Noble v. Bruce

CHASANOW, Judge. The two consolidated cases before this Court, Noble, et al. v. Bruce, No. 7, September Term 1997, and Fauntleroy, et al. v. Blizzard, et al., No. 55, September Term 1997, present the identical issue of whether a nonclient, testamentary beneficiary may maintain a cause of action for professional malpractice against an attorney where it is alleged that the attorney either provided negligent estate planning advice to the testator, or negligently drafted the testator’s will, in a manner which resulted in significant estate and inheritance taxes that could have been avoided. I. A. Noble The Noble beneficiaries are six of eight surviving children of Earl and Florence Long. The Longs retained Respondent, Charles A. Bruce, Jr., to advise them in planning their estates and preparing their wills.

The Longs owned, as joint tenants with right of survivorship, approximately 366 acres of real property including several farms, securities worth $660,000, and cattle worth approximately $30,000. Bruce prepared “mirror wills” which were executed on July 29,. 1991. Under these wills, Mr. Long bequeathed all of his interest in the Longs’ property to Ms. Long if she survived him, and Ms. ⁷³⁴ Long bequeathed all of her interest in their property to Mr. Long if he survived her. Both of the wills also provided that upon the death of the survivor: 1) the family residence and curtilage on one of the farms would pass to Lorraine Kulyncyz, one of the Longs’ daughters who is not a party in this case; 2) the Longs’ partial interest in certain other real property passed to Mr. Long’s sister; and 3) the remainder of the estate passed to the Longs’ eight children as joint tenants with right of survivorship, subject to a life estate in Thomas F. Long, one of their sons who is not a party in this case.

On August 28, 1991, Mr. Long died, and all of his property passed to Ms. Long pursuant to the will and by operation of the joint tenancies, free from federal estate taxes under the marital deduction provided in 26 U.S.C. § 2056 . Shortly after Mr. Long’s death, Ms. Long transferred all of her real property to Lorraine Kulyncyz and Thomas F. Long. 1 On June 22, 1994, Ms. Long died. On August 25, 1994, the beneficiaries filed a legal malpractice action against Bruce alleging that Bruce was negligent in failing to advise Mr. and Ms. Long that they could each shelter up to $600,000 in both of their estates from any federal estate tax under 26 U.S.C. § 2010 , the Unified Credit Against Estate Tax. If both spouses use the Unified Credit, up to $1.2 million can pass to beneficiaries free of federal estate tax.

In order for both spouses to take advantage of the Unified Credit, one mechanism commonly used is the bypass, or credit shelter, trust for the benefit of the surviving spouse. In his affidavit in support of summary judgment, Bruce asserted that he advised the Longs of the ramifications of federal estate and gift tax laws and the benefits of utilizing a bypass trust, but the Longs rejected such a mechanism because it would interfere with their control over their assets during their lifetimes. ⁷³⁵ Prior to discovery, Bruce filed a motion to dismiss the complaint, or in the alternative, a motion for summary judgment. On July 26, 1995, the Circuit Court for Somerset County granted summary judgment in favor of Bruce determining that the beneficiaries would be unable to prove what the Longs’ intentions were and unable to contradict Bruce’s assertion in his affidavit that he “fully advised” the Longs regarding the ramifications of federal estate and gift taxes and the use of the bypass trust. The circuit court noted that the issue of “whether third party beneficiaries may maintain an action for damages against an attorney, with whom they have no privity, for alleged failure to draft a will properly so as to give effect to the testator’s intended disposition of property” was “irrelevant.” On appeal, the Court of Special Appeals, in an unreported per curiam opinion, affirmed the judgment of the circuit court on other grounds holding that the Noble beneficiaries did not have standing to sue Bruce as third-party beneficiaries under Kirgan v. Parks, 60 Md.App. 1 , 478 A.2d 713 , cert. denied, 301 Md. 639 , 484 A.2d 274 (1984).

