Liggett v. Young, 877 N.E.2d 178 (Ind. 2007)

Brief Summary
Violation of RPC 1.8(a) regarding “doing business with clients” does not create per se liability, but a client may sue for breach of common law duties. Left open is a question concerning the scope of the “standard commercial transaction” exemption to RPC 1.8(a).

Complete Summary
Lawyer Young hired client Liggett to build a home. After an unpaid material supplier sued Liggett, Liggett sued Young, claiming lack of payment for change orders to which Liggett and Young had allegedly orally agreed. After the trial court granted summary judgment to Young on the basis of their written agreement, Liggett appealed on the ground that the trial court had not adequately considered the significance of the fact that Liggett and Young were in a lawyer-client relationship at the time of this contract.

The Indiana Supreme Court first considered whether a violation of RPC 1.8(a), the rule governing doing business with clients, would give rise to civil liability. Relying in part on the Preamble to its RPCs and on prior case law, the court held that such a violation would not create per se liability. Instead, a plaintiff-client suing a lawyer had to meet the common law standards for an action for breach of fiduciary duty.

The court noted in passing, however, that the comments to Indiana RPC 1.8(a) and the parallel ABA Model Rule contain an exemption for “standard commercial transactions between the lawyer and the client for products or services that the client generally markets to others” because, “In such transactions, the lawyer has no advantage in dealing with the client * * *.” The court declined to consider whether the fact that Liggett was a contractor who therefore sold homes on a regular basis did or did not place his transaction with Young within this exemption. (A separate opinion that concurred in the result stated that the “standard commercial transactions” exemption should not apply whenever a lawyer drafts the contract with the client.)

The court also held that Young did owe a common law fiduciary duty to Liggett and that the trial court had not adequately considered the effects of this duty in its grant of summary judgment. The court held that where, as here, the contract between lawyer and client was not completely on a standard form but was drafted in part by the lawyer, the absence of evidence below to the effect that the contract was not fraudulent as to Liggett and was fair and honest required reversal and remand. Cf. Restatement (Third) of The Law Governing Lawyers § 126 (2000).

Significance of Opinion
The decision highlights the overlap between civil liability standards and the RPCs even if violation of the RPCs does not give rise to per se liability. As noted, however, the more interesting and significant question may be the one that the court did not expressly answer: whether the “standard commercial transactions” exemption contained in the comments to RPC 1.8(a) applies when or to the extent that the contract for the ostensibly “standard” transaction between lawyer and client was drafted by the lawyer.

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