Estate of Schneider v. Finmann A direct breach of the front lines of privity? No – more of a flanking action.

“Fortress Privity,” which had protected estate planning attorneys and others against malpractice suits brought by injured parties after the client’s death, relied on the rock-solid foundation set forth in Estate of Spivey v. Pulley, 138 A.D.2d 563, 564 (1988). Set in concrete was the rule in Spivey, which proclaimed that “absent fraud, collusion, malicious acts or other special circumstances,” an attorney is not liable to third parties, not in privity with the attorney, for harm caused by professional negligence. [See also, Deeb v. Johnson, 170 A.D.2d 865 (1991).]

Nevertheless, stout-hearted fiduciaries and beneficiaries of estates, having suffered many rebuffs, did not retreat. For decades, their battalions gallantly mounted one direct assault after another against the well-entrenched battlements of the impenetrable wall of privity. In venues far and wide, plaintiffs had tested and probed the formidable defenses of “Fortress Privity,” searching for weaknesses. Then, suddenly, their hopes were buoyed by a defendant-attorney who apparently counseled his client to transfer a one million dollar life insurance policy back into the client’s name alone. The client then died, sorely accursed by the dreaded affliction known as “incidents of ownership.” So grievously wounded was the estate by deep lacerations of additional estate taxes, that the executor, seized by the punctilio of an honor most sensitive, did file his lawsuit against said attorney.

Privity’s line of defense held firm and repelled the estate’s attack in the initial foray in Nassau County Supreme Court. Plaintiff was not in privity with defendant, announced the court, and added that none of the Spivey exceptions were present either. Nor could the estate avail itself of a viable cause of action held by decedent for legal malpractice, for the alleged damage was an increase in estate taxes, which meant the cause of action accrued only after decedent’s death. The estate’s forces, having regrouped to again assail the barrier of privity in the Appellate Division, were once again repelled. The action could only have been brought while decedent was alive, decreed the court, and may not be maintained under EPTL 11-3.2(b). Estate of Schneider v. Finmann, 60 A.D.3d 892, 876 N.Y.S.2d 121 (2nd Dept., 2009).

The court, however, extended no open invitation to every variety of plaintiffs to pursue “malpracticing” attorneys. Privity stands unbowed, blocking the way of third parties, such as beneficiaries of the estate. Only personal representatives of a decedent’s estate may circumvent the wall of privity by suing as decedent’s representatives for causes of actions accruing during his lifetime. That class of plaintiffs achieved victory, not by directly smashing through the wall of privity, but rather by outflanking it. Estate of Schneider v. Finmann, …. N.Y.3d …, N.Y.S.2d …., 2010, NY Slip Op 05281 (June 17, 2010). The rule of “strict privity” remains in effect.

Donald J. Farinacci is the Estates and Trusts Partner at the Mineola law firm of Bee Ready Fishbein Hatter & Donovan, LLP, in Mineola. He is also a fellow of the American College of Trust and Estate Counsel.