In this age of specialists, many lawyers knowledge of the referred attorney's Department of Labor's recommen-
refer clients and potential clients to incompetence, a cause of action for negligent dation of prospective employees for the
other lawyers more experienced in a referral may be recognized in Pennsylvania. claimant's business. 15 The Department
given area of law. Similarly, professionals In Tormo v. Yormark,5 the U.S. District Court of Labor advised claimant that prospec-
in different fields refer to other profes- for New Jersey addressed whether a referring tive employees would be recruited,
sionals. Indeed, the referral process is a attorney was negligent in transferring his screened and interviewed by the
productive source of new business. client's case to a criminally indicted Department.16 The court held that the
However, under recent case law, referring attorney who subsequently embezzled Department's screening process was
without exercising due diligence may be the client's funds.6 The court recognized a voluntarily undertaken and must be
actionable. claim for negligent referral involving the performed with due care.17 It held that
lawyers, by denying the attorney defen- such duty was performed negligently,
Recently, New York's Appellate dant's summary judgment motion. By resulting in a theft at claimant's business
Divisions in the First, Second and Third denying summary judgment, the court by an employee recommended by the
Departments, and a number of other state implicitly recognized a claim for negligent Department who was previously involved
courts, implicitly recognized negligent referral among lawyers. The court went in thefts, and thus warranted plaintiff's
recommendation/referral as a potential on to state that a jury could find that the recovery of damages.18
cause of action. While New York does referring attorney had a responsibility to
not yet expressly recognize "negligent check the referred attorney's qualifications.7 Of even more concern to referring
referral" or "negligent recommendation" parties is the First Department's decision
as a cause of action, such a claim may be The court stated that the referring in Friedman v. Anderson,19 denying an
supported by applying the tort of negligent attorney's responsibility arose from his accountant's motion to dismiss based
misrepresentation. A claim for negligent "duties as an agent toward his [clients] and upon the recommendation of a financial
recommendation/referral may also be from his affirmative conduct in bringing manager. In Friedman, the court referred
supported by the scope of duty voluntarily his clients into contact with a person of to Rule 201 of the American Institute of
taken as part of a professional's responsi- previously unknown character under Certified Public Accountants (AICPA),
bility under the rules governing profes- circumstances affording the opportunity which states that accountants "shall
sional ethics, conduct and responsibility. for crime."8 obtain sufficient relevant data to afford
a reasonable basis for... Recommenda-
Historically, most jurisdictions have It noted that the referring attorney, tions in relation to any professional
only recognized claims for negligent who was from New York, might not be services performed."20 The court found
referral in the area of medical malpractice. required to know of the other attorney's that the AICPA promulgated ethical
In New York, "[i]t is generally true that indictment in New Jersey,9 but that a jury and practical rules and measures profes-
the mere referral of a patient by one could conclude that the referring attorney sional standards requiring accountants to
physician to another, without more," is was negligent because he should have been "obtain sufficient data to afford a rea-
insufficient to "render the referring suspicious of the other attorney's solicita- sonable basis for conclusions or recom-
doctor vicariously liable" for the negligent tion of clients in violation of the Code of mendations in relation to any profes-
treatment of the patient by the referred Professional Responsibility.10 sional services performed."21 The court
doctor.1 further held that by recommending the
The court found that the alleged neg-
A Pennsylvania federal district ligence selecting the attorney could be a money manager to plaintiff, defendant
court held that "negligent referral to a proximate cause of plaintiff's damages accountants were required to perform
specialist, i.e. when the referring physician and allowed the negligent referral claim professional services with due care.
