed any accounting in the guardianship proceedings and allegedly dissipated the funds belonging to or intended to benefit Stewart.
During the ensuing years, Stewart reached the age of majority, married, and fathered two children. An Arkansas resident, he filed suit in his own name in Arkansas, alleging that his mother and stepfather, who also lived in Arkansas, failed to transfer to him the money he was awarded in the Kentucky car accident case. A few months later, his wife, Elizabeth Stewart, petitioned an Arkansas court to have Stewart declared incompetent. Stewart had allegedly suffered a head injury in the Kentucky accident that resulted in brain damage. The Arkansas court eventually declared him incompetent and named Elizabeth as her husband's guardian.
Meanwhile, Elizabeth, acting as Stewart's guardian, filed the instant legal malpractice and breach of fiduciary duty case
Stewart appealed to the Court of Appeals. The Court of Appeals reversed the trial court, holding that an attorney-client relationship existed between Branham and Stewart, the real party in interest. We accepted discretionary review and now affirm the opinion of the Court of Appeals.
A. Applicable Standard of Review is De Novo.
In reviewing a trial court's grant of summary judgment, we can uphold the summary judgment only if the party opposing summary judgment "could not prevail under any circumstances" at trial, viewing the evidence in the light most favorable to that party.
B. Attorneys Retained by a Minor's Next Friend or Guardian Owe Professional Duties to the Minor.
Under Kentucky law, a next friend may bring an action on behalf of a minor.
Unlike a next friend, whose authority is limited to filing suit on the minor's behalf and who lacks the authority to settle the lawsuit, a statutorily appointed guardian has a broader scope of authority and may settle a lawsuit on the ward's
There are other theories, such as recognizing a duty to the next friend's or guardian's minor or ward as a third-party beneficiary; but it seems clear to us that an attorney in this situation has an attorney-client
And we perceive no conflict between an attorney furthering the interests of the minor or ward and any duties the attorney would owe the person who retained the attorney in the capacity as next friend or guardian. The role of both the next friend and the guardian is to protect and further the minor's or ward's interests.
While we perceive no conflict between the interests of Stewart as beneficiary and ward and the interests of Backus as next friend and guardian, we recognize the existence of potential conflicts in this case between Stewart's interests and Backus's interests as an individual and as administrator of her deceased son's estate. But the fact that Branham accepted legal representation of these potentially conflicting interests does not negate the duties he owed to Stewart.
Branham argues that finding that attorneys owe duties to the minor wards of their clients serving as next friends or guardians is unnecessary because of the statutory protections provided in these situations.
Branham also argues that recognizing that attorneys have attorney-client relationships with, and owe duties to, the minors or wards of guardians or next friends may result in representation by two attorneys who may not agree on whether to accept a settlement if the child also has a guardian ad litem appointed under KRS 387.305. To be sure, guardians ad litem have been regarded as both attorneys and fiduciaries under Kentucky law.
On the other hand, were we to hold that the attorney retained by the individual acting in the capacity as next friend or guardian was not the attorney for the minor or ward, the minor or ward would be unrepresented, which would be contrary to the clear legislative intent to protect minors. Surely the Kentucky General Assembly did not enact a comprehensive legislative scheme concerning appointing guardians to further the "best interest" of minors,
Branham also argues that since a guardian is a fiduciary, a Kentucky Bar Association ethics opinion (KBA E-401, issued September 1997) stating that the attorney represents the fiduciary, not the estate or beneficiaries, is applicable. But this ethics opinion specifically addresses "the lawyer's responsibilities to the beneficiaries of estates and trusts" and does not specifically apply to a minor's guardian or next friend. This ethics opinion is not binding on us in this context;
Branham urges us to adopt the test stated in RESTATEMENT (THIRD) GOVERNING LAWYERS § 51
C. No Reason for Limiting This Holding to Apply Prospectively.
This is a matter of first impression in Kentucky, but we see no reason to limit our holding to apply prospectively as Branham argues. Rather, we find it clear that Branham owed, and should have known he owed, duties to the minor whose interests he and the next friend and guardian were obligated to advance and protect. While we may occasionally exercise our discretion to make application of a holding prospective only,
D. We Express No Opinion on Whether or When Attorney-Client Relationship Came to an End.
Because the existence of an attorney-client relationship between Branham and Stewart is the principal issue addressed by the parties to this appeal, the parties did not address arguments to the duration of the attorney-client relationship that we, by today's holding, have found to exist. We will attempt, nevertheless, to address briefly any concern about the terminus of the attorney's duties to any minor or ward retained by a next friend or guardian to pursue legal action on behalf of the minor or ward.
