Erika Fabian, the niece of a wealthy South Carolina doctor brought suit against her uncle’s estate planning attorneys for professional negligence and breach of contract in Fabian v. Lindsay, 410 S.C. 475, 765 S.E.2d 132, an October 2014 case decided by the South Carolina Supreme Court. The case had been dismissed in the circuit court for failure to state a cause of action on the grounds that there was no attorney-client relationship and no privity.
The facts were viewed in the light most favorable to 
Ms. Fabian. She alleged that her uncle, Denis Fabian, had signed a trust agreement drafted by his attorneys when he was around 80 years old, leaving his wife, who was about 20 years younger, a life interest. Remainder beneficiaries included his wife’s two daughters from a prior marriage, Dr. Fabian’s one living brother, Eli Fabian, who was in his 70’s and not in good health, and two nieces, Miriam Fabian, Eli’s daughter, and Erika Fabian, the daughter of a predeceased brother.
Erika had been told by her uncle and his wife that when his wife passed away, one half of the estate would be distributed to Mrs. Fabian’s daughters, and the other half would be distributed to Dr. Fabian’s nieces.
Dr. Fabian died in early 2000, and his brother died a few weeks later. The trust was valued at approximately $13 million.
After Dr. Fabian’s death, his estate planners mailed a letter and two pages of the trust agreement to Ms. Fabian informing her that she would not be receiving anything from the estate. Instead, her cousin Miriam would inherit as Eli’s only heir. Erika alleged that a drafting error resulted in an unexpected windfall to her cousin.
The Court took a huge leap, joined the vast majority of states, and recognized causes of action, both in tort and contract, by a third-party beneficiary of an existing will or estate planning document against a lawyer whose drafting error defeats or diminishes the client’s intent. Recovery under either cause of action was limited to individuals named in the estate planning document or otherwise identified in the instrument by their status.
Interestingly, the Court stated that its decision did not place an undue burden on estate planning attorneys because it merely puts them in the same position as most other attorneys by making them responsible for their professional negligence.
Ms. Fabian had argued that an estate planning lawyer’s negligence impacts three potential classes of plaintiffs: (1) the client, who is deceased; (2) the client’s estate, which lacks a cause of action or damages or both; and (3) the intended beneficiaries, the only possible plaintiffs who might suffer harm. If no cause of action is available for the beneficiaries, the negligent drafting lawyer is effectively immune from liability.
Also interesting was the Court’s application of the new rule to cases on appeal as of the date of the opinion. In a separate opinion, Justice Pleicones stated that the new rule should only apply prospectively because this case creates new liability where formerly none existed.
While not technically a dirt case, real estate practitioners should take note of the court’s inclination to favor third-party beneficiaries and reflect whether the Justices’ thought process could affect our world.
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