knows or has reason to know the specialist to proceed.11 The potential breach of that duty
is incompetent, may be a basis for liability and damages resulting might form a
under general negligence principles."2 Recent New York appellate cases
have questioned what was previously "proper basis for claims of negligence
However, the following year, a Pennsyl- and negligent representation."22
vania state court refused to apply the considered settled law that "[t]he mere
same standards to the legal profession, recommendation of a person for potential Notably, ethical violations by
ruling that Pennsylvania did not recognize employment is not a proper basis for attorneys have not yet been conclusive
a cause of action for negligent referral.3 asserting a claim of negligence where grounds for civil liability. Under prior
another party is responsible for the actual rules, the New York Court of Appeals
Nevertheless, in the same opinion, hiring."12 held that, even if an attorney's conduct
the court distinguished Tranor, stating that was contrary to the standards set forth
"appellant did not allege in her complaint In Bryant v. New York,13 the Second
Department held that where an individual in DR 9-102 (also known as, section
that Appellees knew [the referred to] 1200.46 of the New York Code of
Attorney to be incompetent."' voluntarily provides a recommendation or
referral, that individual must perform the Professional Responsibility), "an ethical
The court considered the possibility duty with due care.14 Bryant involved violation will not, in and of itself, create
that where an attorney has actual defendant. a duty that gives rise to a cause of
NYSBA N.Y. Real Property Law Journal | Summer 2010 | Vol. 38 | No. 3 1
action that would otherwise not exist at Despite settled law that insurance ery are permitted only when there is an
law."23 companies are not responsible for acts of "intimate nexus... by contractual privity
independent contractors they recommend, or its equivalent."36
Nevertheless, as demonstrated in a claims adjuster's exaggerated recom-
Bryant and Friedman, the First and Second mendation can open the door to a negli- Lastly, the Weisblatt court considered
Departments now recognize such inde- gent recommendation or negligent mis- but denied liability under a negligent
pendent causes of action. In making re- representation claim. Analogous to New misrepresentation theory. Plaintiff failing
ferrals, an attorney must act with due York's Bryant case, affirmative referrals or to assert a statement of false information,
care, such as has been found for account- recommendations can lead to liability. An and the single occurrence of her recom-
ants. 24 At the very least, an attorney Arkansas court examined whether an mended attorney's mishandling of her
should advise clients in writing that the insurance agent who provides a list of case, does "not establish a lack of expertise
referral is not an express endorsement or "competent" building contractors or experience" so as to make the CBA's
representation of actual services to be representations false.37 Apparently, if
rendered and that the client must make to an insured can charge the insurer with plaintiff actually alleged that the CBA told
that decision independently. the duty to determine the competency her the attorney recommended actually
and qualifications of such contractors.29 lacked expertise" (contrary to CBA's
On April 1, 2009, New York joined The court held that the "gratuitous representations) or was deemed incom-
47 other states by adopting ABA's undertaking to represent the competence, petent on other legal malpractice
"Model Rules." The new rules thor- insured, and bonded status of contractors matters, her cause of action for negligent
oughly regulate fee splitting. Rule 1.5(g) created a duty ...to exercise ordinary care misrepresentation might have been
governs fee splitting between attorneys. to ensure that the information it commu- recognized.
An attorney must advise his/her client nicated was true."30 The court remanded
that fees will be split, including the the case to determine whether the evidence The case of Aiello v. Adar38 suggests
share each lawyer will receive. The fee yielded proof of a causal connection be- that a cause of action for 22 NYSBA N.Y.
cannot be excessive and must bear a tween the alleged negligent recommenda- Real Property Law Journal I Summer 2010 1 Vol.