On March 14, 1997, this Court granted the Noble beneficiaries’ petition for writ of certiorari. B. Fauntleroy Because the issue before us arises from the granting of a motion to dismiss the complaint, we must assume as true all well-pleaded material facts in the complaint, the exhibits, and any reasonable inferences that may be drawn from them. See Flaherty v. Weinberg, 303 Md. 116, 135-36 , 492 A.2d 618, 628 (1985). The complaint alleges that the Fauntleroy beneficiaries are the sole beneficiaries of a residuary clause contained in the will of the late Sue M. Jackson.

Ms. Jackson retained T. Hughlett Henry, Jr., 2 and his law firm, Henry & Price, to advise her in planning her estate and preparing her will. Ms. Jackson’s will was executed on March 11, 1983. Ms. Jackson owned a significant amount of stock in a company called Pittsburgh Des Moines Steel Company (PDM). The 1983 will ⁷³⁶ bequeathed her shares of PDM stock to the children and grandchildren of William R. Jackson, Ms. Jackson’s brother-in-law.

The 1983 will also directed that all of the taxes be paid out of the residuary estate. On March 29, 1983, Henry sent to Ms. Jackson a letter estimating the federal estate taxes that would be imposed on her estate at her death. The letter included the following statement by Henry: “I do not know whether you were aware that the tax problem in your estate is as bad as it is and I am all the more pleased that we have made the decision to have the bulk of the PDM stock pay its own share of that tax.” Ms. Jackson later added two codicils to her 1983 will, but neither codicil changed the clause regarding payment of taxes. In 1988, Ms. Jackson revoked the 1983 will and executed a new will also prepared by Henry and his firm.

However, the 1988 will was substantially the same as the 1983 will, leaving intact the clause directing all of the taxes to be paid out of the residuary estate. Ms. Jackson subsequently executed two codicils on March 29, 1990 and on January 28, 1992. Again, these codicils did not alter the clause regarding payment of taxes. In April 1990, Ms. Jackson and PDM entered into a stock purchase agreement which provided that upon Ms. Jackson’s death the estate would sell all of Ms. Jackson’s PDM shares back to PDM at a price equal to the closing price of the stock as of the date of her death.

Ms. Jackson’s obligation under this agreement was conditioned on the transaction being treated as a sale or exchange, rather than a dividend, for tax purposes. The stock purchase agreement, however, was never implemented upon Ms. Jackson’s death because this condition could not be satisfied. The agreement was ultimately declared null and void. On January 10, 1994, Ms. Jackson died.

In addition to a farm, Ms. Jackson’s estate included 44,816 shares of PDM stock, worth approximately $1.4 million. Because the stock purchase agreement was not implemented, the PDM stock passed to certain beneficiaries as provided in Ms. Jackson’s ⁷³⁷ 1988 will and its codicils. The estate and inheritance taxes totaled approximately $910,000 and were borne by the Fauntleroy beneficiaries as residuary beneficiaries. On January 8, 1997, the Fauntleroy beneficiaries filed a complaint against Respondents, Sara N. Blizzard and W. Thomas Fountain, Personal Representatives of the Estate of Henry 3 and his law firm, alleging that Henry and his firm committed malpractice by negligently preparing the 1983 will so that all taxes would be paid out of the residuary estate, contrary to Ms. Jackson’s intent.

Respondents subsequently filed a motion to dismiss or, in the alternative, a motion for summary judgment. Prior to discovery, a hearing was held on Respondents’ motion, and the Circuit Court for Talbot County granted Respondents’ motion to dismiss on April 4, 1997, ruling that the Fauntleroy beneficiaries lacked standing to sue Respondents under Kirgan . On April 10, 1997, the Fauntleroy beneficiaries appealed to the Court of Special Appeals and also filed in this Court a petition for writ of certiorari. This Court issued a writ of certiorari on July 30, 1997 prior to proceedings in the Court of Special Appeals.

