# Schunk v. Zeff & Zeff, PC

> Michigan Court of Appeals · September 9, 1981 · 109 Mich. App. 163

URL: https://www.frixlaw.com/law-library/cases/9734676

## Case

- **Full name:** Schunk v. Zeff & Zeff, Pc
- **Court:** Michigan Court of Appeals
- **Decided:** September 9, 1981
- **Citations:** 109 Mich. App. 163; 311 N.W.2d 322
- **Precedential status:** Published
- **Opinion:** Dissent by MacKenzie
- **Judges:** Danhof, C.J., and Cynar and MacKenzie
- **Cited by:** 4 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

Mackenzie, J.
(dissenting). I respectfully dissent. I would set aside the order of partial summary judgment entered by the circuit court and hold that an attorney may be liable in an action for negligence brought by his client’s adversary for breach of his duty to conduct a reasonable investigation before instituting suit where it is reason *175 ably foreseeable that a breach of such duty would injure the adversary.
I. A lawyer has a duty to investigate.
Initially, we must determine whether the trial court erred in finding that the defendants did not owe a legal duty to plaintiff. I am aware that the decision of the trial judge is in accord with the great weight of present legal authority and that there are strong policy reasons upon which courts have relied in determining that an attorney owes no duty to his client’s adversary. However, while the adversary system requires that an attorney be devoted to the cause of his client, justice requires that one who has suffered a wrong have access to the courts to seek his remedy.
Plaintiff urges us to regard the Code of Professional Responsibility as a body of standards establishing the minimum level of conduct for the legal profession, below which no lawyer may fall without being subject to disciplinary action. Plaintiff further suggests that, in the proper circumstances, certain of the provisions can be adopted to establish a standard of conduct, the violation of which is actionable at common law by the injured party. Plaintiff urges that code provisions are relevant and appropriate in assessing the substance of rights of injured third parties, particularly where the provisions of the code are reinforced by the Michigan General Court Rules, also adopted by the Supreme Court, as is the case with provisions proscribing the representation of untenable claims.
Canon 7 of the Code of Professional Responsibility adopted by the Michigan Supreme Court provides that "a lawyer should represent a client zealously within the bounds of the law”. (Emphasis added.) Disciplinary Rule 7-102 amplifies the obli *176 gation of the attorney pursuant to Canon 7, and provides, in pertinent part:
"(A) In his representation of a client, a lawyer shall not:
"(1) File a suit, assert a position, conduct a defense, delay a trial, or take other action on behalf of his client when he knows or when it is obvious that such action would serve merely to harass or maliciously injure another.
"(2) Knowingly advance a claim or defense that is unwarranted under existing law, except that he may advance such claim or defense if it can be supported by good faith argument for an extension, modification, or reversal of existing law.
"(5) Knowingly make a false statement of law or fact.”
In discussing the obligation imposed upon an attorney by the aforesaid Canons and Disciplinary Rules, Judge Horace E. Gilmore states:
"The meritoriousness of the action is a matter that must always be carefully considered by the attorney. It is his duty to advise a client fully and completely on the merits of his case. If he ñnds that there is not merit in the contemplated action, it is his duty to advise his client to that effect and not to represent him in court if the client refuses to accept such advice. The attorney is an officer of the court, and, as such, when he appears in court he represents to the court that he has examined the claim of his client, that there is merit in it, and that the claim or defense is not being asserted for purposes of delay or harassment.” Gilmore, 1 Michigan Civil Procedure Before Trial (2d ed, 1975), § 1.3(D), p 15. (Emphasis added.)
Furthermore, lawyers are required by the mandate of the Code of Professional Responsibility to *177 temper their zeal in fulfilling their obligations as officers of the court. Ethical Consideration 7-10, accompanying Canon 7 of the Code of Professional Responsibility promulgated by the American Bar Association, explicitly recognizes that an attorney has a dual obligation under the Canon:
"The duty of a lawyer to represent his client with zeal does not militate against his concurrent obligation to treat with consideration all persons involved in the legal process and to avoid the infliction of needless harm.” 1
Thus, it is clear that a duty of reasonable investigation in favor of a potential adversary would not conflict with or restrict a lawyer’s duty and obligations to his client, but rather would be complementary to it.
