## Facts

- F.E. Appling Interests managed Boca Chica Development Co., a real estate development venture financed by Victoria Savings Association (VSA).
- After VSA declined to expand Boca Chica’s credit, Boca Chica filed a lender-liability suit against VSA and later sought settlement before a potential federal receivership.
- Boca Chica sought assurance that any settlement would be enforceable against a federal receiver under 12 U.S.C. § 1823(e), including the requirement of bank board approval.
- During settlement negotiations, Appling’s representative asked VSA’s counsel, McCamish, Martin, Brown & Loeffler, whether VSA’s board had approved the settlement and whether statutory requirements had been satisfied.
- Appling alleged McCamish represented that the board had approved the settlement and that the necessary requirements were met, and that Appling relied on those statements in settling and dismissing its claims.
- The VSA board had not approved the settlement in the manner Appling understood, and after federal receivership the receiver refused to honor the settlement for noncompliance with § 1823(e).
- Appling (a nonclient of McCamish) sued McCamish for negligent misrepresentation, not legal malpractice.

## Issues

1. Whether Texas’s attorney-client privity rule that bars nonclient legal-malpractice claims also bars a nonclient’s negligent misrepresentation claim against an attorney.
2. Whether an attorney may owe a duty of reasonable care to a nonclient under Restatement (Second) of Torts § 552 for information supplied in the course of representing a client.

## Decision

- The Supreme Court of Texas affirmed the court of appeals and held that the privity rule does not categorically bar a nonclient negligent misrepresentation claim against an attorney.
- The court adopted Restatement (Second) of Torts § 552 as the governing framework for attorney liability to nonclients for negligent misrepresentation.
- Because McCamish sought summary judgment solely on lack of duty based on absent privity, and § 552 can impose a duty to a limited, identifiable group intended to rely on the information, summary judgment was improper.
- The case was remanded for further proceedings on the negligent misrepresentation claim.

## Legal Principles

- Texas legal-malpractice claims generally require privity because the duties of competence and loyalty run to the client, not third parties.
- Negligent misrepresentation is a distinct tort focused on an independent duty to use reasonable care in obtaining and communicating information supplied for another’s guidance in business transactions.
- Under Restatement § 552, liability is limited to losses suffered by a person (or a limited group) whom the speaker intends to benefit or knows the recipient intends to benefit, and arising from reliance in a transaction the speaker intends (or knows) the information will influence.
- Recognizing § 552 liability for attorneys does not create a general duty to disclose to nonclients; it imposes a duty of care only as to the accuracy of affirmative information the attorney provides for known third-party reliance.

## Conclusion

The Texas Supreme Court held that, although privity generally bars nonclient legal-malpractice suits, attorneys may be liable to nonclients for negligent misrepresentation under Restatement § 552 when they supply information for a known, limited group’s guidance in a specific transaction and fail to use reasonable care in communicating it.


McCamish, Martin, Brown & Loeffler v. F.E. Appling Ints., 991 S.W.2d 787 (Tex. 1999)