Independent Contractors and Legal Malpractice
Plaintiff retains attorney to arrange for a tax free gift to her son. The IRS cutoff for tax free gift v. taxable gift is $1 million. She did not have a million in cash. However, she owned a valuable building in Manhattan. So, the law firm selected a Real Estate appraiser and arranged for the transaction. Problem? The IRS challenged, and Plaintiff had to pay $ 180,000 in additional tax. Was the law firm responsible for the mistake of the RE appraiser, or was the appraiser an independent contractor for whom they were not responsible?
Put another way, is this a Kleeman v. Rhinegold problem or not? There the attorney was responsible for negligent process service. Here, in Goldstein v Stern Keiser & Panken, LLC
2013 NY Slip Op 32666(U) October 18, 2013 Supreme Court, New York County Docket Number: 157177/12 Judge Joan A. Madden decided that the attorneys were not responsible.
From Kleeman : "The most often cited formulation is that a duty will be deemed nondelegable when "`the responsibility is so important to the community that the employer should not be permitted to transfer it to another'" (id., at 119, quoting Prosser and Keeton, op. cit., at 512). This flexible formula recognizes that the "privilege to farm out [work] has its limits" and that those limits are best defined by reference to the gravity of the public policies that are implicated (5 Harper, James and Gray, Torts § 26.11, at 73 [2d ed]; see also, id., at 76-77).
Viewed in the light of these principles, the duty at issue here — that owed by an attorney to his or her client to exercise care in the service of process — fits squarely and neatly within the category of obligations that the law regards as "nondelegable." Manifestly, when an individual retains an attorney to commence an action, timely and accurate service of process is an integral part of the task that the attorney undertakes (see, 5 Harper, James and Gray, op. cit., at 76-77; cf., Feliberty v Damon, supra, at 120). Furthermore, proper service of process is a particularly critical component of a lawyer's over-all responsibility for commencing a client's lawsuit, since a mistake or oversight in this area can deprive the client of his or her day in court regardless of how meritorious the client's claim may be. Given the central importance of this duty, our State's attorneys cannot be allowed to evade responsibility for its careful performance by the simple expedient of "farming out" the task to independent contractors.
The existence of an extensive and comprehensive Code of Professional Responsibility that governs the obligations of attorneys to their clients reinforces our conclusion. Under the Code, a lawyer may not "seek, by contract or other means, to 276*276 limit prospectively the lawyer's individual liability to a client for malpractice" (DR 6-102, 22 NYCRR 1200.31). Moreover, the Code forbids lawyers from "[n]eglect[ing] legal matter[s] entrusted to [them]" (DR 6-101 [A] , 22 NYCRR 1200.30 [a] ), enjoins them to assist in "secur[ing] and protect[ing] available legal rights" (EC 7-1) and requires them to represent their clients as zealously as the "bounds of the law" permit (Canon 7). All of the latter ethical and disciplinary considerations are implicated when a client's lawsuit is undermined — or even defeated — as a consequence of carelessness in the service of process.
Our conclusion is also supported by the perceptions of the lay public and the average client, who may reasonably assume that all of the tasks associated with the commencement of an action, including its formal initiation through service of process, will be performed either by the attorney or someone acting under the attorney's direction. While it may be a common practice among attorneys to retain outside agencies like Fischer's to assist them in effecting service, that custom is not necessarily one of which the general public is aware. Even where a client is expressly made aware that a process serving agency will be retained, it is unlikely that the client will understand or appreciate that the process serving agency's legal status as an "independent contractor" could render the retained attorney immune from liability for the agency's negligence. Under established principles, the client's reasonable expectations and beliefs about who will render a particular service are a significant factor in identifying duties that should be deemed to be "nondelegable" (see, Restatement, op. cit., § 429; see also, Feliberty v Damon, supra, at 120).
Finally, we conclude that permitting lawyers to transfer their duty of care to process servers would be contrary to sound public policy. In this State, licensed attorneys have been granted an exclusive franchise to practice law, with the understanding that they have both the specialized knowledge and the character required to represent clients in a competent, diligent and careful manner. Under this system, lawyers are authorized to hold themselves out as being uniquely qualified to manage their clients' legal affairs, a task that unquestionably includes the commencement of lawsuits. While it is true that the State also licenses nonlawyers to perform certain discrete, law-related tasks such as service of process (see, General Business Law art 8), the existence of that licensing system certainly does not evince a governmental intent to 277*277 relieve attorneys of the responsibilities implicit in their franchise."
From Goldstein: In the present matter, where there is no allegation that SKP was negligent in choosing JDM, where there is no non-delagable duty, or dangerous condition, the attorney defendants are not liable for JDM's alleged negligence iri preparing the report. Plaintiff has made no allegations which would establish that SKP I should be held vicariously liable for JDM's mistake. There is no showing that the attorney defendants' negligence was the proximate cause of plaintiff's injuries, or that "but foru their handling of any duty owed to plaintiff, plaintiff would not have
been injured. Consequently, the attorney defendants' motion to dismiss the complaint is granted."