The affirmative obligation to conduct a reasonable investigation prior to the commencement of an action is also imposed upon an attorney by the provisions of GCR 1963, 114.2, which provide:
"Effect of signature. The signature of an attorney constitutes a certificate by him that he has read the pleading; that to the best of his knowledge, information, and belief there is good ground to support it; and that it is not interposed for delay.”
The foregoing provision is identical to the provision of Rule 11 of the Federal Rules of Civil Procedure. Cases which have considered the federal counterpart of GCR 114 are unanimous in holding that the rule casts an affirmative obliga *178 tion on the attorney who signs a pleading to conduct a reasonable investigation prior to the filing of such pleading. In Heart Disease Research Foundation v General Motors Corp, 1972 Trade Cases § 73,849 (SD NY, 1971), the court discussed Rule 11 of the Federal Rules of Civil Procedure as follows:
"That Rule, it is true, is seldom invoked by parties in federal civil actions. Yet, as the Rule at the very least implies, the signature of an attorney or law firm on a federal civil pleading amounts to a certificate by that signer that there are good grounds to support the pleading. As has been held by this court before, Rule 11 casts an affirmative obligation upon counsel who signs a pleading to represent his honest belief that there are facts and law to support the claims asserted in that pleading. * * * See Freeman v Kirby, 27 FRD 395 (SD NY, 1961).” 1972 Trade Cases §73,849, pp 91,564-91,-565. (Emphasis added.)
See Levy v Seaton, 358 F Supp 1, 6 (SD NY, 1973).
The purpose of the signature rule is to create a duty on counsel, as an officer of the court, to prevent the filing of frivolous and baseless claims by requiring an investigation by counsel to enable him to represent in good faith his honest belief that there are facts and law to support the claim.
As a result of these requirements, it can be said that the attorney-client relationship imposes upon an attorney the affirmative obligation to conduct such an investigation as is reasonable under the circumstances to determine whether his client has a viable claim.
II. Attorney’s liability should be based on foreseeability not privity.
We must next consider whether a person who is foreseeably injured as a result of the breach of *179 that duty may maintain a cause of action for negligence. In granting summary judgment on plaintiff’s negligence count, the trial judge accepted the assertion that the attorney’s duty does not extend beyond the confines of the attorney-client relationship, finding that he was bound to follow two previous Michigan Court of Appeals decisions, Friedman v Dozorc, 83 Mich App 429 ; 268 NW2d 673 (1978), lv gtd 405 Mich 823 (1979), and Gasis v Schwartz, 80 Mich App 600 ; 264 NW2d 76 (1978). In Friedman and Gasis, this Court affirmed dismissals of negligence claims against attorneys who had commenced what proved ultimately to be unsuccessful medical malpractice actions against physicians. In both cases it was held that the duty of the attorney in connection with the commencement of an action is owed only to his client and does not extend to the potential adversary.
In Friedman, supra, 435-436 , a panel of this Court acknowledged "the demise of the privity requirement”, but nonetheless invoked the authority of Savings Bank v Ward, 100 US 195 ; 25 L Ed 621 (1879), which expressly required privity for recovery by a third party against an attorney. Further, relying on Rosenberg v Cyrowski, 227 Mich 508, 513 ; 198 NW 905 (1924), the Friedman Court concluded that absent privity of contract, the attorney’s liability to third parties is limited to cases involving fraud, collusion, or malicious prosecution. Friedman, supra, 436 . Although Rosenberg did concern a situation where the attorney allegedly knowingly gave false advice to a third party who relied to his detriment, the case was significant due to its holding that an attorney would be held responsible for erroneous legal advice even though he had absolutely no duty to give such *180 advice. The Rosenberg Court, supra, 513, cited with approval 1 Thornton on Attorneys at Law, § 295, for the proposition that:
"An attorney’s liability does not end with being answerable to his client. He is also liable to third persons who have suffered injury or loss in consequence of fraudulent or tortious conduct on his part.”
