Cicone v. URS Corp.

Majority - MARTIN, J.

Yes, an attorney owes a duty to opposing counsel and their client to refrain from intentional fraud or negligent misrepresentation during business negotiations, and can be held liable for damages and indemnity if such misrepresentation leads to the opposing attorney's legal malpractice liability. The court found that Cicone adequately pleaded causes of action for fraud, negligent misrepresentation, and equitable indemnity, and that the trial court abused its discretion in sustaining the demurrer without leave to amend. Regarding the claims for fraud and deceit, the court established that everyone has a duty to refrain from intentionally tortious conduct, and a promise made without any intention of performing it is a misrepresentation of fact (promissory fraud). Canady's alleged statement that URS would treat the balance sheet warranty as 'to sellers’ best knowledge,' while allegedly intending to rely on the strict warranty, constituted an actionable misrepresentation. The court rejected the argument that Cicone's reliance was unjustifiable as a matter of law, noting that justifiable reliance is typically a question of fact, and negligence in reliance is not a defense when misrepresentation is intentionally made to induce reliance. Furthermore, the court held that the subsequent settlement by Lucas was not necessarily a superseding cause, as it was foreseeable that a party facing a substantial monetary demand and expensive defense would settle, and incurring legal defense expenses constitutes a compensable detriment. For negligent misrepresentation, the court recognized that an attorney owes a duty of care to third persons when their statements or advice are intended to be transmitted to and relied upon by those third persons in dealing with the attorney's client. Applying the `Biakanja v. Irving` factors, the court concluded that public policy supports imposing a duty of care on an attorney (Canady) who makes an affirmative misrepresentation of fact directly to an opposing attorney (Cicone) for the purpose of influencing Cicone's client (Lucas). This duty requires the attorney to have a reasonable basis for believing the truthfulness of their representations. Such a duty would not jeopardize the attorney-client relationship but rather ensure professional conduct. Finally, for equitable indemnity, the court clarified that the concept of full equitable indemnity survived `American Motorcycle Assn. v. Superior Court`, particularly for vicariously liable tortfeasors or where there is a significant difference in the quality of conduct between tortfeasors. If Cicone were found merely negligent while cross-defendants intentionally deceived, full indemnity could apply. If cross-defendants were found negligent, partial (comparative) indemnity would apply. The court noted that indemnity covers joint tortfeasors (those liable for the same harm) and includes misrepresentation as a basis for tort liability.