The Institute in the Courts: State Supreme Court Adopts Section of Law Governing Lawyers

In Parkinson v. Bevis, 2019 WL 4266089 (Idaho Sept. 10, 2019), the Supreme Court of Idaho adopted Restatement of the Law Third, The Law Governing Lawyers § 37, Comment d.

That case arose when a client filed an action for breach of fiduciary duty against the attorney who represented her in her divorce proceedings, alleging, among other things, that the attorney “without [the plaintiff’s] knowledge or consent, shared attorney-client confidential information with [plaintiff’s husband’s] attorney” and “was complicit with [plaintiff’s husband’s attorney] in securing a divorce for [her husband] on terms more favorable to [her husband].” The plaintiff initially sought damages in “an amount to be proven at trial” but, after the defendant filed a motion to dismiss, the plaintiff admitted that she did not suffer economic loss and that she sought equitable remedies that were ‘“implicit in her breach of fiduciary duty claims.’” Granting the defendant’s motion to dismiss, the state district court found that the plaintiff’s claim “was, in essence, a legal malpractice claim,” and ‘“because [the plaintiff] [h]ad failed to allege sufficient facts to show the information was confidential and/ or the communications were privileged, [the plaintiff’s] complaint fail[ed] to state a cause of action upon which relief [could] be granted.’” The district court denied the plaintiff’s motion for reconsideration of the dismissal and motion to amend her complaint, reasoning “that it would be futile to allow [the plaintiff ] to amend her complaint to clarify the equitable nature of her allegations, because such a claim [was] indistinguishable from a negligence claim, for which [the plaintiff ] would have to show damage.”

Vacating the judgment of dismissal and reversing the district court’s grant of the defendant’s motion to dismiss, the Supreme Court of Idaho held, inter alia, that the district court was correct in “conclud[ing] that Idaho permit[ted] plaintiffs to bring a claim for breach of fiduciary duty where the fiduciary duty ar[ose] from the lawyer-client relationship,” but that “the court erred in concluding that the facts here failed to establish an independent claim for breach of fiduciary duty by [the defendant].” The court explained that “[b]reach of fiduciary duty, even when based on attorney misconduct, differ[ed] from a legal malpractice claim.”

The court noted that Restatement of the Law Third, The Law Governing Lawyers § 37, Comment d, provided factors to be used in determining whether an attorney’s violation of a duty to his or her client constituted a clear and serious violation that warranted partial or complete forfeiture of the attorney’s compensation. Adopting § 37, Comment d, the court explained that “[t]he sanction of fee forfeiture [was] available when an attorney violate[d] his duty to his client in a serious way,” and that the factors set forth in § 37—“(1) the extent of the misconduct, (2) whether the breach involved knowing violation or conscious disloyalty to a client, (3) whether forfeiture [was] proportionate to the seriousness of the offense, and (4) the adequacy of other remedies”—“[were] to be used to determine whether the trial court [could] order forfeiture of all or a portion of an attorney’s fee as an appropriate equitable remedy in these circumstances.” The court clarified that “[t]he result here is narrow, offering relief to a client only in those cases in which the client seeks fee disgorgement as a solitary remedy. To the extent that legal malpractice plaintiffs seek both damages and fee disgorgement, the principles articulated in this decision would apply to the equitable portion of the claim. But, if the breach of fiduciary duty claim includes a claim for damages, that claim is appropriately subsumed by the legal malpractice claim.” In making its decision, the court pointed out that other states, including Nevada and West Virginia, had relied upon and adopted the Restatement’s factors.