Tormo v. Yormark
17 U.C.C. Rep. Serv. (West) 166, 20 Fed. R. Serv. 2d 488, 398 F. Supp. 1159 (1975)
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Rule of Law:
An attorney has a duty to exercise ordinary prudence in selecting and supervising out-of-state counsel for a client. While this duty does not require the attorney to discover facts that are notorious only within the foreign jurisdiction, it does require investigation into suspicious circumstances suggesting untrustworthiness, and may include a continuing duty of supervision if the attorney's representations or the parties' understanding imply ongoing involvement.
Facts:
- In July 1968, Karen Tormo, a New York citizen, was injured in a boating accident in New Jersey.
- Tormo's father, Henry Wendel, consulted their New York family attorney, Edward Devlin, who agreed to handle the personal injury claim.
- Shortly thereafter, a New Jersey attorney, Milton Yormark, contacted Devlin, stated he was familiar with the accident, and expressed interest in handling the case.
- In 1969, Yormark was indicted in New Jersey for insurance fraud, a fact not widely known outside of the state.
- In June 1970, because a lawsuit needed to be filed in New Jersey, Devlin referred Tormo's case to Yormark after only confirming Yormark was listed in a legal directory.
- After the referral, Wendel remained in regular contact with Devlin, who provided assurances about the case's progress.
- Yormark settled the case for $150,000, forged Tormo's endorsement on the settlement draft, deposited the funds into his own account, and embezzled the money.
- Devlin remained unaware of Yormark's criminal history or his embezzlement of the settlement funds until Yormark disappeared in March 1972.
Procedural Posture:
- Plaintiffs Henry Wendel and Karen Wendel Tormo filed suit in the U.S. District Court for the District of New Jersey against several defendants, including Fidelity Union Trust Company and Keene National Bank (the banks).
- The banks filed a third-party complaint against Edward Devlin, the plaintiffs' original attorney, seeking contribution or indemnity based on Devlin's alleged negligence.
- Third-party defendant Devlin filed a motion for summary judgment against the third-party plaintiffs (the banks), arguing he was not negligent and could not be held liable.
- The District Court is now ruling on Devlin's motion for summary judgment.
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Issue:
Does a referring attorney's duty of care to a client extend to investigating an out-of-state attorney's background beyond state licensure and supervising the case post-referral, such that the referring attorney may be liable for contribution for the out-of-state attorney's subsequent embezzlement?
Opinions:
Majority - Coolahan, District Judge
Yes, a referring attorney's duty of care may extend to further investigation and supervision, creating potential liability for contribution. The court granted summary judgment in favor of the attorney on the claim of negligent failure to discover the out-of-state attorney's indictment, as that information was not notorious outside New Jersey. However, the court denied summary judgment on the claims of negligent selection and supervision, finding that a jury could hold the attorney liable for failing to investigate suspicious circumstances suggesting unethical client solicitation and for failing to reasonably supervise the case after making assurances to the client.
Analysis:
This case clarifies the scope of a referring attorney's duty when enlisting out-of-state counsel. It establishes that while attorneys can generally rely on a foreign state's licensing as evidence of fitness, this reliance is not absolute. The decision creates a distinction between facts requiring local knowledge, for which an out-of-state attorney is not responsible, and 'red flags' like potential solicitation, which trigger a duty to inquire. Furthermore, it affirms that the attorney-client relationship and its corresponding duty of supervision do not automatically terminate upon referral, but depend on the parties' mutual understanding and the referring attorney's subsequent conduct.
