## Facts

- Thomas R. Waggoner co-founded STAAR Surgical Company (a Delaware corporation) and served as CEO and a director until 1989.
- Waggoner retained Elliot H. Lutzker in 1984 as counsel for STAAR; Lutzker later practiced with Snow, Becker, Kroll, Klaris & Krauss, P.C., continuing to represent STAAR.
- STAAR obtained a line of credit from the Bank of New York, which later demanded personal guarantees from STAAR’s officers as a condition of continuing the credit.
- At a board meeting on December 13, 1987, Waggoner offered to personally guarantee substantial corporate debt in exchange for voting control while his guarantees remained outstanding; Lutzker attended and stated he was acting only as counsel for STAAR.
- The board authorized issuing preferred stock to Waggoner with conversion features intended to provide voting control if his guarantees remained outstanding after a specified date; at the board’s direction, Lutzker drafted the implementing corporate documents.
- Waggoner later exercised the conversion provisions and claimed voting control; about a year later, the board removed him as CEO and as a director.
- Waggoner consulted Lutzker about removing and replacing the remaining directors; Waggoner alleged Lutzker expressed no awareness of any legal bar, and Waggoner attempted to reconstitute the board.
- Delaware litigation followed over corporate control; the Delaware Supreme Court ultimately held the board lacked authority to create the preferred stock voting rights as structured and that the conversion was invalid.
- Waggoner sued Lutzker and the law firm for legal malpractice, alleging negligent drafting of the preferred-stock/conversion structure and negligent advice about removing and replacing directors.

## Issues

1. Whether an attorney-client relationship existed between Lutzker (and his firm) and Waggoner in Waggoner’s individual capacity, creating a duty supporting a malpractice claim.
2. Whether New York or California law governed the malpractice claims, including whether privity was required for recovery.

## Decision

- The Ninth Circuit affirmed summary judgment for Lutzker and the law firm.
- Applying California choice-of-law rules, the court held New York had the most significant relationship to the alleged malpractice and applied New York law.
- Under New York law, malpractice liability generally requires privity (a direct attorney-client relationship).
- The court held no attorney-client relationship existed between Lutzker and Waggoner personally because Lutzker represented STAAR as an entity, including during the board meeting and in drafting the corporate instruments.
- Because Waggoner could not establish privity, his malpractice claims failed without reaching whether the drafting or advice was negligent or caused the asserted losses.

## Legal Principles

- In a diversity malpractice action, a federal court applies the forum state’s choice-of-law rules to select the governing substantive law.
- Under New York law, a legal malpractice plaintiff ordinarily must show privity with the attorney; nonclients generally cannot recover for malpractice.
- Representation of a corporation does not, by itself, create an attorney-client relationship with the corporation’s officers, directors, or shareholders; an individual duty requires a separate, clearly established attorney-client relationship.
- A corporate officer’s personal financial involvement (including personal guarantees) and incidental reliance on corporate counsel’s work does not, standing alone, convert corporate representation into personal representation.

## Conclusion

The Ninth Circuit held that New York law governed and required privity, and because corporate counsel represented the corporation rather than the CEO individually, the CEO could not maintain a legal malpractice action against corporate counsel for work and advice given in the corporate context.


Waggoner v. Snow, Becker, Kroll, Klaris & Krauss, P.C., 991 F.2d 1501 (9th Cir. 1993)