If you go to an attorney for advice and the attorney gives you bad advice that you rely upon, and that advice harms you, don’t you have a right to sue the attorney? This is a question the Supreme Court of Colorado answered in Allen v Steele. Let’s break down that important case between the attorney and the prospective client.
At the age of 24, Jack Steele suffered major head injuries as a result of a traffic accident. Subsequently, he and his wife Danette Steele (now age 26) consulted the lawyer Katherine Allen concerning a potential negligence suit against another driver.
They accused Allen of misleading them about the statute of limitations. Allen had allegedly told them that they had five years to file the lawsuit; in fact, the three-year statute of limitations had already run out. That is, the Steeles had waited too long to sue.
In response, the Steeles sued Allen and her professional corporation, Katherine Allen, P.C., for negligent misrepresentation and legal malpractice. In a decision that for years hamstrung Illinois plaintiffs, the trial court granted summary judgement on both claims. The Steeles appealed only the dismissal of their negligent misrepresentation claim.
The trial court granted Allen’s motion to dismiss the Steeles’ claims, finding that they did not plead enough facts to support a finding that Allen owed them a duty of care or that they otherwise maintained an attorney-client relationship. The Steeles took their case to the Court of Appeals.
The Colorado Court of Appeals reversed the trial court and found that the Steeles had stated a claim for negligent misrepresentation. In doing so, the court concluded that: [T]aking the facts alleged in the Steeles’ petition as true, they have stated facts sufficient to satisfy the elements of negligent misrepresentation, despite the fact that Allen did not issue an opinion letter.
The Supreme Court of Colorado overruled the Court of Appeals, holding that an initial consultation about a potential civil lawsuit was not sufficient to maintain a claim for negligent misrepresentation because the requisite element of ‘guidance to their business’ was not present.
The court explained that a ‘business transaction’ meant a commercial transaction, so that the alleged representation must be made in connection with the plaintiff’s business or professional dealings. A potential lawsuit wouldn’t qualify as a business transaction.
The court stressed that an attorney owes no duty of reasonable care to non-clients, and even prospective clients. One must be a client to state a claim for legal malpractice.
Duty-of-care: Information provided to prospective clients does not create a duty of reasonable care (as against malpractice) until an attorney-client relationship is formed.
It is wise to document the nature of the consultation and the limits of the advice to ensure you won’t lose in a lawsuit.
The Allen v Steele case teaches that it is critical to clearly understand the relationship attorneys have with clients and prospective clients. For clients, it means not relying on an attorney-client until an engagement letter is signed. You should also be careful to keep track of applicable deadlines.