Professional Negligence PDF

COMMENT
PROFESSIONAL NEGLIGENCE
INTRODUCTION ............................................ 628
I. PROFESSIONS: PRELIMINARY OBSERVATIONS ............ 629
II. THE PROFESSIONAL STANDARD ........................ 633
A. The Standard ................................. 633
B. Analysis of the Standard ........................ 636
1. Elements of the Standard .................... 636
2. Non-expertise .............................. 637
3. Care ..................................... 637
4. Knowledge and Mechanical Functions ......... 637
5. Judgment ................................. 640
C. Setting the Standards ....................... 645
1. Standards Set by the Profession.............645
2. Standards Set by the Government ............ 646
3. Standards Set by the Professional ............ 649
4. Setting a Standard of Perfection: The Professional
as Insurer? ................................ 650
III. THE SCOPE OF PROFESSIONAL LIABILITY ............... 652
A. Introduction .................................. 652
B. Possible Limits and Bases of ProfessionalLiability ,. 654
C. Emerging Limits of Professional Liability for Negli-
gence-Beyond Privity ......................... 660
1. Accountants ............................... 660
2. Architects ................................. 661
3. Attorneys ................................. 664
4. Surveyors ................................. 666
5. Summary ................................. 667
D. Statutes and the Scope of ProfessionalLiability ..... 669
1. Federal Securities Acts ...................... 670
2. Federal Immunity Statutes ........... I ....... 674
E. Conclusion-Toward a Clearer Limit of Liability .... 676
IV. RE mDIS........................................... 678
A. Civil Damage Suits ............................ 679
B. Criminal Sanctions ............................. 681
C. ProfessionalReview ............................ 683
D. Summary .................................... 688
V. CoNCLUsIoN........................................ 689
627
628 UNIVERSITY OF PENNSYLVANIA LAW REVIEW [Vol. 121:627
INTRODUCTION
Item: A thirty year-old woman who lost a third of her brain, one
eye, her hearing, and the baby she was carrying has been awarded
over one million dollars in damages against an engineering firm which
designed a highway left hand curve which banked to the right. Hers
was the fourteenth accident at the curve in as many. months.'
Item: An eighteen year-old high school graduate has filed suit
against the school system, contending that Ihe can neither read nor
write well enough to qualify for employment other than 'the most de-
meaning, unskilled, low paid manual labor.' ,2
Item: A chiropractor who told the parents of a young girl that he
could cure her eye cancer without surgery, and induced them to forgo
a planned operation was convicted of second-degree murder
Item: Standard & Poor's has been named a defendant in a class
action suit by bondholders who "share the unenviable distinction of
being left holding the bag the first time an issue of triple-A-rated
bonds ever defaulted on an interest payment."4 It is alleged that the
rating--" 'like God himself stamped his approval on it' "k--was mis-
leading and based on an erroneous assumption that the bonds were
backed by the state.
Item: A 10.27 million-dollar suit has been filed against an ac-
counting firm which prepared allegedly misleading and fraudulent fi-
nancial statements about a now-bankrupt cattle business.6 It is con-
tended that the firm was depicted as "'a growing, successful, solvent
business enterprise' "7 in the accounting statements which are instead
alleged to have concealed a fraudulent course of conduct.
This Comment will explore the law of professional errors, and will
reexamine aspects of the fundamental tort questions of standard of
conduct, duty, and remedy, as they have developed in the professional
field. Several questions must be asked. What is the standard of care re-
quired of a professional? Is a physician culpable when he loses his pa-
tient?' Must teachers succeed in their efforts to teach? To whom is a
1
2
N.Y. Times, Oct. 4, 1972, at 53, col. 2 (city ed.).
TpjYn, Jan./Feb. 1973, at 3.
SPeople v. Phillips, 270 Cal. App. 2d 381, 75 Cal. Rptr. 720 (Dist. Ct. App. 1969),
cert. denied, 396 U.S. 1021 (1970).
4Wall St. J., Oct. 2, 1972, at 25, col. 1.
5Id.
6 N.Y. Times, Sept. 11, 1971, at 33, col. 7.
7 Id.
8 This Comment does not purport adequately to address the broad subject matter
of medical malpractice. Two factors explain this omission. First, except in a relatively
small number of circumstances (as in the case of an airplane crash proximately caused
by improper medical diagnosis and treatment) only a single plaintiff, or his estate, will
be affected by a physician's error, obviating most of the problems created by suits by
duty owed? Do accountants owe a duty to persons other than the

clients for whom statements are prepared? May users or only builders
of poorly designed highways sue the designer for damages? Are the
goals of the legal process served by incarcerating a negligent doctor,
or are they better served by revoking his license to practice, or by
merely subjecting him to damage actions?
Several years ago, while expressing doubt "that conditions [would]
remain the same,"'9 one commentator stated, "The law of professional
liability is almost totally common law. Its basic principles have
changed very little over the years."' 0 Special emphasis is focused in
this Comment, therefore, on the effect that statutes have had in the
development of professional liability for negligence, and how develop-
ments external to the common law can influence its further develop-
ment.
I. PROFESSIONS: PRELIhINARY OBSERVATIONS
The concept of a professional for tort purposes is an elusive one.