II

The issue before this Court has been the subject of many articles in recent years. See, e.g., Martin D. Begleiter, Attorney Malpractice in Estate Planning—You’ve Got to Know When to Hold Up, Know When to Fold Up, 38 Kan. L. Rev. 193 (1990); Helen Bishop Jenkins, Privity—-A Texas-Size Barrier to Third Parties for Negligent Will Drafting—An Assessment and Proposal, 42 Baylok L.Rev. 687 (1990); Gerald P. Johnston, Legal Malpractice in Estate Planning— Perilous Times Ahead for the Practitioner, 67 Iowa L. Rev. 629 (1982). See generally Symposium, The Lawyer’s Duties and Liabilities to Third Parties, 37 S. Tex.

L. Rev. 957 (1996). We last addressed the issue of whether an attorney may be ⁷³⁸ held liable to a nonclient for legal malpractice in Flaherty, supra. In Flaherty , we recognized that the state of the law regarding attorney liability to nonclients was “far from settled.” 303 Md. at 125 , 492 A.2d at 622 . Our review of the present state of the law indicates that our previous statement still holds true.

In attorney malpractice cases arising out of will drafting or estate planning, courts have continued to follow three different approaches: 1) the strict privity theory; 2) the balancing of factors theory; and 3) the third-party beneficiary theory. 4 A. The Strict Privity Rule We begin with a discussion of the traditional rule of strict privity. Over one hundred years ago, the United States Supreme Court held that a third party not in privity with an attorney has no cause of action against the attorney for negligence in the absence of fraud or collusion. Nat’l Savings Bank v. Ward, 100 U.S. 195, 205-06 , 25 L.Ed. 621, 625 (1879). In attorney malpractice cases, Maryland generally adheres to the strict privity rule first explicated by this Court in Wlodarek v. Thrift, 178 Md. 453 , 13 A.2d 774 (1940).

In Wlodarek , this Court noted that an attorney is not liable to a nonclient for the alleged failure to properly examine the title to certain realty. 178 Md. at 468 , 13 A.2d at 781 . We later followed the strict privity rule in Kendall v. Rogers, 181 Md. 606 , 31 A.2d 312 (1943), holding that an attorney was not liable to non- ⁷³⁹ clients in negligence for representations made to the non-clients regarding their obligation to cure a defective title to a farm that they had previously conveyed to the attorney’s client. In Kendall , we set forth the elements of a cause of action for negligence or malpractice against an attorney. 181 Md. at 611-12 , 31 A.2d at 315 . Specifically, a plaintiff must allege: 1) the attorney’s employment; 2) his neglect of a reasonable duty; and 3) loss to the client proximately caused by that neglect of duty.

Flaherty, 303 Md. at 128 , 492 A.2d at 624 . Thus, we have recognized that a plaintiff in an attorney malpractice action must, as a threshold matter, “allege and prove the existence of a duty between the plaintiff and the defendant.” Flaherty, 303 Md. at 134 , 492 A.2d at 627 . In Jacques v. First Nat’l Bank, 307 Md. 527 , 515 A.2d 756 (1986), we discussed the concept of duty where the plaintiffs’ injury was purely economic. Jacques involved a claim by home buyers against a bank alleging negligence, inter alia, in the processing and determination of the Jacques’ application for a residential loan. 307 Md. at 528 , 515 A.2d at 756 .

Upon concluding that a contract existed between the Jacques and the bank, we held that under the circumstances of the case the bank owed a duty of reasonable care to the Jacques in the processing and determination of their loan application. Id. We stated that: ⁷⁴⁰ Jacques, 307 Md. at 534-35 , 515 A.2d at 759-60 . We further noted that an inverse correlation existed between the nature of the harm and the parties’ relationship. ⁷³⁹ “In determining whether a tort duty should be recognized in a particular context, two major considerations are: the nature of the harm likely to result from a failure to exercise due care, and the relationship that exists between the parties.

