The Risk Manager, Summer 2010
In the landmark decision Branham v. Stewart (No. 2007-SC-000250-DG, 3/18/10) the Kentucky Supreme Court held that a minor may make a claim for legal malpractice or breach of fiduciary duty against a lawyer retained by a person acting as the minor's next friend or statutory guardian.
Branham is a must read Supreme Court case for Kentucky lawyers. While clarifying the professional relationship of lawyers with minors, the decision also raises ethical questions regarding representing minors. What follows is a brief synopsis of the case, identification of issues raised in a vigorous dissent, and risk management suggestions.
Facts: When the minor Gary Stewart was seriously injured in a car accident in which his brother was killed, Stewart’s mother retained Branham to represent her individually, as Next Friend of Stewart, and as administrator of her deceased son’s estate. Branham also represented the mother in obtaining appointment as statutory guardian of Stewart. The mother then settled all tort claims for $1,300,000. Branham and the mother allocated one-half of the net settlement to Stewart. Branham paid Stewart’s share of the settlement to the mother as Stewart’s guardian. The mother never filed an accounting in the guardianship proceedings and allegedly dissipated the funds belonging to Stewart.
After Stewart reached his majority and living in Arkansas, Stewart’s wife petitioned to have Stewart declared incompetent because of brain damage suffered in the car accident. The petition was granted and the wife named guardian. The wife then filed a legal malpractice and breach of fiduciary duty suit against Branham in Pike Circuit Court. She alleged “that an attorney-client relationship between Branham and Stewart was formed by Branham's representation of Stewart's mother as his Next Friend and Guardian and that Branham breached his duties to Stewart.”
Branham defended in part on the basis that he had no attorney-client relationship with Stewart and owed professional duties only to the mother. The Court granted him summary judgment after concluding that this cause of action was one that “had never before been recognized by Kentucky courts.”
The Holding: The Supreme Court held “that an attorney pursuing a claim on behalf of a minor does have an attorney-client relationship with the minor. And that relationship means that the attorney owes professional duties to the minor, who is the real party in interest.” The Court applied the following reasoning in reaching its decision:
Under Kentucky law, a next friend may bring an action on behalf of a minor. The next friend is the minor's agent under Kentucky law. And the minor is the real party in interest in any lawsuit filed on the minor's behalf by the minor's next friend. Kentucky case law has long boldly proclaimed that the minor himself is the plaintiff in cases filed by the minor's next friend.
Unlike a next friend, whose authority is limited to filing suit on the minor's behalf and who lacks the authority to settle the lawsuit, a statutorily appointed guardian has a broader scope of authority and may settle a lawsuit on the ward's behalf with court approval. A guardian is the ward's agent under Kentucky law and, thus, actually represents the ward in any litigation in which the guardian retained the attorney in the capacity as guardian of the ward. And a guardian's statutory authority to prosecute or defend claims is expressly intended to protect the ward's estate. But the guardian's authority to settle litigation is intended to be on behalf of the ward, not on behalf of the guardian's own interests. In other words, any legal action by the guardian must be to help the ward, not necessarily the guardian.
And we perceive no conflict between an attorney furthering the interests of the minor or ward and any duties the attorney would owe the person who retained the attorney in the capacity as next friend or guardian. The role of both the next friend and the guardian is to protect and further the minor's or ward's interests. Indeed, not protecting the ward's interests exposes the guardian to potential liability for breach of fiduciary duty and other claims….
On the other hand, were we to hold that the attorney retained by the individual acting in the capacity as next friend or guardian was not the attorney for the minor or ward, the minor or ward would be unrepresented, which would be contrary to the clear legislative intent to protect minors. Surely the Kentucky General Assembly did not enact a comprehensive legislative scheme concerning appointing guardians to further the "best interest" of minors, yet, intend for these minors to be unrepresented in litigation filed or settled on their behalf. (footnotes omitted)
The Dissent: In his dissent Justice Scott pointed out the serious problems he sees with the majority opinion “extending the attorney-client relationship with a guardian to the ward of the guardian actually represented.”
- The opinion opens the door to even greater extensions of third party malpractice claims in further derogation of the traditional concept of attorney-client fiduciary duties.
- The opinion "introduces an expensive complexity into litigation for minors that is unjustified given its infrequency and the fact that matters related to guardianships are committed to the exclusive supervision of the courts.”
- The opinion “will necessarily endanger the finality of a guardian’s decisions even though approved by a court.”
- The opinion creates conflicts of interest that will “extend, by several multiples, the attorneys necessary to represent a parent/guardian with multiple children/wards, not to mention the additional attorney necessary for the parent's personal claims. With such a "cast of counsel" imposed on one lay parent – each arguing for inconsistent results – how can one realistically expect our current statutory scheme to function inexpensively and expeditiously?”
Be sure to read the dissent as well as the majority opinion for a full appreciation of the added complexity of representations involving minors.
Managing the Risk: It is hard to miss the point of Branham that when the real party in interest in any action is a minor, lawyers engaged in representing that interest have an attorney-client relationship with the minor with all attendant ethical duties. Accordingly, it is recommended:
- Read Kentucky Rule of Professional Conduct 1.14, Client with Diminished Capacity, for ethical guidance on representing minors. Note the requirement in the Rule to maintain as far as reasonably possible a normal client-lawyer relationship with the client.
- Read “The Child Client in Domestic Violence Proceedings: The Ethical Dilemma of Child Advocacy in Guardian Ad Litem Appointments” by Crabtree and DiLoreto in the January 2010 issue of the KBA Bench & Bar (Vol. 74 No. 1).
- Avoid conflicts of interest when representing more than one party in matters involving minors. You are likely to be sued either for malpractice or fiduciary breach if you fail to do so. Consult the KBA Ethics Hotline to be sure you are on safe ethical ground if you want to represent multiple parties.