For nontort purposes, as well as for tort purposes, the term appears to
be defined to meet the particular needs, circumstances, and objectives
of each situation in which such a distinction is considered to be neces-
sary.
A variety of nontort statutes endeavor to classify "professionals."
Although a number of statutes endeavor to define the word in func-
tional terms," stressing such criteria as advanced and specialized
persons not in privity explored in § III of this Comment, infra. Secondly, there is a
vast and ever-expanding body of literature on this subject, which cannot be replicated
within the confines of this Comment. The reader is therefore directed to the following:
L. ENGEL, Tnm OPERATIoN (1958); R. LONG, THE PHvslcrAN aND= LAw (3d ed. 1968);
L. REGAN, DOCTOR AND PATIENT AN m Lw (4th ed. 1962); Ames, Modern Techniques
in the Preparationand Trial of a Medical Malpractice Suit, 12 VAiD. L. REv. 649 (1959) ;
Averbach, Physician'sLiability for PrescriptionDrugs, 43 ST. Join's L. Rav. 535 (1969);
Belli, An Ancient Therapy Still Applied: The Silent Medical Treatment, 1 Vnr. L. Rpm.
250 (1956); Belli, Medical Malpractice, 3 N.H.BJ. 60 (1961); Belli, 'Ready for the
PlaintiffP', 30 TEm. L.Q. 408 (1957); Binder, Res Ipsa Loquitur in Medical Malpractice,
17 CLav.-MAW. L. Rav. 218 (1968); Fleming, Developments in the English Law of Medi-
cal Liability, 12 VA.M. L. REv. 633 (1959); Hirsh, Insuring Against Medical Professional
Liability, 12 VA=n. L. REv. 667 (1959); Keeton, Compensation for Medical Accidents,
121 U. PA. L. REV. 590 (1973); McCoid, The Care Required of Medical Practitioners,12
Vmmo. L. Rav. 549 (1959); Morris, Custom and Negligence, 42 CoLurm. L. REv. 1147
(1942); Recent Decisions, 9 DuquasaN L. REv. 286 (1970); Note, 44 WAsH. L. REv. 505
(1969).
9 Curran, Professional Negligence-Some General Comments, 12 VAND. L. REV. 535,
545 (1959).
1l Id.
11
E.g., 29 U.S.C. § 152(12) (1970) (labor relations):
The term "Professional employee" means-
(a) any employee engaged in work (i) predominantly intellectual and
varied in character as opposed to routine mental, manual, mechanical, or physical
work; (ii) involving the consistent exercise of discretion and judgment in its
performance; (iii) of such a character that the output produced or the result
accomplished cannot be standardized in relation to a given period of time;
(iv) requiring knowledge of an advanced type in a field of science or learning
customarily acquired by a prolonged course of specialized intellectual instruction
training, and the continued use of intellect, discretion, and judgment,

the majority of the statutes merely present an open-ended listing of
job categoriesl!--typically including those of accountants, attorneys,
architects, engineers, and a variety of medical specialties, and less fre-
quently such categories as teachers and funeral directors'8--or rely ex-
clusively upon the common understanding of the term. 4 Common to
all attempted classifications, however, is that the term is subject to con-
tinued growth and development.
However valuable such listings may be in the areas of corpora-
tion, immigration, or labor law, the demands of tort law require a
rather different approach. Skill and knowledge in the practice of a pro-
fession or trade' 5 are enunciated by the Restatemente as the criteria
and study in an institution of higher learning or a hospital, as distinguished
from a general academic education or from an apprenticeship or from training
in the performance of routine mental, manual, or physical processes ....
Public Employees Relations Act, PA. STAT. ANN. fit. 43, § 1101.301(7) (Supp. 1972):
'Professional employe" means any employe whose work: (i) is predomi-
nantly intellectual and varied in character; (ii) requires consistent exercise of
discretion and judgment; (ii) requires knowledge of an advanced nature in the
field of science or learning customarily acquired by specialized study in an
institution of higher learning or its equivalent; and (iv) is of such character
that the output or result accomplished cannot be standardized in relation to a
given period of time.
12 See, e.g., D.C. CODE ANN. § 29-1102(b) (Supp. V 1972). (District of Columbia
Professional Corporation Act):
The term "professional service" means any type of personal service to the
public which may be lawfully rendered only pursuant to a license and which
by law, custom, standards of professional conduct or practice . . . could not be
rendered by a corporation, including without limitation the services performed
by certified public accountants, attorneys, architects, practitioners of the healing
arts, dentists, optometrists, podiatrists, and professional engineers.
8 U.S.C. § 1101(a)(32) (1970) (immigration and nationality law):
The term "profession" shall include but not be limited to architects, engi-
neers, lawyers, physicians, surgeons, and teachers in elementary or secondary
schools, colleges, academies, or seminaries.
Professional Corporation Law, PA. STAT. ANN. tit. 15, § 2902(4) (Supp. 1972):
"Profession" includes the performance of any type of personal service to
the public which requires as a condition precedent to the performance of such
service the obtaining of a license or admission to practice or other legal authori-
zation . . . . By way of example, and without limiting the generality of the
foregoing, such term includes . . . personal services rendered as an architect,
chiropractor, dentist, funeral director, osteopath, podiatrist, physician, profes-
sional engineer, veterinarian, certified public accountant or surgeon and . . .
an attorney at law....
Professional Association Act, PA. STAT. ANN. tit. 15, § 12,602(2) (1967):
"Profession" shall include all occupations, legally or traditionally designated
as professions, and which members thereof by law, tradition, or ethics, are
forbidden to incorporate for the purpose of rendering professional services, in-
cluding, but not limited to, architects, attorneys at law, certified public ac-
countants, chiropractors, dentists, osteopaths, physicians and surgeons.
13 Of the "four traditional learned professions" (doctors, lawyers, ministers, teachers),
see Wade, Foreword to PRorssloNA Nzoaomcn at vi (T. Roady & W. Andersen ed.
1960), the ministry is consistently omitted, however.
14 See, e.g., Fair Labor Standards Act of 1938, ch. 676, § 13(a) (1), 52 Stat. 1067
(repealed June 23, 1972); 5 U.S.C. §§ 3308, 4101(4), 5361 (1970) (civil service regula-
tions); 20 U.S.C. §§ 1171-73 (1970) (international studies & research with federal aid).
15A lawyer managing a business is not, however, acting in a professional capacity
merely by virtue of his legal professionalism. See, e.g., Oklahoma Tax Comm'n v. Benham,
198 Okla. 384, 179 P.2d 123 (1947).
16 RsTAT7MENT (SEcOND) OF ToRTs § 299A (1965).
'1973] PROFESSIONAL NEGLIGENCE
which constitute "that special form of competence which is not part