The privity doctrine, being subjected over the years to a number of exceptions to avoid its harsh results, has since been abandoned in the areas of general negligence and products liability, Spence v Three Rivers Builders & Masonry Supply, Inc, 353 Mich 120 ; 90 NW2d 873 (1958), Piercefield v Remington Arms Co, Inc, 375 Mich 85 ; 133 NW2d 129 (1965), and liability of certain professionals (abstracters), Williams v Polgar, 391 Mich 6 ; 215 NW2d 149 (1974). Additionally, the privity requirement has been by-passed by application of the third-party beneficiary doctrine. See Talucci v Archambault, 20 Mich App 153 ; 173 NW2d 740 (1969).
The abandonment of the requirement with respect to the liability of various professionals rendering advice is not as clear. The liability of abstracters, in a sense, is distinguishable under the third-party beneficiary doctrine because in such a case it is foreseeable that the buyer of property will rely on an abstract and is an intended beneficiary even though it was the seller who was in privity of contract with the abstracter. The third-party beneficiary doctrine is inapplicable in the area of an attorney’s liability to his client’s adversaries because it can hardly be said that the latter were intended beneficiaries of the attorney-client relationship.
Disputing the abandonment of the privity re *181 quirement in the area of liability of professionals, defendants cite Rogers v Horvath, 65 Mich App 644 ; 237 NW2d 595 (1975). In that case, plaintiff brought a medical malpractice action against the doctor hired by her employer to examine her for the purpose of assessing the validity of her workers’ compensation claim. Defendant-doctor testified at plaintiff’s earlier workers’ compensation hearing that "she was a malingerer”, and not disabled. The referee decided that plaintiff was not disabled. Thus, plaintiff sued defendant for malpractice, alleging that defendant had failed to examine her properly, resulting in his failure to diagnose her condition and the denial of her workers’ compensation claim. The Court denied liability, emphasizing the lack of a physician-patient relationship and the lack of any medical treatment by defendant:
"Under such circumstances, the defendant did not owe plaintiff any duty arising from a physician-patient relationship. This is not to say that a physician who examines a person for reasons other than diagnosis or treatment and for the benefit of someone other than the examinee owes no duty of due care to that person. Rather, we hold that the physician in such a case does not owe such a duty of care as will subject him to liability for malpractice.” (Footnote omitted.) Id., 647 .
Rogers has been limited to a situation where the defendant-physician did not undertake to perform treatment on the plaintiff. Pankow v Sables, 79 Mich App 326, 337 ; 261 NW2d 311 (1977). I find persuasive the reasoning of the Maryland Court of Appeals in Hoover v Williamson, 236 Md 250; 203 A2d 861 ; 10 ALR3d 1064 (1964), that a physician may incur tort liability independent of contract where he assumes to act by rendering treatment, even though gratuitously; he thereby becomes subject to the duty of acting carefully, if he acts at all.
*182 The liability of fire insurers for negligence in the inspection of premises to employees of the insureds was recently considered by the Michigan Supreme Court in Smith v Allendale Mutual Ins Co, 410 Mich 685, 705 ; 303 NW2d 702 (1981). In six cases consolidated on appeal, the Court held that "[t]he law does not impose a duty on insurers to inspect the premises of their insureds, although such an obligation may be undertaken”. The Court further held that:
"An insurer’s inspection of an insured’s premises for fire hazards does not in itself demonstrate an undertaking to render fire inspection and prevention services to the insured. Absent evidence that the insurer agreed or intended to provide services for the benefit of the insured, there is no basis for a conclusion that such inspections are conducted other than to serve the insurer’s interests in underwriting, rating and loss prevention and hence there is no undertaking. An insurer who does not undertake to inspect for the insured’s benefit owes no duty to the insured or the insured’s employees to inspect with reasonable care; such an insurer is, however, subject to liability if it engages in affirmative conduct creating or enlarging a fire hazard.” Id., 705-706 .
Thus, I would conclude that absent privity through a contractual relationship, liability for negligence for legal advice or actions is only engendered where (1) the law imposes a duty of care on the attorney with respect to the plaintiff, (2) it is foreseeable that plaintiff will be harmed by the attorney’s negligence, and (3) the plaintiff actually suffers harm as a result of the attorney’s negligence.