While we reject the argument that no attorney-client relationship was ever formed between Branham and Stewart, we do not hold that the attorney-client relationship in this or similar cases automatically continues indefinitely; and we express no opinion whether the attorney-client relationship had ceased by the time of any of the alleged actions for which Stewart aims to hold Branham responsible. In granting summary judgment for Branham based on its perception of a lack of recognition of a cause of action for a minor or ward against the attorney retained by the next friend or guardian to pursue legal action on behalf of the minor or ward, the trial court seemingly found that no attorney-client relationship ever existed. Accordingly, the trial court never issued any explicit findings about whether or when such an attorney-client relationship had ceased. It would be improper for this Court to make any factual findings concerning whether or when the attorney-client relationship ceased. Rather, cessation of the attorney-client relationship is a matter of proof
We affirm the opinion of the Court of Appeals reversing the summary judgment granted by the trial court in Branham's favor. But in reversing the trial court's summary judgment, we express no opinion on the ultimate merits of Stewart's legal malpractice and breach of fiduciary duty lawsuit against Branham because we do not reach the questions of whether breach, causation, and damages are established by the facts in the case.
All sitting. ABRAMSON, NOBLE, SCHRODER, and VENTERS, JJ., concur.
SCOTT, J., dissents by separate opinion in which CUNNINGHAM, J., joins.
SCOTT, J., dissenting.
I must respectfully dissent from the majority's opinion extending the attorney-client relationship with a guardian to the ward of the guardian actually represented. I do so for several reasons.
Secondly, it introduces an expensive complexity into litigation for minors that is unjustified given its infrequency and the fact that matters related to guardianships are committed to the exclusive supervision of the courts. "Where [the] legal disability of the individual is shown, the jurisdiction of the court is plenary and potent to afford whatever relief may be necessary to protect his interests and preserve his estates." DeGrella By and Through the Parrent v. Elston, 858 S.W.2d 698 (Ky.1993) (citing Strunk v. Strunk, 445 S.W.2d 145, 147 (Ky.1969)). "The court's action in such a case is not limited by any narrow bounds, but it is empowered to stretch forth its arm in whatever direction its aid and protection may be needed." Strunk, 445 S.W.2d at 147; see also KRS 387.070 ("[N]o guardian or conservator shall act until the guardian or conservator has been appointed by the proper District Court, and given bond to the Commonwealth of Kentucky with good surety, either corporate or personal, approved by the District Court to faithfully discharge the trust of guardian or conservator."); KRS 387.122 ("The District Court may direct that all or some part of the assets of a ward's estate be deposited in a bank ... subject to withdrawal by the guardian or conservator only upon authorization of the District Court."); KRS 387.125(6) ("Subject to the approval of the court ... a guardian may settle or compromise the action, claim, or proceeding on behalf of the ward."); KRS 389A.010(l)(a) ("Any trustee, guardian, conservator, or personal representative... not otherwise possessing a power of sale, may move the District Court of the county in which the fiduciary has qualified for an order granting the fiduciary the power to sell or mortgage any real estate or any interest therein possessed by his ward, decedent, or trust.").
Moreover, such an extension will necessarily endanger the finality of a guardian's decisions even though approved by a court, as well as extend, by several multiples, the attorneys necessary to represent a parent/guardian with multiple children/wards, not to mention the additional attorney necessary for the parent's personal claims. With such a "cast of counsel" imposed on one lay parent — each arguing for inconsistent results — how can one realistically expect our current statutory scheme to function inexpensively and expeditiously?
Here, Vicky Backus (Backus) retained Appellant, Ira Branham (Branham), to represent her in litigation stemming from an automobile accident, which killed her ex-husband, Gary Stewart (Stewart), and
On August 14, 1997, Branham filed the suit on behalf of Backus individually, as administratrix of Adam's estate, and as next-friend of Gary Ryan, a minor. Several months later, on December 17, 1997, an application and petition for Backus's appointment as guardian for Gary Ryan was filed in the Pike District Court.
In addition, attorney Michael Lucas was appointed guardian ad litem to represent Gary Ryan in regards to the proposed sale of his interest in the real estate. His report recommending approval of the sale was filed January 29, 1998. Thus, at its inception, the guardianship proceeding was an "adversary" proceeding. See KRS 389A.010(4) (right of appeal to circuit court in adversary proceedings). Thereafter, the sale of Gary Ryan's real estate was approved by the court with the net proceeds therefrom, payable upon behalf of Gary Ryan, being in the amount of $2,000.
Several months later, an agreement was reached to settle the multi-party wrongful death and personal injury suit for $1.3 million dollars, with $325,000.00 to be payable to Backus individually;, $325,000.00 to be payable to Adam's estate; and $650,000.00 to be paid for the benefit of Gary Ryan.