Where the failure to exercise due care creates a risk of economic loss only, courts have generally required an intimate nexus between the parties as a condition to the imposition of tort liability. This intimate nexus is satisfied by contractual privity or its equivalent. By contrast, where the risk created is one of personal injury, no such direct relationship need be shown, and the principal determinant of duty becomes foreseeability.” ⁷⁴⁰ “As the magnitude of the risk increases, the requirement of privity is relaxed—thus justifying the imposition of a duty in favor of a large class of persons where the risk is of death or personal injury. Conversely, as the magnitude of the risk decreases, a closer relationship between the parties must be shown to support a tort duty.” 307 Md. at 537 , 515 A.2d at 761 .

In a case involving a claim brought by a condominium association against the general contractor, developer, and architect of the building for the cost of correcting a construction defect, this Court determined that privity was “not an absolute prerequisite to the existence of a tort duty ... extended to those persons foreseeably subjected to the risk of personal injury.” Council of Co-Owners v. Whiting-Turner, 308 Md. 18, 32 , 517 A.2d 336, 343 (1986). As a general rule, however, if the risk created by negligent conduct is merely one of economic loss, “no tort duty will be found absent a showing of privity or its equivalent.” Jacques, 307 Md. at 537 , 515 A.2d at 761 . Although there may be a trend to relax or abandon the strict privity rule, a number of jurisdictions still retain the rule that, in attorney malpractice cases, absent fraud, collusion, or malice, an attorney is not liable to a nonclient for harm caused by the attorney’s negligence in the drafting of a will or planning an estate. See, e.g., St. Mary’s Church of Schuyler v. Tomek, 212 Neb. 728 , 325 N.W.2d 164,165 (1982) (holding that attorney who drafted will owed no duty to alleged beneficiaries of the will’s residuary clause, and thus, alleged beneficiaries could not maintain negligence action); Viscardi v. Lerner, 125 A.D.2d 662 , 510 N.Y.S.2d 183, 185 (1986) (holding that alleged intended beneficiaries had no cause of action against testator’s attorney for negligently drafting will so that alleged beneficiaries inherited nothing); Simon v. Zipperstein, 32 Ohio St.3d 74 , 512 N.E.2d 636, 638 (1987) (holding that, absent fraud, collusion, or malice, the beneficiary of the will had no standing to bring malpractice action against the testator’s ⁷⁴¹ attorney for negligence in drafting the will that allegedly failed to properly set forth the testator’s intent); Dickey v. Jansen, 731 S.W.2d 581, 582 (Tex.Ct.App.1987) (holding that beneficiaries of trust provision in will had no cause of action against testator’s attorney for negligence in preparing will with invalid trust provision); Copenhaver v. Rogers, 238 Va. 361 , 384 S.E.2d 593, 594-95 (1989) (holding that grandchildren of testator, who held a remainder interest in a trust, had no cause of action in negligence where they alleged, inter alia, that testator’s attorney negligently drafted will which resulted in failure of trust provision and loss of the grandchildren’s remainder interest and that the attorney provided negligent advice which resulted in significant estate and inheritance taxes).

Application of the strict privity requirement in the will drafting or estate planning context has been justified by courts primarily on the following public policy grounds. First, the rule protects the attorney’s duty of loyalty to and effective advocacy for his or her client. While the testator/client is alive, the lawyer owes him or her a “duty of complete and undivided loyalty.” Lewis v. Star Bank, N.A., Butler Cty., 90 Ohio App.3d 709 , 630 N.E.2d 418, 421 (1993), jurisdictional motion overruled, 68 Ohio St.3d 1473 , 628 N.E.2d 1392 (1994). The strict privity rule protects an attorney’s obligation to direct his or her full attention to the needs of the client.

Simon, 512 N.E.2d at 638 . An attorney’s preoccupation or concern with potential negligence claims by third parties might result in a diminution in the quality of the legal services received by the client as the attorney might weigh the client’s interests against the attorney’s fear of liability to a third party. See Simon, 512 N.E.2d at 638 . Second, there exists the danger of placing conflicting duties on an attorney during the estate planning process if a nonclient is permitted to maintain a cause of action against a testator’s attorney.

