Determining who’s the client? The Courier, May 8 Posted:05/13/08
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Who is the client? The Appellate Division of the Superior Court decided an interesting case the other week that helps to answer this question. The case, Estate of Spencer v. Gavin, involves three estates and an unscrupulous lawyer.
Daniel J. Gavin was a lawyer with an office in Woodbridge, New Jersey. The three estates were the estate of a mother who died in 1960 and her two daughters, who died in 1985 and 1994, respectively. Although the reported facts are somewhat scant, it appears that none of the estates were fully administered and that Mr. Gavin, eventually, ended up administering all three estates.
Although not stated in the case, it would also appear that after the death of the mother and the two daughters there were no close relatives. I say this because the last surviving daughter left a significant portion of her estate to a charitable foundation that was to be established after her death. I also say this because of what Mr. Gavin did.
Mr. Gavin, who was diagnosed with terminal lung cancer soon after the death of the last daughter, helped himself between $400,000 and $500,000 of the estates’ money. But the case that was decided recently was not directly about Mr. Gavin.
The case was about another lawyer who rented office space from Mr. Gavin during the period of time that Mr. Gavin was stealing money from the estates. Mr. Gavin owned a professional office building, and he rented space in his building to several attorneys.
Dean Averna was one of the lawyers to whom Mr. Gavin rented space. From the testimony of several witnesses, Mr. Averna and Mr. Gavin had a working relationship through which Mr. Gavin was grooming Mr. Averna to take over Mr. Gavin’s law practice.
In relation to the estates, Mr. Gavin had Mr. Averna performed two small items of work, for which Mr. Averna billed Mr. Gavin less than $3,000.
From the testimony of the various witnesses, other tenants in the office building that Mr. Gavin owned knew or had some reason to know that Mr. Gavin was stealing from the estates. Some of that testimony could lead to the conclusion that Mr. Averna knew that Mr. Gavin was stealing from the estate.
What the Appellate Division had to decide was, Could Mr. Averna be held liable to the estates for his failure to disclose Mr. Gavin’s thievery to the appropriate authority?
Lawyers, as you may know, are governed by Rules of Professional Conduct (RPC). A lawyer has an obligation to report a lawyer who violates an RPC if the non-violating lawyer has actual knowledge that the violating lawyer breached an RPC that reflects on the trustworthiness of the violating lawyer.
Violations of the Rules of Professional Conduct do not result in per se findings of civil liability on an attorney’s part. In other words, just because a lawyer violates an RPC does not mean that the lawyer can be held civilly liable to a third-party who was harmed by the violating attorney’s actions.
The factual basis that was at the core of this decision was that Mr. Averna worked on matters for the estates. Since he worked on those matters, Mr. Averna established an attorney-client relationship between himself and, at least, one of the estates. As an attorney for the estate, Mr. Averna owed an obligation to the estate and could be sued for his inactions in failing to report Mr. Gavin’s thievery.
What was surprising to me in reading this case was not that the Appellate Division held that Mr. Averna could potentially be held liable for his inaction, but that the trial court granted summary judgment in Mr. Averna’s favor holding that no such duty existed.
Since Mr. Averna performed work on behalf of at least one of the estates, it would seem to go without saying that he was an attorney for one of those estates. Since Mr. Averna was an attorney for the estate, he owed a duty of loyalty to the estate. So, if the estate can now prove that Mr. Averna had actual knowledge that Mr. Gavin was stealing from the estate, something that is still unsettled, Mr. Averna would be liable to the estate for damages suffered by the estate through Mr. Gavin’s thievery.
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