of the ordinary equipment of the reasonable man, but which is the re-
sult of acquired learning, and aptitude developed by special training
and experience,1 17 and which distinguish the professional" 8 and the
skilled tradesman 9 from the ordinary reasonable man. Conduct and
liability consistent with superior knowledge and skill is therefore a re-
quirement of both the professional (who is skilled by definition ° ) and
the skilled tradesman 1
Although the distinction between professions and trades is not
clear, 22 two factors serve to delineate the occupations and practitioners
called "professional." The first is the exercise of intellectual judgment
as one's special skill; the second is that of historic social status. As
subsequent analysis shall show, those two influences have shaped much
of the present law of professional liability, and are the influences which
will affect its future directions.
A professional is one who continually must exercise intellectual
judgment, predicated upon high educational achievement, in the per-
formance of his duties, and whose clients rely upon that judgment. He
is one "whose profession gives authority to a statement made by
him."2 s Although the relation between judgment and the professional
standard of conduct will be explored at greater depth later in this
Comment, 4 suffice it to say at this time that the exercise of judgment
of necessity allows errors in judgment. Such errors are unavoidable-
they are neither intended, foreseen, or preventable by the exercise of
reasonable precautions 2 5 Yet unavoidable errors coupled with unprec-
edented increasing litigation against professionals26 have, for example,
led to the increasing use of "professional liability," "malpractice," and
"errors and omissions" insurance to protect against not only legally
negligent but also unavoidable actions which cause injury.27 Although
171d. comment a at 73.

I8 E.g., physician or surgeon, dentist, pharmacist, oculist, attorney, accountant, or
engineer. Id. comment b. Professor Prosser's basic list also includes psychiatrists, architects,
and title abstracters. W. PROSSER, HANDBOOK Or THE LAW OF TORTS § 32, at 161-62
(4th ed. 1971). See also note 13 supra.
19
E.g., airplane pilot, precision machinist, electrician, carpenter, blacksmith, or
plumber. RESTATEMENT (SEcOND) or ToRmS § 299A, comment b (1965).
20d comment a.
21 See W. PROSSER, supra note 18, § 32, at 161.
22
See A. WminsD, ADVENTuRES or IDEAS 73 (1933).
23
Securities Act of 1933 § 11(a)(4), 15 U.S.C. § 77k(a)(4) (1970).
24
See notes 86-110 infra & accompanying text.
25
See W. PRossER, supra note 18, § 29.
26 See, e.g., S. HuzaNEa, K BLACK & R. CLunE, PRoPzR Am Lm
ranmr IUsuANcE
396 (1968) (hereinafter cited as S. HUBNm).
27See id. 396-97.
Malpractice insurance is a form of "specialty insurance"; its risks are excluded from
general liability policies. Exclusions generally follow from (1) uninsurable hazards (wear
and tear), (2) theoretically insurable events for which no market exists (wars, floods,
catastrophes too great for any single firm to handle), and (3) hazards for which another
a professional is not an insurer of his work,2 8 there is a special quality

of the professional which encourages him to protect against even un-
avoidable errors in his performance, and which further serves to define
the professional. Concomitant with reliance upon his judgment is reli-
ance upon his reputation.
Perhaps the greatest distinction between the professional and the
nonprofessional is the extent to which the former relies upon his status
and reputation as a major determinant in his earning capacity 9 Pro-
tection both of that status and the economic consequences of its dam-
age-perhaps in recognition of the need for professional skills in mod-
ern society 3°--accounts for both special limits upon liability3 1 and de-
mands for intra-professional review, 2 and is a continual demand of
33
the professional.
The special needs of professions in the negligence area are as old
as the common law, 34 and the special status of those who bear the title
is even older.3 5 Consideration of the history of professional negligence
reveals one point of particular relevance in understanding the develop-
ment of that law in recent years and which may determine the course
of future developments. That is that "professions" include an ever-ex-
panding list of occupations and an ever-increasing roster of individual
policy is available (workmen's compensation, specialty policies). Professionals were an
unexplored market for many years, with little insurance being written (no expectation
of suit or collection until relatively recently). Most professional hazards were eliminated
by the terms of general policies, which covered bodily injury. Doctors, however, could
incur suit under such a policy, and so their professional activities have always been
excluded. The rationale suggested for such exclusion is a qualitative judgment that their
activities were somehow special, perhaps in the sense that the individual was intentionally
placing himself in a position with a gfeat potential for causing harm to others, much like
a contractor using explosives.
No general ratio exists to compare dollar costs of the general versus special coverage,
since very different bases are used to figure costs. The injury-on-premises coverage is
based on floor footage of a commercial shop, or on the payroll if not a commercial
establishment. Malpractice is a flat rate based on factors such as type of profession or
specialty within it, location and territory, number of employees (professionals, techni-
cians), and number of stores.
Based on an interview with a source in the insurance industry who wishes to remain
anonymous, Sept. 1972.
See also Denenberg, Ehre & Huling, Lawyer's Professional Liability Insurance: The
Peril,
23
the Protection, and the Price, 1970 INs. L.J. 389.
S ee, e.g., Hancke v. Hooper, 173 Eng. Rep. 37, 38 (N.P. 1835).
29 Cf. S. HuEDNER, supra note 26, at 396; Wade, supra note 13, at vii. See also
notes 294, 367 infra & accompanying text.
80 See Parsons, Professions, in 12 INTRNATIONAL ENCYCLOPEDIA OF m SoCiAL
Sc-Ncxs 536, 545-46 (D. Sills ed. 1968).
S321 See notes 224-35 infra & accompanying text.
3
See note 294 infra.
84
8
See Wade, supra note 13, at v & n.1.
5See generally W. Mooaz, T PROsSIoNs: RoLEs AND RuEs 26-29, 38-39 &
passim (1970).
Indeed it may still be asserted that
To have one's occupational status accepted as professional or to have one's
occupational conduct judged as professional is highly regarded in all post-
industrial societies and in at least the modernizing sectors of others.
Id. 3.
members. "Skilled trades" may become "professions." For example,