John H. Bauman, A Sense of Duty: Regulation of Lawyer Responsibility to Third Parties by the Tort System, 37 S. Tex. L. Rev. 995 ,1006 (1996). As a result, an attorney’s loyalty might become divided between the testator/client and the beneficia ⁷⁴² ríes. See Barcelo v. Elliott, 923 S.W.2d 575, 578 (Tex.1996).

Third, courts fear that absent the strict privity rule there would be no limit as to whom a lawyer would be obligated. See Ward, 100 U.S. at 203 , 25 L.Ed. at 624 . In Ward , the Court noted that “[t]he only safe rule is to confíne the right to recover to those who enter into the contract; if we go one step beyond that, there is no reason why we should not go fifty.” Id. Furthermore, parties to a contract for legal services would lose control of their agreement if liability without privity were permitted.

Joan Teshima, Annotation, Attorney’s Liability, to One Other Than Immediate Client, for Negligence in Connection with Legal Duties, 61 A.L.R.4th 615 , 624 (1988). As one commentator noted, the strict privity rule has been retained in some jurisdictions because “not only should an attorney know in advance who is being represented and for what purpose, but also the attorney should be able to control the scope of the representation and the risks to be accepted. Imposing liability in favor of nonclients, generally speaking, threatens those interests. In threatening the interests of the attorney, the interests of potential clients may also be compromised; they might not be able to obtain legal services as easily in situations where potential third party liability exists.

Before abandoning privity, the courts need a good reason for thinking that the private arrangements are inadequate.” John H. Bauman, A Sense of Duty: Regulation of Lawyer Responsibility to Third Parties bythe Tort System, 37 S. Tex. L. Rev. 995 , 1005-06 (1996). Thus, opening attorney-client contracts to the scrutiny of nonclients would place an undue burden on the attorney-client relationship and possibly the legal profession as a whole. See Joan Teshima, Annotation, Attorney’s Liability, to One Other Than Immediate Client, for Negligence in Connection with Legal Duties, 61 A.L.R.4th 615 , 624 (1988) (noting that “opening attorney-client contracts to third party scrutiny would entail a vast range of potential liability”); cf. Dickey, 731 S.W.2d at 583 .

Although several jurisdictions still, as a general rule, adhere to the traditional strict privity requirement in attorney malpractice cases, some ⁷⁴³ jurisdictions have either relaxed the requirement in limited situations or abandoned it altogether. B. The Balancing of Factors Theory Forty years ago, the Supreme Court of California began the trend of alternative approaches to the strict privity rule when it first formulated its policy-based balancing of factors theory in Biakanja v. Irving, 49 Cal.2d 647 , 320 P.2d 16, 19 (1958). The California court later modified the balancing of factors theory in the context of an attorney malpractice case in Lucas v. Hamm, 56 Cal.2d 583 , 15 Cal.Rptr. 821 , 364 P.2d 685 (1961), cert. denied, 368 U.S. 987 , 82 S.Ct. 603 , 7 L.Ed.2d 525 (1962). In Lucas , the court addressed the issue of whether the beneficiaries of a will had a cause of action in negligence against the attorney who drafted the will.

Id. In determining whether an attorney will be held liable to a nonclient, the court noted that it will consider the following factors: “the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury, and the policy of preventing future harm.” Lucas, 15 Cal. Rptr. at 823 , 364 P.2d at 687 . An additional factor considered by the court was whether recognizing liability in such cases would impose an undue burden on the legal profession.

Lucas , 15 CaLRptr. at 824, 364 P.2d at 688 . Although the court recognized that the amount of liability in some cases could be “large and unpredictable,” the court concluded that no undue burden would be placed on the profession, especially since a conclusion otherwise would result in the innocent beneficiary bearing the loss. Id. Despite the lack of privity between the beneficiaries and the attorney who drafted the will, the beneficiaries could maintain an action in tort against the attorney. 5 ⁷⁴⁴ Some jurisdictions have followed the Lucas approach in the will drafting or estate planning context.

