In Landry v. Base Camp Management, LLC, the First Circuit recently rejected the law of mandate as a vehicle for a direct attack by a non-client against an adversary’s attorney and reinforced the requirement that a non-client plead intent to cause direct harm and malice to state a cause of action. 2015-1377 (La. Ct. App. 1 Cir. 10/31/16).
Plaintiffs, the stars of Swamp People and their production company, retained the Maughan parties (which included an attorney and law firm) in 2010 to assist with entertainment-related pursuits. The next year, Plaintiffs sought to renegotiate their contract to adjust the fee agreement with the Maughan parties. Plaintiffs retained Lippman to represent them in the negotiations. The new contract was executed in October 2011 contained an arbitration clause.
In November 2012, Plaintiffs terminated the new contract and the Maughan parties sought remaining payments allegedly owed. Unable to resolve the controversy, Plaintiffs filed a declaratory judgment action seeking to void the October 2011 contract because the arbitration clause now violated disclosure requirements established by the Louisiana Supreme Court in a July 2012 ruling. The Maughan parties objected, urging the dec action’s prematurity given the arbitration clause. The district court overruled the objection and found that Lippman should have advised Plaintiffs of the full consequences of the arbitration clause. The district court concluded that failure to do so rendered the arbitration clause void and unenforceable.
Seizing on the district court’s ruling, the Maughan parties filed a third party demand against Lippman contending that Lippman exceeded the scope of authority given to him by Plaintiffs by failing to satisfy the disclosure requirements identified by the Louisiana Supreme Court after the contract was executed. Furthermore, the Maughan parties claimed that they were the intended beneficiaries of Lippman’s engagement and asserted liability in mandate. Louisiana law provides that a mandatary who exceeds his authority is personally bound to the third person with whom he contracts, unless that person knew at the time the contract was made that the mandatary exceeded his authority or the principal ratified the contract. However, the Maughan parties did not allege any intentionally tortious conduct on the part of Lippman. Lippman excepted to the third party demand as failing to state a cause of action absent allegations of intentional conduct. The district court sustained the exception. The First Circuit affirmed.
The First Circuit declined to create an exception to the established line of jurisprudence requiring a non-client to plead intent to cause direct harm and malice to maintain a cause of action against his adversary’s attorney in this case where the essence of the Maughan parties’ claims against Lippman was that he failed to foresee that the Louisiana Supreme Court would subsequently issue new disclosure requirements for attorney-client retainer agreement that include arbitration clauses. Furthermore, the First Circuit found that the Maughan parties were adversaries and not third party beneficiaries to Lippman’s retention agreement with Plaintiff.
Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.