Brennan v. RuffnerBrennan v. Ruffner
PARIENTE, Judge.
The opinion of this court filed March 2, 1994 is withdrawn and the following opinion is substituted. Appellant‘s motion for rehearing, considered in light of this substituted opinion, is denied.
We affirm a final summary judgment entered in favor of a lawyer аnd against a disgruntled minority shareholder of a closely held corporation. We find that an attorney/client relationship did not exist between the individual shareholder and the attorney representing the corрoration. Consequently, there is no basis for a legal malpractice
In 1976, appellant, Robert J. Brennan, M.D., (Dr. Brennan) along with a Dr. Martell, employed appellee, Charles L. Ruffner, Esq., (lawyer) to incorporate their medical practice as a professional association. In connection with the incorporаtion, the lawyer prepared a shareholder‘s agreement. In 1982, a third doctor, Dr. Mirmelli, joined the corporation, and each doctor became a one-third shareholder in the new firm. The lawyer, who wаs corporate counsel since 1976, was requested to draft a new shareholder‘s agreement. After approximately 8 months of negotiation, the shareholders executed a new shareholder‘s agrеement. The new agreement included a provision for the involuntary termination of any shareholder by a majority vote of the two other shareholders. It is undisputed that Dr. Brennan was aware of this provision at the time he signed the documents and that he signed the agreement upon reassurances from Dr. Mirmelli that he would not join with Dr. Martell in using the provision against Dr. Brennan.
However, despite the assurances, in 1989 Dr. Martell and Dr. Mirmelli involuntarily terminated Dr. Brennan as a shareholder and employee of the corporation. Dr. Brennan instituted a lawsuit against Dr. Martell and Dr. Mirmelli claiming breach of contract and fraud in the inducement. The verified comрlaint in that lawsuit specifically alleged that Dr. Brennan was not represented by counsel in the negotiation of the shareholder‘s agreement. That lawsuit was settled. Dr. Brennan then filed this suit for legal malpractice, breach of contract, breach of fiduciary duty and breach of contract as a third party beneficiary. In contradiction to the sworn allegations of the first lawsuit, Dr. Brennan alleged in this complaint that the lаwyer represented him individually, as well as the corporation, in the preparation and drafting of the agreement. The lawyer denied undertaking the representation of Dr. Brennan individually.
In a legal malpraсtice action, a plaintiff must prove three elements: the attorney‘s employment, the attorney‘s neglect of a reasonable duty and that such negligence resulted in and was the proximate causе of loss to the plaintiff. Bolves v. Hullinger, 629 So.2d 198 (Fla. 5th DCA 1993); Gentile v. Rodriguez, 583 So.2d 382 (Fla. 3d DCA 1991); Riccio v. Stein, 559 So.2d 1207, (Fla. 3d DCA), rev. dismissed, 567 So.2d 436 (Fla. 1990). Florida courts have uniformly limited attorney‘s liability for negligence in the performance of their professional duties to clients with whom they share privity of contract. Angel, Cohen & Rogovin v. Oberon Inv., 512 So.2d 192 (Fla. 1987); Ginsberg v. Chastain, 501 So.2d 27 (Fla. 3d DCA 1986). “In a legal context, the term `privity’ is a word of art derived from the common law of contracts and used to describe the relationship of persons who are parties to a contract.” Espinosa v. Sparber, Shevin, Shapo, Rosen & Heilbronner, 612 So.2d 1378, 1379-89 (Fla. 1993) (citation omitted). The only instancеs in Florida where the rule of privity has been relaxed is where the plaintiff is an intended third party beneficiary of the employment contract. Espinosa; Oberon; Rosenstone v. Satchell, 560 So.2d 1229 (Fla. 4th DCA 1990).
