Baker v. Wood, Ris & Hames, Professional Corp.
364 P.3d 872
Colo.2016Background
- Floyd Baker retained attorneys (Wood, Ris & Hames; Cook; Brundin) to draft his will and testamentary trusts; Betty (his wife) was named trustee/beneficiary with broad distribution powers; each child received $10,000 and equal shares of the remaining family trust principal after Betty’s death.
- After Floyd died, some assets passed to Betty by joint tenancy and the trusts were funded; Betty later executed her own will that resulted in one child (Roosa) receiving a substantially larger share than Baker and Kunda.
- Baker and Kunda (Floyd’s children) sued the Attorneys for breach of contract (third-party beneficiary), professional negligence (legal malpractice), fraudulent concealment, and negligent misrepresentation, alleging the Attorneys failed to advise Floyd about joint tenancy and that Betty’s subsequent estate plan frustrated his intent.
- The district court dismissed the complaint for failure to state claims, citing lack of standing/privity and insufficient pleading for fraud-related claims; the court of appeals affirmed; the Colorado Supreme Court granted certiorari.
- The Supreme Court declined to abandon Colorado’s strict privity rule (limiting attorney liability to clients except for narrow exceptions such as fraud, malicious conduct, or negligent misrepresentation), affirmed dismissal of Baker and Kunda’s claims, and rejected their arguments to adopt the California Test or the Florida–Iowa third-party beneficiary extension.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether third-party intended beneficiaries may sue a testator’s estate-planning attorney for malpractice or breach of contract (abandon strict privity) | Baker/Kunda: adopt California Test or Florida–Iowa Rule to allow intended beneficiaries to sue attorneys for negligence or contract breach | Attorneys: Colorado should retain strict privity; non-clients generally lack standing except for fraud, malicious conduct, negligent misrepresentation | Court held strict privity remains; refused to adopt California Test or Florida–Iowa Rule; claims fail |
| Whether the California Test supports plaintiffs’ claims | Baker/Kunda: California balancing factors justify liability to beneficiaries | Attorneys: California Test conflicts with policies protecting attorney-client loyalty and would invite unlimited suits; not applicable here | Court: Even if adopted, Lucas would not help because Floyd’s intent was implemented by the will; plaintiffs received what will specified |
| Whether the Florida–Iowa third-party beneficiary rule should be adopted | Baker/Kunda: extend contract third-party beneficiary doctrine to allow beneficiaries to sue drafting attorneys | Attorneys: Rule would conflict with privity policies and existing remedies (e.g., reformation, fraud claims); risk of conflicted duties and unlimited liability | Court: Declined to adopt; even if adopted plaintiffs’ claims fail because the will’s terms were implemented and any claim would rely on extrinsic evidence of intent |
| Whether fraudulent concealment claims were pleaded properly and whether C.R.C.P. 9(b) applies | Baker/Kunda: their concealment claim is distinct and should not be subject to Rule 9(b)’s heightened pleading | Attorneys: Fraud-based claims must be pleaded with particularity under C.R.C.P. 9(b); plaintiffs failed to plead elements | Court: Fraudulent concealment is subject to 9(b); plaintiffs failed to plead material concealment, intended reliance, and resulting detrimental action; dismissal affirmed |
Key Cases Cited
- Allen v. Steele, 252 P.3d 476 (Colo. 2011) (attorney duties to non-clients are limited; negligent misrepresentation requires business purpose)
- Lucas v. Hamm, 364 P.2d 685 (Cal. 1961) (California balancing test for third-party liability to beneficiaries where testator’s intent is clear but frustrated by attorney negligence)
- Ward, 100 U.S. 195 (U.S. 1879) (support for privity limitation to avoid unlimited liability)
- Schreiner v. Scoville, 410 N.W.2d 679 (Iowa 1987) (adopting rule allowing intended beneficiaries to sue when testamentary intent, as expressed, is frustrated by attorney negligence)
- DeMaris v. Asti, 426 So. 2d 1153 (Fla. Dist. Ct. App. 1983) (Florida approach recognizing malpractice/contract claims by intended beneficiaries when attorney negligence directly frustrates expressed testamentary intent)
- First Interstate Bank of Fort Collins, N.A. v. Piper Aircraft Corp., 744 P.2d 1197 (Colo. 1987) (elements of fraudulent concealment)