surgeons in England were long denied professional status, as their skill
was merely manual and not diagnostic; today they are considered pro-
fessional.36 Similarly, such groups as accountants, architects, and en-
gineers, though not "traditional" professions, 37 are now accorded that
status, and are dealt with as such in this Comment. It has been as-
serted that "[m]odern life ever to a greater extent is grouping itself
into professions, ' 3 and that "[p]rofessions are more numerous than
ever before.139 Others may therefore follow, and the law must prepare
to adapt to greater numbers of occupational groups demanding the
special tort position accorded that status.
The judicial system also must prepare to deal not only with more
groups, but also with more members. Professionals are becoming an
increasing percentage of the work force, 40 and as the educational level
of the American population rises,41 more of its members seek profes-
sional status.42
As professionals and professionalism increases, as its definition
expands, as professionalism becomes the norm, not the exception, and
as attacks upon professionals' work increase, tort law must respond to
the challenges of a developing society and of the professionals. At the
same time, the professional groups must themselves respond to those
same challenges.4 It is from this perspective that the balance of this
Comment should be read.
II. THE PROFESSIONAL STANDARD

A. The Standard
A rule that "has guided the courts in their decisions from the
earliest cases to the present day ' 44 is that, in the absence of an ex-
press understanding to the contrary, the professional undertakes only
to exercise reasonable care and the measure of skill and knowledge
ordinarily possessed by members in good standing of his profession.4 5
36 Id. 10.
3
7See note 13 supra.
38 A. WA-EHEmA, supra note 22, at 73.
39 Hughes, Professions, in TnE PROFESSIONS INIA.ERICA 1 (K. Lynn ed. 1965).
40 Id.
41 See, e.g., BuRAu OF Ta CENSUS, U.S. DEP'T or COZEMERCE, HISTORICAL STATIS-
TIcs or = UNITED STATES: COLONI TnS TO 1957, at 202-14 (1960); BURFAU OF T=E
CENsus, U.S. DE'T or Com cE, HIsToaIcAL STATISTICS OF THE UNIrE STATES: CoN-
TINUATioN TO 1962 AND REvISIONS 31-33 (1965).
42
See Lynn, Introduction to Tim PROFESSIONS fl ARiERcA at ix (K. Lynn ed.
1965); U.S. DEN'T OF LABOR, U.S. MANPOWER N THE 1970's: OPPORTUNITY AND CEAL-
LENGE (1970).
43
See also W. MooRE, supra note 35, at 233-43.
44
Patterson & Wallace v.Frazer, 79 S.W. 1077, 1080 (Tex. Civ. App. 1904). The
quotation isas accurate today as itwas in 1904. See RESTATEmENT (SECOND) OF TORTS
§ 299A (1965).
45
See id.; Wade,supra note 13, at vii.
Virtually identical phrasing has been used to express the professional 48

47
responsibilities of the attorney, 46 accountant, architect or engineer,
doctor, 49 or title abstracter. 50 The very antiquity of this legal formula,
however, seems to have shielded it from close critical analysis. 1
The "professional standard," as perceived by some, has been crit-
icized as less demanding than the standards by which tradesmen and
other laymen are evaluated. William Curran, for example, asserts that
while professional conduct is evaluated in reference to the professional
community, the familiar "reasonably prudent man" test contains ele-
ments of "oughtness" which exact better-than-average conduct of the
man on the street.5 2 Others have found the test of lay conduct "un-
realistically high,"53 and excessively demanding of those born incom-
petent through no fault of their own. For, as Leon Green notes, the
care and prudence which the law deems "ordinary" is such as prudent,
and not average, men exercise. 54 No similar complaints of impossibility
seem to have been directed at the "professional standard."
Before analyzing what the standard is, and whether it varies sig-
nificantly from the standard for nonprofessionals, the question arises
whether professionals should receive special treatment under negli-
gence law. Professor Clarence Morris bases a relatively unenthusiastic
defense of custom as the proper standard of professional care on the
assertion that no other test would be feasible in light of jury inexper-
tise in evaluating professional (medical) conduct. 5 More vociferous
proponents have expressed the fear that a more exacting standard
would deter prospective professionals from ever undertaking profes-
sional training.5 6 One author has approvingly suggested that the stan-
dard arose from a judicial reluctance to permit juries to find the con-
7
duct of those at the highest levels of social responsibility tortious.r
46See, e.g., Gambert v. Hart, 44 Cal. 542, 552 (1872).

