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Lawyer liable for failure to denounce other lawyer whom he knew was defrauding a client



A lawyer with close business ties to another attorney who pilfered funds from their common client may be liable to that client for damages if he knew about the thievery but kept silent, the New Jersey Superior Court, Appellate Division, ruled April 23 (Estate of Spenser v. Gavin, N.J. Super. Ct. App. Div., No. A-0424-06T5, 4/23/08) in what I consider to be an excellent opinion.

Although there was no partnership among the lawyers that would support a finding of vicarious liability, the court reasoned that direct liability is justified by principles of "legal ethics, tort law, and public policy" if on remand the plaintiffs can prove that the lawyer knew about the theft but said nothing.

One of the sources the court cited as support for its conclusion is New Jersey Rule of Professional Conduct rule that requires lawyers to denounce lawyers who breach their professional duties in a way that raises a substantial question about their honesty, trustworthiness, or fitness.

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Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.