Michigan law imposes a duty on an attorney to investigate by making reasonable inquiries and examining evidence accessible to his client and *183 himself to determine in good faith that a factual and legal basis for the claim exists. This duty runs to persons who are defendants to groundless actions. It is certainly foreseeable that a person who becomes the object of a groundless lawsuit will suffer damages.
III. Policy considerations.
The remaining question is whether the policies for allowing an attorney to commence a lawsuit without conducting a reasonable preliminary investigation of available facts and evidence do not as a matter of law outweigh countervailing policies and the foreseeable risk of harm to potential adversaries. As a matter of law, negligence will not be predicated on conduct if the court determines that the social utility of defendant’s conduct is so great that it should be fully protected. Moning v Alfono, 400 Mich 425, 434 ; 254 NW2d 759 (1977). However, in most cases, the resolution of the balance between the value of defendant’s conduct and the risk of harm thereby created depends on the reasonableness of the risk and defendant’s conduct and should be determined by a jury. Id.
Upon considering plaintiff’s allegations of misconduct by defendants, which must necessarily be taken as true by this Court in reviewing the trial court’s grant of summary judgment in favor of the defendants, I cannot say that defendants’ conduct should enjoy "absolute protection” or that defendants’ conduct is, as a matter of law, "reasonable”. The failure of an attorney under the facts herein to undertake proper preliminary investigation of readily available facts and objective evidence could provide the basis for a jury to decide that the attorney acted unreasonably in bringing suit.
It would be unrealistic to argue that harm to a client’s potential adversary is not foreseeable *184 where an attorney files a lawsuit without undertaking the type of investigation necessary and appropriate under the circumstances to form a good-faith belief that a tenable claim is involved. Further, the harm to the adversary is real and significant, including economic harm in the form of legal fees, lost time spent in defending against the claim, and, in the case of some professionals, increased costs for malpractice insurance or even cancellation of malpractice insurance. There are also the more intangible forms of harm, such as mental distress and damage to reputation, which may themselves have substantial economic ramifications. Considering the severity of the harm to the potential adversary and the degree of the probability of its occurrence where insufficient investigation is undertaken by the attorney, it is obvious that the risk of harm is very significant. I would find that this risk of harm in cases involving egregious attorney conduct, together with the social policies discussed herein favoring enforcement of the duty of adequate investigation on attorneys, outweighs the competing considerations favoring an unrestrained legal profession. Thus, defendants’ conduct is not entitled to "absolute protection” as a matter of law within the meaning of Moning .
Lawyers will not be deterred from zealously representing the tenable claims of their clients. Both the Friedman and Gasis decisions, upon which the trial court based its decision, assume that a lawyer’s duty to represent zealously the interests of his client somehow conflicts with the existence of a leal duty in favor of the potential adversary of the client. There is no inconsistency between an attorney’s duty to be a zealous advocate of his client’s interests and the recognition of *185 certain duties running in favor of his client’s adversary. The lawyer already bears the duty of representing his clients "within the bounds of the law”. The bounds of the law can and should require counsel to fulfill his professional trust and responsibility to the court, the public, and potential adversary parties by conducting such a reasonable investigation under the circumstances as is necessary and appropriate to form a good-faith belief that his client has a tenable claim. The principle of ardent representation is not sacrificed in any way by recognition and enforcement of such a duty.
The compatibility of the duties of zealous representation and of reasonable investigation of law and fact was recognized in Tool Research & Engineering Corp v Henigson, 46 Cal App 3d 675, 683-684; 120 Cal Rptr 291 (1975):
"So long as the attorney does not abuse that duty [of zealous representation] by prosecuting a claim which a reasonable lawyer would not regard as tenable or by unreasonably neglecting to investigate the facts and law in making his determination to proceed, his client’s adversary has no right to assert malicious prosecution against the attorney if the lawyer’s efforts prove unsuccessful.”
Clearly, these two duties may be fulfilled without either interfering with the other.