47
See, e.g., Gammel v. Ernst & Ernst, 245 Minn. 249, 255, 72 N.W.2d 364, 368 (1955).
48 See Bell, Professional Negligence of Architects and Engineers, 12 VAND. L. REv.
711, 716 (1959).
49
See Johnston v. Rodis, 151 F. Supp. 345, 346 (D.D.C. 1957), rev'd on other
grounds, 251 F.2d 917 (D.C. Cir. 1958).
50 See Roady, Professional Liability of Abstracters, 12 VAND. L. REv. 783, 784
(1959).
51Note, Attorney Malpractice, 63 CoLur. L. REv. 1292, 1294 (1963): "Judicial
attempts to articulate the standard of care . . .have yielded talismanic formulae that
too often obscure analysis."
52 Curran, Professional Negligence-Some General Comments, 12 VAND. L. REv. 535,
538 (1959).
53 See, e.g., Reynolds, The Reasonable Man of Negligence Law: A Health Report on
the "Odious Creature," 23 OKA. L. REv. 410, 417 (1970).
54 Green, The Negligence Issue, 37 YALE L.J. 1029, 1035 n.19 (1928).
55 Morris, Custom and Negligence, 42 CoLuM. L. REv. 1147, 1164 (1942).
56 See Goodman & Mitchell v. Walker, 30 Ala. 482, 495 (1857) (if held accountable
for the consequences of each erroneous act, "no one . . . would be found rash enough
to incur such fearful risks") ; Evans v. Watrous, 2 Porter (Ala.) 205, 210 (1835).
57 Proehl, Tort Liability of Teachers, 12 VAND. L. REv. 723, 751-53 (1959).
And some special sanctity has been found in the fact that professionals,
unlike merchants, do not advertise their wares, and vend services
rather than products. 58 A strict standard for professional conduct
might result in professionals becoming easy targets for malpractice
suits. The potential increase in litigation-inevitable where solvent
professionals are involved-is not a development to be welcomed en-
thusiastically. 9 The client-professional relation could be seriously im-
paired by placing professionals on the defensive for uncertainties over
which they have no control, or by causing professionals to avoid under-
taking novel problems. Moreover, the very label attached to such suits
---"malpractice"--indicates the vulnerability of the professional rep-
utation to the effects of a negligence suit. While these factors may not
outweigh a legitimate concern for client welfare, they counsel against
hasty extensions of liabilty against professionals.
Notwithstanding that the "professional standard" has been criti-
cized as being too lax, and that various reasons exist to support a spe-
cial standard for the professions, there is doubt as to how "special" the
standard is, and whether the differences from lay standards exist more
in theory than in fact. A typical statement of the professional standard
was given in Patterson & Wallace v. Frazer," 0 in a jury charge refer-
ring to attorneys:
Attorneys... are held to undertake to use a reasonable
degree of care and skill, and to possess, to a reasonable ex-
tent, the knowledge requisite to a proper performance of the
duties of their profession .... There is, however, no implied
... guaranty [of] the success of [the] proceedings in a suit,
or... of his opinions .... [E]rrors as to questions of law
which an attorney with reasonable capacity, with ordinary
investigation, might know, is a ground for liability, where
injury results therefrom. By 'reasonable care and skill' and
'reasonable knowledge' is meant such a degree of care, dili-
gence, and skill as a practicing lawyer of ordinary skill and
prudence and knowledge of the law would exercise in case
of like character under like circumstances ....61
Examination of the demands of this standard reveals no major devia-
tion from lay norms, except the possibility of shelter from liability
where a lawyer of ordinary skill, prudence, and knowledge would make
the same simple error. Whether this kind of shelter from liability was
intended is suspect. The framers of the standard apparently felt it to
be a logical extension of the reasonably prudent man test. There was
58 Newmark v. Gimbel's, Inc., 54 N.j. 585, 596-97, 258 A.2d 697, 702-03 (1969).
59
Professor Morris suggests that ambulance chasers would likely thrive in the new
legal climate that stricter professional liability standards would create. Morris, supra
note 55, at 1165.
60 79 SmW. 1077 (Tex. Civ. App. 1904).
61 Id. at 1079.
an apparent understanding that a professional made no claim to be