relationship to services rendered and the 38 1 No. 3 "negligent referral" exists in a
tion and the plaintiff's injury.31
client must give written consent and, feesharing agreement. In Aiello, plaintiffs
significantly, both attorneys are jointly The Illinois courts have also exam- retained the services of attorney Issler
responsible for the work. ined possible liability for negligent refer- to assert medical malpractice claims.39
ral. An appellate court held that the Chi- After preparing the claims, Issler referred
More jurisdictions are expanding cago Bar Association (CBA) was not li- the case to attorney Starr, pursuant to a
the duties of other professions involving able for negligent referral, but presciently written fee sharing agreement.40 The
referrals and recommendations. Courts detailed the potential loopholes wherein attorneys agreed to share 50% of the
in Connecticut and Ohio have recog- an individual attorney could be impliedly contingency fee.41 Starr was to have
nized causes of action against real estate liable for negligent referral.32 Plaintiff "primary responsibility," but Issler
agents for "negligently" recommending argued that defendant (CBA) lawyer re- agreed to remain the attorney on record.42
home inspection companies. ferral service acted as a "referring lawyer" A fee dispute arose between Issler and
The New London Superior Court in under the Illinois Rules of Professional Starr when Starr filed a petition to
Connecticut denied a motion to strike Conduct and owed plaintiff the same prevent Issler from recovering the
negligent referral as a cause of action.25 duty for the performance of services as agreed 50%. Starr argued that he
It held that plaintiff purchasers and de- the referred attorney.33 performed 96% of the work and
fendant real estate agent entered into an accordingly Issler should only receive
Rejecting this argument, the Court
agreement creating a relationship, obli- his quantum meruit share.43
found that the CBA was not a "lawyer"
gating defendant to exercise reasonable subject to the provisions of the Illinois The court found the lawyers'
care in its recommendations.26 The Code of Professional Responsibility and agreement valid because it confirmed
court held that where a real estate agent stated, "[o]nly where the referring entity Issler would assume responsibility of
recommends a home inspector, "it is not is a lawyer can such a responsibility and the action and in no way limited the
an unfair burden to place on the party is such a responsibility imposed."34 Thus, client's rights against Issler only.44 A
making the recommendation to do an
the Weisblatt court, like Friedman and Tormo, recent case in the New York Appellate
appropriate investigation of the person
did not shut the door to using ethical Division Third Department suggests
recommended before the party makes
violations as a basis for civil liability when that a cause of action for "negligent
one attorney negligently refers another. referral" for failure to supervise applies
27 The court also noted that, Furthermore, in response to plaintiff's to a law firm recommending or referring
although the Restatement of Torts § 323 argument that she had pled a cause of its client to another attorney to perform a
concerning the failure to exercise action for negligent performance of a vol- portion of legal services for the client.45
reasonable care only allows recovery for untary undertaking, the court was con- Plaintiff initially retained defendant to
physical harm, the cause of action is not strained to limit recovery under such cir- recover her interest in a partnership
defeated because defendant caused cumstances, based on case precedent and against Julius Gerzof, which defendant
plaintiff's emotional and physical general tort recovery, to non-economic successfully accomplished.46 However,
distress.28 damages. 35 It stated that the exceptions to Gerzof died a resident of Florida before
the general rule for economic loss recov- judgment was satisfied.41 Defendants,
NYSBA N.Y. Real Property Law Journal | Summer 2010 | Vol. 38 | No. 3 2
attempting to recover from the estate, to brokers, engineers or mortgage compa- 22. Id.
sought the assistance of Florida counsel, nies. Courts may hold the referring attor- 23. Shapiro v. McNeill, 92 N.Y.2d 91, 97
Scott Cagan, and the law firm of Bailey. ney liable under tort theories of negligent (1998).
Bailey did not file a notice of claim with misrepresentation or where a duty is 24. See Friedman.
25. Marx v. McLaughlin, 2001 WL 837921
the Gerzof estate during the required voluntarily undertaken, giving rise to an (Conn. Super. Ct. 2001).
time period and thus plaintiff was unable obligation to undertake such duty with 26. Id. at *4.
to recover from the estate. Plaintiff due care. Caveat advocatus. 27. Id.
claimed, and the court agreed, that 28. Id. at *5.
"defendant (the referring law firm) is 29. Capel v. Allstate Insurance Co., 77
liable for damages resulting from Bailey's 1. Datiz v. Shoob, 71 N.Y.2d 867, 868 (1988). S.W.3d 533 (Ark. Ct. App. 2002).
failure to file the notice of claim either 2. Estate of Tranor v. Bloomsburg Hosp., 60 F. 30. Id. at 543.
on the basis that defendant had a non- 31. Id. at 542.
Supp.2d. 412, 416 (M.D. Pa. 1999).
delegable duty to file such notice of 3. Bourke v. Kazaras, 746 A.2d 642 (Pa. Super 32. Weisblatt v. Chicago Bar Assoc., 684
Ct. 2000). N.E.2d 984 (Ill. Ct. Cl. 1997).
claim or based upon defendant's negligent 33. Id. at 989.
supervision of Bailey."48 4. Id. at 644.
5. 398 F. Supp. 1159 (D.N.J. 1975). 34. Id.
The court explained that: [The] 6. Id. at 1170. 35. Id. at 988.
