## Facts

- Manchester Hawaii Properties, Ltd. (MHP) was a limited partnership formed to invest in Hawaii real estate; its general partner was controlled by Douglas Manchester.
- The fee owner offered to sell an industrial park to MHP on favorable terms, and MHP agreed to purchase it.
- Attorney Christopher B. Neils and his firm represented MHP/Manchester in legal work related to the purchase, restructuring, buyout of limited partners, and dissolution of the partnership.
- After agreeing to buy the property, Manchester sent limited partners a letter offering them the choice to (a) sell their limited partnership interests back or (b) contribute additional capital for the acquisition.
- The letter did not disclose the favorable purchase terms or that MHP had already agreed to buy the property.
- Neils approved the letter; most limited partners sold their interests.
- Former limited partners later sued Manchester and the general partner for fraud-related claims and sued Neils and his firm for professional negligence and breach of fiduciary duty based on their role in the buyout communications and transaction structure.
- The trial court granted summary adjudication for Neils on the negligence and fiduciary-duty claims on the ground Neils owed no duty to the limited partners and they could not show reliance; the limited partners sought writ relief.

## Issues

1. Whether, on the summary adjudication record, triable issues existed as to an actual or implied attorney-client relationship (and resulting duty of care or fiduciary duty) between partnership counsel and individual limited partners.
2. Whether lack of direct communications with, or identification to, the limited partners defeated duty or reasonable reliance as a matter of law in a transactional setting.
3. Whether summary adjudication was improper where competing inferences could be drawn about counsel’s role in documents intended to influence the limited partners’ economic decisions.

## Decision

- The court of appeal granted writ relief in relevant part.
- It held the trial court erred in concluding, as a matter of law, that Neils owed no duty to the limited partners.
- It found triable issues of material fact as to whether duties arose to the limited partners under a totality-of-the-circumstances analysis for implied attorney-client relationships.
- It rejected the view that absence of direct attorney–investor communications or the investors’ lack of knowledge of the attorney’s identity necessarily defeated reliance or duty.
- It issued a peremptory writ directing the superior court to vacate the summary adjudication order and to enter a new order denying the motion on the professional negligence and breach of fiduciary duty causes of action.

## Legal Principles

- Summary adjudication is improper where material facts are disputed or where reasonable inferences from the evidence could support competing conclusions on duty, reliance, or causation.
- An attorney representing a partnership or similar entity does not automatically represent individual partners, but an implied attorney-client relationship with individuals may be found based on objective manifestations under the totality of the circumstances.
- Factors relevant to an implied attorney-client relationship include: the nature and extent of attorney–individual contacts; whether the attorney provided individualized legal advice; the individual’s reasonable expectations; whether the attorney knew or should have known of likely reliance; and whether interests were adverse.
- In transactional matters, duty and reliance may arise from an attorney’s drafting or approval of documents intended to influence third-party decisions when reliance on the legal content of those documents is foreseeable and reasonable.
- Whether a fiduciary relationship existed and whether fiduciary obligations were breached in connection with a transaction involving potential conflicts between controlling insiders and noncontrolling investors are commonly fact questions not suited to summary adjudication on an undeveloped or disputed record.

## Conclusion

The court of appeal held that, given the evidence of counsel’s involvement in communications and transaction structure aimed at prompting limited partners to sell or invest, a factfinder could infer an implied attorney-client relationship and corresponding duties; therefore, summary adjudication for partnership counsel on negligence and fiduciary-duty claims was reversed by writ and the claims were allowed to proceed.


Johnson v. Superior Court, 38 Cal. App. 4th 463 (Cal. Ct. App. 1995)