and was not generically different from other men, but only claimed to
possess special expertise. Thus, the relative standards for the profes-
sions were to be no more and no less exacting than those of any other
trade, except insofar as the profession itself was more exacting, and
demanded a series of delicate judgments under which error would be
occasionally unavoidable." Thus the professional standard may in ab-
solute terms be more demanding than the ordinary test of care for the
layman; most scholars have expended little effort arguing that proposi-
tion.6 3
B. Analysis of the Standard
1. Elements of the Standard
In assessing the theoretical and practical operation of the profes-
sional standard, it may be helpful to examine separately the discrete
elements of a professional's work. In addition to lay functions which
do not entail professional expertise, professional efforts may be sepa-
rated into at least three discernible components: care, mechanical mat-
ters, and judgmental matters. Care involves attentiveness, sensitivity,
and caution. Mechanical functions are at their essence clerical, and
include the acquisition of knowledge through research techniques and
the mastery of routine procedures. Matters of judgment, on the other
hand, lie at the core of professionalism; judgment occurs in making
decisions and exercising discretion without the aid of routine and dis-
positive methods. Throughout the following analysis, the legal profes-
sion is used as a primary example," on the belief that the wisdom of
the legal system's decisions regarding its own professionals should be
more apparent than in its decisions involving the separate expertise of
other professions. Perhaps the legal malpractice cases are atypical for
the very reason that judges are abnormally well equipped to spot negli-
gence without relying on expert testimony, thus creating in fact an
interprofessional distinction not contemplated by legal theory. None-
62 James, The Qualities of the Reasonable Man in Negligence Cases, 16 Mo. L. Rv.
1, 15 & n.87 (1951). Bowman v. Tallman, 27 How. Pr. 212 (N.Y. Super. Ct. 1864),
noted: "The practice of the law ... is subjected to the same rules as any other employ-
ment, even where the implements are of a more material kind, and not to any of either
greater or less stringency." Id. at 274. See also Moore, Liability of Artisans and Trades-
men for Negligence, in PROFESSiONAL NEGLIGENCE 309 (T. Roady & W. Andersen ed.
1960): "[O]ftentimes it would appear that a peculiar set of rules applies to professional
men as a class. But this is not true unless there is included within the definition of
'profession' practically any occupation or trade requiring particular skills or abilities."
Cf. Pepsi Cola Bottling Co. v. Superior Burner Serv. Co., 427 P.2d 833, 839 (Alas. 1967),
in which a court found no error in the instruction that a serviceman was required to
exercise "'that degree of care and skill in handling the job . . . which a reasonably
prudent,
63
skilled and qualified boiler repair man would exercise under the circumstances."'
Theobald v. Byers, 193 Cal. App. 2d 147, 150, 13 Cal. Rptr. 864, 866 (Dist. Ct.
App. 1961); see W. PROSSER, supra note 18, § 32, at 132; McCoid, The Care Required of
Medical Practitioners,12 VAwD. L. REV. 549, 606-07 (1959).
64
See note 8 supra.
19731 PROFESSIONAL NEGLIGENCE
theless, the strictness with which the law has policed itself should at
least suggest the level of stringency at which the law has aimed for all
professions.
2. Non-expertise
In areas of non-expertise, professionals have been held only to
lay standards. Accordingly, an attorney was not deemed expert in hu-
man psychology, and was excused the failure to detect the mental in-
competence of his client, when prior conversations had seemed to
indicate her normalcy. 5 Similarly, in Reumping v. Wharton,6 6 an at-
torney was forgiven for an error in property appraisal. For like reasons
attorneys have not been required to divine the honesty of their clients,
and have been allowed to rely upon the client's having fairly stated the
facts which constitute his defense. 7
3. Care
It is firmly established that the professional is not required to ex-
ercise extraordinary care. The care demanded of him exceeds the "or-
dinary" only when his expertise makes him aware of a need for cau-
tion that a layman would not perceive, just as a layman is judged in
light of special knowledge he may have acquired. 8 It seems wise that
a separate "professional" care standard has not been demanded. To
urge that extraordinary care replace ordinary care raises delicate dem-
ocratic and philosophic problems. Since it seems a fair presumption
that ordinary care combined with average professional attainments
will result in salutary results for the client, there is no compelling
legal need to demand better-than-standard care.
4. Knowledge and Mechanical Functions
Apart from a recognition in such old cases as Von Wallhoffen v.
Newcombe6 9 and Goodman & Mitchell v. Walker"0 that a profession
may be divided into mechanical and judgmental segments, there is no
consistent recognition in expressions of the professional standard that
the area of mechanical functions involves a different standard than in
the area of judgment. Historically the two have been fused uncriti-
cally, and it is implied that the professional's obligation is to conform
to professional community norms in each, suggesting that professionals
may be insulated from liability by a relaxed community norm. What
the early framers of the professional standard intended in judging a
65 Everett v. Downing, 298 Ky. 195, 182 S.W.2d 232 (1944).
66 56 Neb. 536, 76 N.W. 1076 (1898).
67 Cf. Rapuzzi v. Stetson, 160 App. Div. 150, 145 N.Y.S. 455 (1914).
68 W. PROSSER, supra note 18, § 32, at 161. See also Beach v. Chollett, 31 Ohio App.
8, 11-12, 166 N.E. 145, 146 (1928).
69 10 Hun 236 (N.Y. Sup. Ct. 1877).
70 30 Ala. 482 (1857).
professional by community standards is speculative; however, courts