In fact, such a duty is consistent with duties to the client’s adversary already created by the Code of Professional Responsibility and the court rules. Defendants herein, concurrently with their professional obligations to their clients, were and will continue to be required by the mandate of the Code of Professional Responsibility and the court rules to temper their zeal in fulfilling their obliga *186 tion as officers of the court. The code explicitly recognizes that an attorney has a dual obligation to his client and all others involved in the legal process. Thus, the lawyer’s duty of reasonable investigation in favor of a potential adversary is substantially coextensive with the lawyer’s existing ethical duties.
The second major premise of the Gasis and Friedman decisions is that negligence actions brought against attorneys by third parties would subvert the public policy favoring free access to the courts. Free access to the courts is obviously a fundamental right of every citizen. The policy favoring free access has been principally relied upon by courts in other jurisdictions in resolving the issue before this Court. The free access argument, presumably, is that lawyers will be fearful of initiating "borderline” cases due to the prospect of thereby incurring liability to the client’s adversary and that parties with meritorious claims will be deprived of their due right of access to the courts.
The attorney is not a mere conduit by which the citizen avails himself of the free access right. It is incumbent on the attorney under the Canons of Professional Responsibility and the Michigan General Court Rules to exercise professional judgment as to the facts and the applicable law to determine whether the client has a tenable claim or one which is groundless. Though the client may be intent on suing another party, the lawyer is still obligated to assess the merits of the claim in relation to the available facts. Because the legal duty called for by plaintiff does not extend beyond the attorney’s existing obligations, free access should not be restricted, any more than it already is, by the operation of those obligations.
*187 A lawyer licensed to practice law in the State of Michigan is presumed to be knowledgeable as to what facts are fundamentally relevant to determining the existence of a bona fide claim. Legal minds may differ substantially as to the likelihood of success on the merits, and lawyers certainly cannot be and should not be insurers of success. Where the facts are in doubt, the attorney should be entitled to resolve those doubts in favor of the client. But legal minds should not differ in evaluating whether a lawyer has satisfied the minimal requirement that he advance only tenable claims or whether the preliminary investigation into the facts and available evidence has been deficient.
It is well to keep in mind that the duty of reasonable preliminary investigation into fundamentally relevant facts creates no additional burdens on the individual attorney which he will not have to bear eventually in the course of the litigation if he genuinely intends to present a convincing case to the court and to the trier of fact. Unless the lawyer is under the duress of the statute of limitations, he has no excuse for failing to ascertain fundamentally relevant facts and review the readily available material evidence before commencing litigation against a possibly innocent or even uninvolved party. At the time defendants commenced the case on behalf of Linda and Gerald Koras against plaintiff, the statute of limitations had six months to run.
IV. Conclusion.
The applicable standard is that the attorney is answerable in negligence to his client’s adversary for the failure, prior to commencing suit, to conduct such an investigation as is reasonably necessary under the circumstances to allow the attorney to make a good-faith determination that there are *188 legal and factual grounds to support the allegations contained in the complaint. See the affirmative obligation imposed on the attorney to conduct a reasonable investigation prior to commencing suit as expressed in Tool Research, supra, 683-684:
"An attorney has probable cause to represent a client in litigation when, after a reasonable investigation and industrious search of legal authority, he has an honest-belief that his client’s claim is tenable in the form in which it is to be tried * * *. The test is twofold. The attorney must entertain a subjective belief in that the claim merits litigation and that belief must satisfy an objective standard * * *.
* * * So long as the attorney does not abuse that duty [of zealous representation] by prosecuting a claim which a reasonable lawyer would not regard as tenable or by unreasonably neglecting to investigate the facts and law in making his determination to proceed, his client’s adversary has no right to assert malicious prosecution against the attorney if the lawyer’s efforts prove unsuccessful.” (Emphasis added.)
It should be emphasized that counsel has no obligation to be satisfied that the client will prevail in the litigation. What counsel must do is to conduct such investigation as to enable him to come to the honest belief that the client has an arguable claim.
See Wise, Legal Ethics (Supp 1979), p 327. The ethical considerations to Canon 7 were relied on by the Michigan Supreme Court in State Bar Grievance Administrator v Corace, 390 Mich 419, 434, fn 9 ; 213 NW2d 124 (1973), in interpreting the intent and meaning of DR 7-102 of the Code of Professional Responsibility.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9734676. Public record. Not legal advice.