One of the unique elements of legal malpractice is the requirement of privity. Privity of contract (or representation) is an ancient concept, which states that only those in direct contract may be held responsible for harm. It is the opposite of generalized tort liability. Familiar to law students, privity giving way to generalized tort liability can be seen clearly in the product liability world. For example, a kid who was injured in old washer/dryers was unable to sue the manufacturer for a long time because they lacked privity of contract with the seller/distributor/manufacturer. That gradually changed to tort liability for a dangerous product.
In Bloostein v Morrison Cohen LLP 2016 NY Slip Op 31309(U) July 11, 2016 Supreme Court, New York County Docket Number: 651242/2012 Judge: Anil C. Singh we see the same issue with the law firm which issued an opinion letter upon which the investors relied. None had a direct privity relationship with the law firm.
“The third-party complaint also seeks contribution from Brown Rudnick. There is no dispute that Brown Rudnick did not have direct privity with the plaintiff investors. However, Morrison Cohen claims that Brown Rudnick breached its duty of care to the plaintiff investors and ultimately did have a relationship approaching privity in issuing an Opinion Letter which contained false representations of what the default trigger rating would be. Exhibit E. Morrison Cohen cites to Millennium I’mport, LLC v Reed Smith LLP, 104 AD3d 190, 194 (1st Dept 2013) which held that, “[i]t is well settled that attorneys may be liable for their negligence both to those with whom they have actual privity of contract and to those with whom the relationship is ‘so close as to approach that of privity. It also cites to Prudential Ins. Co. v Dewey, 80 N.Y. 2d 383-85 (1992), where, in the context of opinion letters, the Court of Appeals has held that a relationship “approaching privity” exists between the drafting attorney and a non-client recipient where there is: “(1) an awareness by the maker of the statement that it is to be used for a particular purpose; (2) reliance by a known party on the statement in furtherance of that purpose; and (3) some conduct by the maker of the statement linking it to the relying party and evincing its understanding of that reliance.” In Prudential, the court found that the relationship between lender and the law firm representing borrower was sufficiently close to support liability for law firm’s alleged negligent creation of an opinion letter regarding the effect of restructuring of loan transaction and the transmission of that letter to the creditor for its own use. In particular, the court found that the law firm knew that letter was to be used by lender in deciding whether to permit debt restructuring, the lender unquestionably relied on the opinion letter in agreeing to that restructuring, and the law firm addressed and sent the opinion letter directly to lender. Similarly, here, Brown Rudnick was aware that its Opinion Letter was to be used for the purpose of the Transaction. It also addressed and directly sent the Opinion Letter to each of the investors. The Letter also states at page 34 that, “this Opinion may not be relied upon except with respect to the consequences discussed herein” and “this Opinion may be relied upon and used by the parties listed in Schedule A”. Schedule A includes the plaintiff investors. Brown Rudnick contends that Morrison Cohen does not set forth sufficient facts tending to show that by issuing the Opinion Letter, the investors were caused to execute the transaction documents containing the revised rating trigger. However, in order to state a claim for contribution, Morrison Cohen need only allege that Brown Rudnick’s tortious conduct contributed to the injury alleged by the investors – not that Brown Rudnick’s conduct was the sole cause of the injury. Schauer v Joyce, 54 N.Y. 2d 1, 5 (1981). Therefore, Morrison Cohen’s claims for contribution against Stonebridge are dismissed. Brown Rudnick’s motion to dismiss the claims based on contribution is denied. “