of the past two centuries in fact have applied, with only minor excep-
tion, differing standards to the areas of mechanics and judgment.
The professional's duty to know his field and to master routine
procedures is exemplified by judicial opinions in legal negligence cases.
While the courts have declared broadly that lawyers are not required
to know all the law, 71 they repeatedly have required them to have
searched diligently for it. A plethora of examples suggests that the
community standard for these mechanical functions demands perfec-
tion of basic research technique and mastery of clearly defined proce-
dures. Thus the courts have rejected the plausible argument that could
follow from a "community standard"--that each professional inevi- 7
tably will err at some time, and should be forgiven and protected. 1
Thus, in Siegel v. Kranis,78 while noting that attorneys were not
liable for all errors of judgment, the court observed that an attorney
might be liable for ignorance of rules of practice, failure to comply
with requirements of notice precedent to suit, or for neglect to prose-
cute or defend an action. In making that observation, the court did
not feel it necessary to look to community standards in these matters.
Reviewing comparable carelessness in Armstrong v. Adams, 74 the court
found no "controvertible interpretation of law" or "uncertainty or am-
biguity of fact" involved, noted that the defendant's error in drafting
a complaint involved the most important part of his client's case, and
reversed a lower court's ruling on the attorney's demurrer. 75 Likewise,
mechanical research omissions have produced liability.7 In Werle v.
Rumsey 77 the court found it clear and established law that an estoppel
certificate from mortgagor to mortgagee did not bar a usury defense to
a debt, and found that failure of an attorney to so advise created a
prima facie case of negligence. Liability also78 has been found for failure
to follow the lawful instructions of a client.
71Montriou v. Jefferys, 172 Eng. Rep. 51, 53 (N.P. 1825), phrased it thus: "God
forbid that . . . an attorney, or a counsel, or even a judge is bound to know all the
law . . . ." But cf. Moulton v. Huckleberry, 150 Ore. 538, 546, 46 P.2d 589, 592 (1935)
("fail[ure] to use . . . well-known tests" unquestionably deemed negligence); Goodman
& Mitchell v. Walker, 30 Ala. 482, 496 (1857). See also Savings Bank v. Ward, 100 U.S.
195, 199 (1879) ("[Alttorneys do not profess to know all the law or to be incapable of
error or mistake in applying it .... "); Adams v. Boyce, 37 Cal. App. 2d 541, 548, 99
P.2d 1044, 1048 (Dist. Ct. App. 1940) (physicians).
72
See Samueis v. Willis, 133 Ky. 459, 466, 118 S.W. 339, 342 (1909) ("Because all
men at some time are careless does not relieve any man from the legal consequences of
his careless act .... ).
73 29 App. Div. 2d 477, 288 N.Y.S.2d 831 (1968).
74102 Cal. App. 677, 283 P. 871 (Dist. Ct. App. 1929).
75
Id. at 684-85, 283 P. at 874.
76
E.g., Moser v. Western Harness Racing Ass'n, 89 Cal. App. 2d 1, 9, 200 P.2d 7,
11 (Dist. Ct. App. 1948) ("with but slight research a wealth of authority on the subject
[was] readily available").
77278 N.Y. 186, 15 N.E.2d 572 (1938).
78
E.g., W.I. Douglas Shoe Co. v. Rollwage, 187 Ark. 1084, 63 S.W.2d 841 (1933).
See Gilbert v. Williams, 8 Mass. 51, 57 (1811). See also Fleener v. Fleener, 263 N.E.2d
879 (Ill. App. Ct. 1970).
Professionals who err in mechanical functions will not find protec-

tion from liability merely because the professional community is lax
and has a "custom" of poor performance; medical malpractice cases
attest to this."D While indicating that custom is the usual test of profes-
sional care, Professor Morris writes that "[w] hen laymen are compe-
tent to determine whether the doctor has been negligent, the plaintiff
need not prove that the defendant departed from standard practices.
If, for example, the evidence shows that a surgeon bandaged an arm
too tightly ... the courts do not require the plaintiff to show that the
methods used are eschewed by other reputable doctors . . . 2"' And
Francis Bohlen indicated that although in general "the standard of the
profession... determines the skill and competence which the [profes-
sional] must exercise," a "certain minimum of general professional
competence is always required no matter how isolated or poor the
neighborhood." 81 The remarks of the two tort scholars point to a single
conclusion: regardless of acceptance in the whole profession or narrow
locality, a palpably unreasonable custom, if it can be perceived as such,
will be found negligent. The crucial difficulty is in the perception.
One example of the law's unwillingness to accept unreasonable
custom as determinative of liability is the recent 1136 Tenants' Corp.
v. Max Rothenberg & Co. 82 There the court found that defen-
dant accountant, who had failed to report to his employer suspicious
financial circumstances disclosed by the employer's records, had been
hired to perform a full audit and was thus liable for failing to conform
to normal auditing standards. But, the court noted in dictum, had he
only been hired to perform non-analytic "write-up" services, he still
would have been legally obligated to report blatantly suspicious cir-
cumstances, irrespective of accounting custom.
There would be obvious danger if the Rothenberg dictum were
taken by other courts as license to prescribe their own untutored no-
tions of prudent accountancy. However, if read more narrowly, the
case merely exemplified traditional judicial refusal to condone flagrantly
negligent professional custom. This judicial review, it goes without say-
ing, is of paramount importance: properly guided, such review can
dispel the fears of professional oligopoly which some commentators
have foreseen as the end result of stricter professional standards and
an expanded scope of liability.
Perhaps the greatest departure for lawyers from the exacting scru-
tiny of mechanical error has occurred in the area of foreign law.
Though Von Wallhoffen v. Newcombe"3 indicated that an attorney
"must be presumed to be familiar with the law and rules regulating the
79 Morris, supra note 55, at 1165.
soId.
81
Bohlen, Some Recent Decisions on Tort Liability, 4 TurAnx L. Rlv. 370, 379
(1930).
8236 App. Div. 2d 804, 319 N.Y.S.2d 1007 (1971).
83 10 Hun 236, 240 (N.Y. Sup. Ct. 1877).
practice in actions which he undertakes to bring," an ancient New

