Summary
The Supreme Court of Oregon held that a lawyer may not be held jointly liable with a client for substantially assisting the client's breach of fiduciary duty when the lawyer acts within the permissible scope of the lawyer-client relationship. The plaintiff bears the burden of proving that the lawyer acted outside that scope, including by acting in a manner unrelated to the representation, solely in the lawyer's self-interest, or within the crime-or-fraud exception. Applying that rule, the court reversed the Court of Appeals and affirmed summary judgment for the lawyer.
Topics
Practice areas
Questions Presented
- Whether a lawyer may be held jointly liable to a third party for substantially assisting a client's breach of fiduciary duty or acting in concert with the client.
- Whether a lawyer acting within the permissible scope of the lawyer-client relationship is protected by a qualified privilege from such liability.
- Whether the summary-judgment record contained evidence that Markley acted outside the scope of his lawyer-client relationship.
Holdings
- A lawyer may not be held jointly liable with a client for the client's breach of fiduciary duty when the lawyer acted on behalf of the client and within the scope of the lawyer-client relationship. Liability may be imposed only if the third party proves that the lawyer acted outside that scope.
- The summary-judgment record contained no evidence from which a reasonable jury could find that Markley acted outside the permissible scope of his representation of Schrock.
Key quotations
“We hold that a lawyer may not be held jointly liable with a client for the client's breach of fiduciary duty unless the third party shows that the lawyer was acting outside the scope of the lawyer-client relationship.” (142 P.3d at 1063)
“In this case, we extend those well-recognized principles to a context that we have not previously considered and hold that a lawyer acting on behalf of a client and within the scope of the lawyer-client relationship is protected by such a privilege and is not liable for assisting the client in conduct that breaches the client's fiduciary duty to a third party.” (142 P.3d at 1069)
“In our view, the test that we hold applicable herewhether the lawyer's conduct fell outside the permissible scope of the lawyer-client relationshipoften will lead to the same result as the tests adopted in the cases described above.” (142 P.3d at 1071)
Factual background
Clyde Reynolds and Donna Schrock jointly purchased two parcels of land and later settled consolidated litigation between them through an agreement negotiated and drafted by their attorneys, including Schrock's attorney Charles Markley. Under the settlement, Reynolds transferred his interest in one property to Schrock, while the parties were to sell the other property and apply the proceeds according to specified conditions; a potential security interest in the transferred property depended on the sale proceeds. Markley advised Schrock that the agreement did not expressly require her to retain the transferred property, assisted her in selling it confidentially, and advised and assisted her in revoking consent to the sale of the other property. Reynolds alleged that Schrock breached fiduciary duties and that Markley was jointly liable for substantially assisting that breach.
Procedural history
Clyde Reynolds sued Donna Schrock and her attorney, Charles Markley, arising from Schrock's alleged breach of fiduciary duty and related conduct in implementing a settlement agreement. Reynolds alleged that Markley aided and abetted Schrock's torts and interfered with the settlement contract. After Reynolds and Schrock settled, Markley moved for summary judgment; the circuit court granted the motion. The Court of Appeals affirmed as to conversion but reversed as to aiding and abetting breach of fiduciary duty. The Supreme Court reversed the Court of Appeals and affirmed summary judgment for Markley.
Remand instructions
None. The Supreme Court affirmed the circuit court's summary judgment in favor of Markley.