See, e.g., Creighton University v. Kleinfeld, 919 F.Supp. 1421, 1426 (E.D.Cal. 1995); Auric v. Continental Cas. Co., 111 Wis.2d 507 , 331 N.W.2d 325, 329 (1983). This Court has declined to adopt this balancing of factors approach in the past, and we see no valid reason to adopt such a test now. As we noted in Flaherty , this approach has not been universally accepted by other jurisdictions.

The balancing of factors approach has been criticized as being too broad, see Pelham v. Griesheimer, 92 Ill.2d 13 , 64 Ill.Dec. 544, 548 , 440 N.E.2d 96, 100 (1982), and so unworkable that it has led to “ad hoc determinations and inconsistent results.” Guy v. Liederbach, 501 Pa. 47 , 459 A.2d 744, 749 (1983). We agree and therefore decline to adopt the balancing of factors approach in the instant cases. C. The Third-Party Beneficiary Theory Maryland courts applied the strict privity rule in attorney malpractice cases without exception until 1972 when this Court recognized the third-party beneficiary theory in an attorney malpractice case, Prescott v. Coppage, 266 Md. 562 , 296 A.2d 150 (1972). In Prescott , Coppage was the receiver for Security Financial Insurance Corporation (Security), a creditor of Maryland Thrift Savings and Loan Company (Maryland Thrift).

Coppage sued Medley, the court-appointed receiver for Maryland Thrift, as well as Prescott who was counsel specially appointed by the court “ ‘to aid [Medley] in the performance of his duties as receiver.’ ” 266 Md. at 565, 574 , 296 A.2d at 152,156 . Although it is unclear whether Coppage brought suit under a tort theory or a contract theory, the subject matter of the suit was a $40,000 debt owed to Security by Maryland Thrift. Coppage alleged that Medley and Prescott improperly distributed Maryland Thrift’s assets to lower ⁷⁴⁵ priority creditors instead of paying the balance due on Security’s priority claim. Prescott, 266 Md. at 565 , 296 A.2d at 151 .

In determining who is a creditor beneficiary, this Court noted that “the intention of the parties to recognize a person or class as a primary party in interest as expressed in the language of the instrument and consideration of the surrounding circumstances as reflecting upon the parties’ intention[ ] are controlling factors.” Prescott, 266 Md. at 574 , 296 A.2d at 156 . This Court further noted that the judicial order appointing Medley as receiver made clear that all creditors of Maryland Thrift were third-party beneficiaries and that the court order appointing Prescott “by necessary implication bound him to those creditor beneficiaries.” Id. Thus, because Prescott was appointed by the court and not retained by Maryland Thrift or Medley, Prescott owed a duty to the court as well as to any beneficiaries the court intended to benefit. This Court then held that the acceptance of the duties by Medley and Prescott entailed in the court order created conditions that gave Cop-page standing to sue Prescott as a third-party creditor beneficiary.

Id. This Court last addressed an issue of attorney liability to nonclients for professional malpractice in the Flaherty case which involved a lawsuit by mortgagors against an attorney on theories of negligence, breach of warranty, and negligent misrepresentation. 303 Md. at 134 , 492 A.2d at 627 . The Flahertys purchased a home that First Federal Savings and Loan Association (First Federal) financed. Flaherty, 303 Md. at 132 , 492 A.2d at 626 .

First Federal retained the firm Weinberg, Michel and Sterns (Weinberg) to represent it at settlement, but the Flahertys did not retain counsel for themselves. Id. At settlement, Weinberg assured the Flahertys that they were purchasing the property described in the contract of sale, a representation that the Flahertys subsequently discovered to be inaccurate. Flaherty, 303 Md. at 132-33 , 492 A.2d at 626 .