7. Id. 36. Id. (citing Chew v. Paul D. Meyer M.D.,
general rule is that "[a] firm is not ordi- P.A., 527 A.2d 828, 832 (Md. Ct. Spec. App.
narily liable.. .for the acts or omissions of 8. Id.
9. Id. at 1170-71. 1987).
a lawyer outside the firm who is working 37. Id. at 990-91 (Plaintiffs alleged that the
with the firm lawyers as co-counsel or in 10. Id. at 1171.
11. Id. at 1172-73. CBA “provid[ed] an attorney referral service
a similar arrangement" (Restatement 12. Cohen v. Wales, 133 A.D.2d 94, 95, 518
by which members of the public may obtain
Third of Law Governing Lawyers § 58, N.Y.S.2d 633 (2d Dep’t 1987)(In Cohen, plain- from this service the names of attorneys
Comment e), as such a lawyer is usually tiff alleged that the board of education was with purported expertise in specified areas
an independent agent of the client. Here, of law.”)
negligent for recommending a former em-
however, defendant solicited Cagan and ployee for a position as a grammar school 38. 750. N.Y.S.2d 457 (N.Y. Sup. Ct. 2002).
teacher without disclosing that the former 39. Id. at 459.
Bailey and obtained their assistance 40. Id.
without plaintiff's knowledge. Although employee had been charged with sexual mis-
conduct. Id. The plaintiff was injured by the 41. Id.
plaintiff was later advised that Bailey 42. Id.
teacher. Id. at 643. The court held that the
had been retained by defendant, she had 43. Id. at 460.
common law imposes no duty to control the
no contact with Bailey and did not enter conduct of another or to warn those endan- 44. Id. at 465-66.
into a retainer agreement with that firm. gered by such conduct in the absence of a 45. Whalen v. DeGraff, Foy, Conway, Holt-
Defendant concedes that plaintiff completely special relationship between either the person Harris & Mealey, 863 N.Y.S.2d 100 (3rd
relied on defendant to take the necessary who threatens harmful conduct or the foresee- Dep’t 2008).
46. Id. at 101.
steps to satisfy her judgment against able victim. Id. The court concluded that no
special relationship existed; rather a cause of 47. Id.
Gerzof. Under these circumstances, 48. Id.
defendant assumed responsibility to action lies with the school district which had
49. Id. at 102 (internal citations in the original).
plaintiff for the filing of the Florida estate custody over plaintiff and hired the wrong-
doer. Id. See also Bell v. Perrino, 490 N.Y.S.2d
claim and Bailey became defendant's
821 (N.Y. App. Div. 2d Dept. 1985), where
subagent (see Restatement Third of Law plaintiff was injured by a taxicab driver and
Governing Lawyers § 58, Comment e). sued the company that had dispatched the
driver alleging the company was negligent in
Therefore, defendant had a duty to
failing to supply, dispatch, and/or hire compe-
supervise Bailey's actions (see Restate- tent, skilled, and licensed drivers and knew or
ment Third Agency § 3.15; Restatement should have known that the driver was prone
Second Agency §§ 5, 406).49 to violence and the use of firearms. The court
held that since the company was an independ-
The Whalen decision supports the ent entity providing dispatching services to
principle that law firms can be liable for more than 20 cab companies in the area, it was
failure to supervise and/or for the negli- not responsible for hiring the driver. Merely
gence of a referred attorney. recommending the driver was insufficient to
hold the company accountable for the driver's
Conclusion actions. Id. at 822).
13. 805 N.Y.S.2d 634 (2d Dep’t 2005).
Although New York courts remain generally 14. Id. at 636.
unsympathetic to causes of action for 15. Id. at 635.
negligent referral or recommendation, 16. Id.
given recent Appellate Division decisions, 17. Id. at 636.
practitioners should be cautious and 18. Id.
diligent with referrals and affirmative 19. 803 N.Y.S.2d 514 (1st Dep’t 2005).
20. Id. at 516. Abraham B. Krieger is a member of the firm’s
recommendations. Real estate attorneys Real Estate law practice at Meyer, Suozzi,
may be responsible for referring clients 21. Id.
English & Klein, P.C.’s Garden City office.
NYSBA N.Y. Real Property Law Journal | Summer 2010 | Vol. 38 | No. 3 3