Summary Judgment Reversed in Legal Malpractice Case

In Roberts v. Ray, No. E2015-01522-COA-R3-CV (Tenn. Ct. App. April 13, 2016), the Court of Appeals reversed summary judgment on a legal malpractice claim, finding that there were genuine issues of material fact in the case.

Plaintiff’s attorney (now the defendant in a legal malpractice claim) drafted a prenuptial agreement for defendant husband and his estranged wife in 2006. Attorney used a standard form from 1993, and this was the first prenuptial agreement he had drafted. Husband, wife and plaintiff attorney were all in agreement that there had been no “full and fair disclosure” of husband’s assets before the agreement was signed. The agreement, however, did state that “[e]ach party acknowledges that he or she knows and understands the value of the property…”

During the divorce proceeding, wife sought to invalidate the prenuptial agreement. Evidence in the divorce case suggested that husband and wife had never really talked about the value of husband’s assets, that husband kept financial information in a cabinet to which wife had access, though she testified that she had not looked at it, and that both husband and wife thought that defendant attorney were representing them both during the drafting and signing of the prenuptial agreement. After a hearing, the trial court set aside the prenuptial agreement, and plaintiff husband eventually entered into a marital dissolution agreement with wife which included a financial settlement.

After the agreement was set aside, plaintiff husband filed this action against defendant lawyer who drafted the voided prenuptial agreement for legal malpractice. Plaintiff asserted that defendant failed to conform to the applicable standard of care when drafting the agreement at issue.

In order for a prenuptial agreement to be valid in Tennessee, spouses must enter into it knowledgeably. Tenn. Code Ann. § 36-3-501. The Tennessee Supreme Court has held that “the proponent of a prenuptial agreement must prove the knowledgeability requirement by either (1) demonstrating that a full and fair disclosure of the full nature, extent, and value of the proponent spouse’s holdings was made or (2) establishing that disclosure was unnecessary because the spouse seeking to avoid the agreement had independent knowledge of the full nature, extent, and value of the holdings.” Randolph v. Randolph, 937 S.W.2d 815 (Tenn. 1996).

Here, the parties agreed that there was no full and fair disclosure, but attorney argued that a disclosure was unnecessary. Defendant attorney pointed to the language in the document itself to assert that “Plaintiff’s evidence was insufficient to establish a legal malpractice claim when the Agreement established that Wife possessed independent knowledge of the full nature, extent, and value of the holdings.” Attorney’s position was that “the court in the divorce action erred by setting aside the Agreement, a contract which should have been interpreted without consideration of extrinsic evidence.” Plaintiff, on the other hand, argued that “the court [in the malpractice case] erroneously relied upon the boilerplate language in the Agreement and failed to consider the conflicting testimony in the divorce action in determining whether he set forth sufficient facts to establish that the requirement of knowledgeability was not met.”

The Court of Appeals sided with plaintiff husband and reversed the summary judgment. The Court determined that “genuine issues of material fact remain[ed] as to whether Wife possessed independent knowledge of the full nature, extent, and value of the holdings as evidenced by the conflicting testimony presented by the parties,” and that there were thus genuine issues of material fact regarding whether attorney’s conduct fell below the standard of care. The Court explained that the extrinsic evidence used here was not offered to “add to, vary, or contradict a term in the contract,” but rather to determine whether wife had the requisite knowledge going into the agreement to make it valid at all. The Court noted that “knowledge is simply an element that must be proven to establish the existence of a valid contract” in a prenuptial agreement case. Citing Randolph. Because genuine issues of material fact remained regarding whether wife had the requisite knowledge and whether attorney’s conduct conformed to the standard of care, the Court remanded the case back to the trial court.

While this case is heavily fact dependent, it does serve as a reminder to lawyers that simply relying on boilerplate contract language may not be enough to avoid a subsequent malpractice suit. Here, the attorney at issue used a 13-year-old form to draft his first ever prenuptial agreement. Though the form had language saying that the parties had the knowledge required to make a prenuptial agreement valid in Tennessee, the facts suggested that the lawyer may not have asked any questions to make sure that was true. While the merits of this case are not yet decided, the reversal of summary judgment is a warning to lawyers that reliance on boilerplate language is not enough to meet the knowledgeability requirement.