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Keywords

plaintiffattorneynegligenceliabilitymalpracticetrustpatenttax lawlegal malpractice
plaintiffdefendantdamagesattorneynegligenceappealmalpracticetrustpatentlegal malpractice

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Horne v. Peckham, 97 Cal.App.3d 404, 158 Cal.Rptr. 714, 207 U.S.P.Q. 527

Facts

Roy C. Horne obtained a patent for a product and sought to establish a Clifford trust to take advantage of tax benefits. He consulted with attorney Peckham, who admitted he lacked expertise in tax matters. Horne later decided to include a license agreement for the patent in the trust instead of the patent itself. After the IRS audited Horne's tax returns and assessed a deficiency, he sued Peckham for malpractice, claiming that the trust documents were invalid and resulted in tax liability.

In 1960, Horne obtained a patent for processing low grade wood into defect-free material known as “Perfect Plank Plus.” In 1962, he founded a business called “Perfect Plank,” and in 1967 began to produce the patented product.

Issue

Did the attorney commit malpractice by failing to research the tax implications of the Clifford trust and by not referring the client to a tax specialist?

Did the attorney commit malpractice by failing to research the tax implications of the Clifford trust and by not referring the client to a tax specialist?

Rule

An attorney has a duty to perform adequate research on legal matters and to refer clients to specialists when necessary, especially when the attorney lacks expertise in a relevant area.

An attorney has a duty to perform adequate research on legal matters and to refer clients to specialists when necessary, especially when the attorney lacks expertise in a relevant area.

Analysis

The court determined that the attorney's failure to research the tax implications of the trust and his reliance on a less experienced attorney constituted negligence. The court emphasized that the attorney should have recognized the need for specialized knowledge in tax law and referred the client accordingly. The trust was found to be invalid for tax purposes, leading to the client's tax liability.

The court determined that the attorney's failure to research the tax implications of the trust and his reliance on a less experienced attorney constituted negligence.

Conclusion

The court affirmed the judgment against the attorney for legal malpractice, concluding that he failed to meet the standard of care required of a general practitioner in this context.

The court affirmed the judgment against the attorney for legal malpractice, concluding that he failed to meet the standard of care required of a general practitioner in this context.

Who won?

Plaintiffs Roy C. Horne and Doris G. Horne prevailed in the case due to the attorney's negligence in drafting the trust documents without proper research.

Defendant, an attorney, appeals from a judgment entered after a jury awarded damages of $64,983.31 against him for legal malpractice in connection with the drafting of a “Clifford Trust” for plaintiffs Roy C. Horne (Horne) and Doris G. Horne, husband and wife.

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