Given the majority's extension of the attorney-client relationship on the facts at hand, a future guardian, such as Backus, will not be able to rely upon the advice of one (1) counsel in navigating the myriad number of issues she will face in resolving multi-party, multi-issue litigation. Due to the inherent conflict now created for counsel, she will need three (3) attorneys: one for her individual claims, another to advise her as administratrix of Adam's estate, and a third to advise her as next friend/guardian on Gary Ryan's claims — each of which counsel must necessarily, by virtue of our loyalty rule, be solely devoted to maximum benefits for the single interest they represent. One could only imagine the difficulties this will present in the decision-making process for lay people, whether parents or not, who must handle these various fiduciary positions. It not only increases the complexity of litigation involving minors and other beneficiaries but inhibits the fundamental precept embodied by the court's mandatory supervision of a guardian's actions and decisions.
Keybank Nat. Ass'n v. Shipley, 846 N.E.2d 290, 300 (Ind.App.2006). "When lawyers must be conce[r]ned about their potential liability to third parties, the resultant self-protective tendencies may deter vigorous representation of the client. Attention to third-party risk might cause the attorney improperly to consider `personal interests' or `the desires of third parties' above the client's interests. This would contravene the lawyer's duty of loyalty to the client." Id. Citing JACK I. SAMET, ET AL., THE ATTACK ON THE CITADEL OF PRIVITY, 20 A.B.A. Winter Brief 9, 40 (1991). And "[l]oyalty is an essential element in the lawyer's relationship to a client." Baker v. Coombs, 219 S.W.3d 204, 209 (Ky.App.2007) (citing Kentucky Rules of the Supreme Court ("SCR") 3.130, Rule 1.7, Comment 1).
The "unavoidable tension between these ethical standards on the one hand, and the fear of exposure to malpractice liability to non-clients on the other, is an issue that must be confronted and dealt with squarely." Shipley, 846 N.E.2d at 300. And in resolving such a dilemma, we cannot ignore the inherent difficulties and expense of commanding multiple counsel. "It is well recognized that a fiduciary relationship exists between an attorney and a client, and the attorney owes the client the utmost fidelity, honesty[,] and good faith. An attorney [should owe] a duty to a non-client only in the most limited circumstances." Grimes v. Saikley, 388 Ill.App.3d 802, 328 Ill.Dec. 421, 904 N.E.2d 183, 194 (2009).
Under our previous precedents, although a legal malpractice claim may accrue
Here, the problem was the bond. It was too low and lacked a surety. Yet, "[t]o hold an attorney responsible for the damages occasioned by an erroneous judicial order, even though the error be induced by him, would make the practice of law one of such financial hazard that few men would care to incur the risk of its practice." Rose, 157 S.W.2d at 285. Rose involved an action by a former husband against the wife's attorney to recover alimony improperly paid due to an erroneous court order directing such payments. Although the impropriety of the payments was evident, the court in Rose upheld the dismissal of the claim against the attorney, finding that:
Id. at 285. That being said, "[a] false or fraudulent, and collusive, decision is beyond the power of a court to approve." Elston, 858 S.W.2d at 710. Thus, the court in Revill v. Pettit, 3 Met. 314, 60 Ky. 314, 1861 WL 5630 (1860), upheld the liability of an attorney for his participation with the court in a wrongful proceeding. See also Wood v. Weir, 5 B.Mon. 544, 44 Ky. 544, 1845 WL 3330 (1845). Yet, this action — and the majority's opinion — is not based upon or limited to allegations or collusion of fraud.
That being said, I recognize the majority's reliance upon precedent from other states — specifically Leyba v. Whitley, 120 N.M. 768, 907 P.2d 172, 182 (1995), Toporek v. Zepp, 224 Ga.App. 26, 479 S.E.2d 759, 761 (1996), and In re Guardianship of Karan, 110 Wn.App. 76, 38 P.3d 396, 401 (2002) — as well as other cases un-cited, such as Pederson v. Barnes, 139 P.3d 552 (Alaska 2006), Jenkins v. Wheeler, 69 N.C. App. 140, 316 S.E.2d 354 (1984), and Estate of Treadwell ex rel. Neil v. Wright, 115 Wn.App. 238, 61 P.3d 1214 (2003).
A better analysis is provided within the context of the RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 51 (2000). Subsection 4 negates a duty of care to a non-client unless, "such a duty would not significantly impair the lawyer's performance of obligation to the client." Id. The RESTATEMENT goes on to state:
Id. at 363 (emphasis added). The RESTATEMENT specifically sets forth a similar analysis when it states in § 51:
Id. at 365. This is consistent with KBA Ethics Opinion E-401, which states, "[a] lawyer who represents a fiduciary ... stands in a lawyer-client relationship with the fiduciary and not with respect to the fiduciary's estate."
CUNNINGHAM, J., joins this dissenting opinion.