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Keywords

plaintiffdefendantattorneynegligenceappealpartnershipsustained
plaintiffdefendantattorneyappealpartnership

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Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, 57 Cal.App.3d 104, 128 Cal.Rptr. 901

Facts

Plaintiff Roberts filed a complaint against the law firm Ball, Hunt, Hart, Brown & Baerwitz and attorney Harvey Fierstein, alleging fraud and negligent misrepresentation. The complaint included multiple causes of action, primarily focusing on a letter provided by the law firm that stated the Burbank Broadcasting Company (BBC) was a duly organized general partnership. Roberts claimed he relied on this letter to make loans to BBC, unaware that many of the individuals named as general partners did not believe in the partnership's status. The law firm and Fierstein demurred to the complaint, which was sustained, leading to the dismissal that Roberts appealed.

‘Plaintiff also alleged that Ball's knowledge of this use to which said letter would be put imposed upon Ball a duty to plaintiff to state in the letter all facts known to Ball respecting not only the legal nature of BBC and its component members, but also the fact of the beliefs of such component members respecting the legal nature of BBC and their memberships therein; that by failing to disclose the fact of such beliefs, Ball omitted to state material facts necessary in order to make the statements contained in the letter Not misleading.’

Issue

Did the plaintiff's complaint adequately allege a cause of action for negligent misrepresentation against the defendants?

‘The appeal before us concerns only those causes of action alleged against defendants Ball and Fierstein.’

Rule

Under California law, an attorney may owe a duty to a third person and may be liable for negligent misrepresentation if the third person was intended to be benefited by the attorney's performance and suffered injury due to the attorney's negligence.

‘Under present California law, an attorney may owe a duty to a third person, and may be liable if the third person who was intended to be benefited by his performance is injured by his negligent execution of that duty.’

Analysis

The court analyzed whether the defendants had a duty to disclose doubts about the partnership's status to the plaintiff. It concluded that the law firm, knowing the letter would be shown to the plaintiff to induce him to lend money, had a duty to reveal any doubts regarding the partnership's status. The court found that the plaintiff's allegations of negligent misrepresentation were sufficient to withstand a general demurrer, as the defendants failed to disclose material facts that could influence the plaintiff's decision.

‘Even though defendants may have believed that there was a general partnership in spite of the claims of some of the general partners, the firm had a duty to reveal to plaintiff this doubt as to the status of the partnership as a general partnership, since the firm knew that disclosure of this doubt might well be determinative of plaintiff's decision to make loans to BBC.’

Conclusion

The Court of Appeal reversed the dismissal of the plaintiff's complaint, allowing the claims of negligent misrepresentation to proceed.

‘The judgment (order of dismissal) appealed from is reversed, as indicated herein.’

Who won?

Plaintiff Roberts prevailed in the appeal because the court found that he adequately stated a cause of action for negligent misrepresentation against the defendants.

‘The twelfth and fourteenth causes of action, however, allege negligent misrepresentation and, in our view, stated a cause of action against the defendants which was good against a general demurrer.’

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