The Court of Appeals of California has reversed a lower court’s dismissal of a legal malpractice action on the basis that an implied attorney-client relationship existed. In Connelly v Hayashi, a physician who invented a protein enriched sports drink sought investors to form a new business venture to develop and market the product. The doctor recruited two investors, who recommended an attorney to help them form the new entity.
The attorney prepared various documents in order to establish the company. The attorney also met separately with the doctor and prepared a document, which governed the doctor’s contributions to the entity. The agreement specified that certain intellectual property owned by the doctor would be withheld and directed how his monetary contribution would be applied. Unbeknownst to the doctor, the attorney did not include the requested terms and added other items to the agreement, including language which disclaimed any attorney-client relationship between him and the doctor.
The venture failed and the doctor sued the attorney for legal malpractice. The trial court dismissed the case ruling that the doctor had failed to establish that an attorney-client relationship existed based on the language in the agreement. The court also held that the doctor could not have relied on the attorney’s advice because he admitted that he did not read the agreement before signing it. The client appealed.
The appeals court reversed finding that the attorney’s agreement to prepare the contribution document on behalf of the doctor created an implied attorney-client relationship. The doctor therefore justifiably relied on the attorney to draft the agreement in accordance with his instructions and the attorney’s failure to do so constituted a breach of the attorney’s duty of care.
Decision: Connelly v. Hayashi