The Flahertys’ second amended complaint alleged that “ ‘[t]he hiring of [Weinberg] was intended to benefit the lender as well as the purchasers in that both had identical interests in the property. The plaintiffs were ⁷⁴⁶ intended, either expressly or impliedly, to benefit from the defendant attorneys’ undertaking in this matter.’ ” Flaherty, 303 Md. at 138-39 , 492 A.2d at 629 (brackets in original). Noting that the third-party beneficiary theory is the sole exception in Maryland to the strict privity rule, this Court explained that the gravamen of an attorney malpractice action “is the negligent breach of a contractual duty.” Flaherty, 303 Md. at 130, 134 , 492 A.2d at 625, 627 . Although the third-party beneficiary exception is “ ‘peculiarly applicable’ to contract actions, its scope has a broader range.

In our view, the scope of duty concept in negligence actions, Clagett v. Dacy[, 47 Md.App. 23, 28 , 420 A.2d 1285, 1289 (1980)], may be analogized to the third party beneficiary concept in the context of attorney malpractice cases.” Flaherty, 303 Md. at 130 , 492 A.2d at 625 . Thus, regardless of whether a tort theory or a contract theory is pled, a plaintiff in an attorney malpractice action must first “allege and prove the existence of a duty between the plaintiff and the defendant.” 6 Flaherty, 303 Md. at 134 , 492 A.2d at 627 . In order to establish a duty owed by the attorney to the nonclient, the nonclient “must allege and prove that the intent of the client to benefit the nonclient was a direct purpose of the transaction ⁷⁴⁷ or relationship. In this regard, the test for third party recovery is whether the intent to benefit actually existed, not whether there could have been an intent to benefit the third party.” (Emphasis added).

Flaherty, 303 Md. at 130-31 , 492 A.2d at 625 . In other words, an incidental benefit to a nonclient will not impose a duty upon an attorney. Flaherty, 303 Md. at 131 n. 6, 492 A.2d at 625 n. 6. Once a duty to the nonclient is established, he or she then must allege and prove the remaining elements of a negligence cause of action in order to recover against the attorney in negligence.

Flaherty, 303 Md. at 131 , 492 A.2d at 625 . This Court reasoned that the third-party beneficiary exception is narrow in scope, and “[pjroperly applied, this exception will not expose the attorney to endless litigation brought by those who might conceivably derive some indirect benefit from the contractual performance of the attorney and his client.” Flaherty, 303 Md. at 131 , 492 A.2d at 625-26 . In addition, in adversarial proceedings, this exception is limited by the Maryland Rules of Professional Conduct, imposing a duty on lawyers to represent clients zealously and generally prohibiting the representation of conflicting interests in a transaction. Flaherty, 303 Md. at 131 , 492 A.2d at 626 .

Turning to the facts of the case, this Court held that the Flahertys could not maintain a cause of action in negligence because they did not employ Weinberg. Flaherty, 303 Md. at 134 , 492 A.2d at 627 . In addition, the Flahertys could not maintain a cause of action for breach of express or implied warranties because they did not allege a contractual relationship with Weinberg, nor did they point to any statute that extended such warranties to them under the circumstances of the case. Flaherty, 303 Md. at 135 , 492 A.2d at 627 .

Like the negligence and breach of warranty claims, this Court stated that the attorney must owe a duty to the nonclient in order for the nonclient to recover under a negligent misrepresentation theory. Id. We concluded that the Flahertys did allege as a fact that First Federal intended the Flahertys to benefit directly from Weinberg’s services as an attorney. Flaherty, 303 Md. at 139 , 492 A.2d at 629-30 .

Thus, this Court held ⁷⁴⁸ that this allegation was sufficient to survive Weinberg’s motion to dismiss even though it would be difficult for the Flahertys to ultimately prove that a direct purpose of the relationship between them and First Federal was to benefit the Flahertys. Id. In reaching our decision, we noted that the fact that the Flahertys did not retain separate counsel was inconclusive as to “whether First Federal intended to benefit the