The material undisputed facts in this case support a legal conclusion that there was no privity of contract between Dr. Brennan and the corporation‘s lawyer. It is undisputed that the lawyer was representing the corporation. The issue raised by Dr. Brennan‘s complaint was whether the lawyer was also representing him individually. While Dr. Brennan made the initial contact with the lawyer, there is no evidence in the record to create a credible issue of fact that the lawyer ever represented Dr. Brennan individually. Dr. Brennan‘s sworn complaint against the other doctors, which preceded the legal malpractice action against the lawyer, states he was unrepresented by cоunsel in the negotiation of the shareholder‘s agreement.
Dr. Brennan argues that a separate duty to him as a shareholder arose by virtue of the lawyer‘s representation of the closely held corporation. Although never squarely decided in this state, we hold that where an attorney represents a closely held corporation, the attorney is not in privity with and
In addition, under the facts of this case, Dr. Brennan cannot claim that he was an intended third party benefiсiary of the contract of representation with the corporation. Florida has extended the third party beneficiary exception to the privity requirement in legal malpractice actions to very limited instances, mainly in the area of will drafting, where it can be demonstrated that the intent of the client in engaging the services of the lawyer was to benefit a third party. Espinosa; Oberon. In this case, there are no facts to suрport Dr. Brennan‘s assertion that the primary intent of the corporation in hiring the attorney to draft the shareholder‘s agreement was to directly benefit Dr. Brennan individually. Dr. Brennan admits that there was an inherent conflict of interest between the rights of the individual shareholder and the corporation. This alone expressly undercuts a third party beneficiary claim. See Oberon, 512 So.2d at 194. A third party beneficiary theory of recovery has been rejеcted in other jurisdictions in similar circumstances on the basis that the individual shareholder cannot be an intended third party beneficiary of a shareholder‘s agreement because the interests of the corрoration and the minority shareholder are potentially in opposition. See Skarbrevik; Felty.
We also reject the notion that the lawyer in this case could be held liable to one of the minority shareholders for a breаch of fiduciary duty. In any closely held corporation, there will be an inherent conflict between the potential rights of the minority shareholder and the rights of the corporation in a shareholder‘s agreement concerning termination. At the time this agreement was drafted, any one of the three shareholders could have ended up becoming the minority shareholder. While Dr. Brennan claimed in the complaint that the lawyer had a duty to advise him of a conflict of interest and never advised him of a potential conflict, the facts in the record do not support that contention. Dr. Brennan testified in deposition that he simрly did not recall any conversations. However, the accountant for the corporation specifically remembered a conversation where the lawyer told the doctors collectively that he represented only the corporation in
Finally, even assuming arguendo that a duty existed based on an attorney/client relationship, a third party beneficiаry theory or a breach of fiduciary relationship, we simply do not find any factual dispute concerning the issue of proximate cause. It is undisputed that Dr. Brennan was aware of the provisions in the agreemеnt and chose to take his chances upon being reassured by Dr. Mirmelli that he would never use the provisions against Dr. Brennan. Compare Miller v. Selden, 591 So.2d 1063 (Fla. 4th DCA 1991).
AFFIRMED.
WARNER and KLEIN, JJ., concur.
Notes
The Code of Professional Responsibility in effect in 1976 (the time the initial contractual relationship began) did not prohibit a lawyer from representing both a shareholder and the corporation. Although there was no Disciplinary Rule on the matter, Ethical Consideration 5-18 stated:
A lawyer employed or retained by a corporation or similar entity owes his allegiance to the entity and not to a stockholder, director, officer, employee, representative, or other person connеcted with the entity... . Occasionally a lawyer for an entity is requested by a stockholder, director, officer, employee, representative, or other person connected with the entity to represent him in an individual capacity; in such case the lawyer may serve the individual only if the lawyer is convinced that differing interests are not present.
Even if 1988 is used as the date of employment, the rule in effect at that timе permitted dual representation. Rule 4-1.13 of the rules regulating the Florida Bar allows a “lawyer representing an organization [to] also represent any of its directors, officers, employees, members, shareholders, or other constituents, subject to the provisions of rule 4-1.7.” Rule 4-1.7 governs conflicts of interest.