Jersey case has allowed mechanical error in using the laws of another
state to be exempt from liability 4 A New York court, however, has
recognized that foreign law of a mechanical sort yields to basic re-
search, and has refused to exonerate attorneys who had drawn defec-
tive and invalid chattel mortgages. 5 This latter approach is better-
reasoned and completely preferable to the former. It is in fuller accord
with the expectations of a client, and in closer harmony with the de-
mands made on attorneys performing other mechanical functions.
Moreover, the New Jersey rationale is inconsistent with the rule that
a professional expert in one speciality who undertakes a task in an
area outside his special expertise must employ basic research tech-
niques to learn the new subject area.
5. Judgment
It is in the area of judgment that the greatest possibility of profes-
sional protectionism exists, and at which the greatest amount of criti-
cism has been directed. A layman is required to exercise reasonably
prudent judgment.8 6 The professional, it is said, only need conform to
the customary level of judgment within his profession; custom, and
not prudent judgment, has become the standard. Yet were there no
such test, and were juries free to pass on the propriety of professional
customs, professionals could easily be found liable for any bad result.
There would be no real guidance for jurors, and trial results would de-
pend on their imaginations and visceral reactions.8 7 And, under a fault-
oriented tort system, there seems to be justice in shielding an other-
wise competent attorney from juror judgment on the propriety of his
reliance on a well-established precedent.8 8 Likewise, a fault system
justifies shielding from liability a doctor confronted by a rare disease
and forced to make a blind attempt at diagnosis.
Shielding from liability, where it exists, exists because of the in-
exactitude, not the mere complexity, of professional judgments. As sug-
gested above, 89 one distinguishing characteristic of a profession is that
it emphasizes intellectual activity. Medical science, for example, fre-
quentiy deals with frontiers of knowledge. Legal science contains few
clearly determinate answers, and "sound" judgments may be upset by
the unpredictable judgments of others. There may be no level at which
legal judgments are harmonized, as frequently even the highest courts
84
Fenaille & Despeaux v. Coudert, 44 N.J.L. 286 (Sup. Ct. 1882).
85Degen v. Steinbrink, 202 App. Div. 477, 195 N.Y.S. 810 (1922); accord, In re
Roel, 3 N.Y.2d 224, 144 N.E.2d 24, 165 N.Y.S.2d 31 (1957) (attorney retained in matter
involving foreign law may not claim he is not required to know that law).
8
6See Kansas City, M. & 0. Ry. v. Perry, 6 S.W.2d 111 (Tex. Comm'n App. 1928).
87
See Babbitt v. Bumpus, 73 Mich. 331, 338, 41 N.W. 417, 419 (1889).
88See Marsh v. Whitmore, 88 U.S. (21 Wall.) 178 (1874).
89See text accompanying notes 22-25 supra.
in different states differ diametrically upon the conclusions which fol-

low from identical factsY0
The alternatives to a custom-oriented standard would benefit
neither the public nor the professions. Importing a "reasonably pru-
dent man" test into the professions would scarcely portend improve-
ment of professional performance. Such a test-whether applied to the
mechanical or the judgmental-would allow a nonprofessional to be
judged in the light of his own skill and knowledge, and the unusual
nature of a true professional's attainments might escape jurors. Thus,
quacks might be able to escape liability for error by qualifying as "rea-
sonably prudent magnetic healers." 91 In short, some reference to pro-
fessional standards is necessary for protection of the relying public.
A "best efforts" standard seems equally inadvisable. As with any
such subjective standard, based as it is upon the specific abilities and
inabilities of the individual, evidentiary problems would become enor-
mous. The standard would become infinitely variable, difficult of proof,
and unrelated to client reliance. And unless conduct were evaluated by
a minimum professional standard, public protection would suffer if a
professional's best efforts were incompetent due to age, illness, or
transitory incapacity. At present, whether or not a professional makes
personal assertions regarding his competence, his certification adver-
tises to the world that minimum professional standards may be de-
manded of him.
To determine when the standard for judgment applies, it is neces-
sary to discern the meaning of the term in the professional context, and
to distinguish judgmental functions from mechanical ones. In attempt-
ing to define the elusive term "judgment," it is perhaps best to begin
by subtracting from the field of professional expertise all that can be
called "knowable," and then to denominate the remainder as the area
of "judgment." Clear examples of judgment are medical problems for
which no treatment has been proven a cure, and legal questions for
which relevant precedents are utterly scrambled. Yet judgment may
likewise be involved in interpreting a statute which might appear clear
on its face.
Mechanical and judgmental matters are not easily separable.
Parker-Smith v. Prince Mfg. Co.9" suggests the obvious difficulty in
distinguishing between mechanical and judgmental areas within the
legal profession. In that case the attorney advised delaying his client's
suit while he attempted to negotiate a settlement; while he negotiated,
the statute of limitations expired. Although the court found these facts
sufficient to submit the question of negligence to the jury, it made
clear that such an error did not necessarily evidence lack of due care
90 Hill v. Mynatt, 59 S.W. 163, 167 (Tenn. Ch. App. 1900).
91 See McCoid, supra note 63, at 606-07.
92 158 N.Y.S. 346 (Sup. Ct. 1916).
and skill. Clearly, errors of judgment may intrude into the most
mechanistic areas of law; conversely, a series of mechanistic decisions
is frequently involved in proceeding to the most complex and specu-
lative of judgments. Mechanical matters must be carefully extracted
and scrupulously examined by the courts. This enormous task of
distilling the known from the unknown and unknowable should engage
the efforts of talented scholars in each profession who have the wisdom
to know what they do not know, and the courage to admit what they
do know.
When a function is judgmental, the standard that is applied
requires that such judgment be rendered only after a professional is
fully qualified and has ascertained all relevant factsY5 Uninformed
judgment is equivalent to a failure to unearth mechanical principles,
and must subject an erring professional to liability. As the court in
Ramp v. St. PaulFire & Marine Insurance Co.94 indicated, a judgment
"must be the considered conclusion of the attorney."' 5 While acknowl-
edging the need for freedom in exercising judgment, the court recog-
nized that a judgment arrived at by deviations from all norms of
research is not a "judgment" at all. 6
In this vein, it should be noted that a professional cannot disclaim
liability by talismanically invoking the word "opinion." Among lay-
men, the mention of "opinion" is expected to trigger an attitude of
distrust, and produce a discounting of the "opinion" offered. In the
professional situation, however, given the unequal informational foot-
ing and the special relation of the professional and his client, an
opinion has been deemed to carry with it an implied knowledge of facts
justifying the opinion. 7
A few examples will serve to illustrate the operation of the judg-
mental standard. Litigation is an area which demonstrates the overlap
between the mechanical and the judgmental, and suggests the difficulty
of passing upon attorneys' "errors." In Pearson v. Darrington,9s an
attorney who gave full evidence of recognizing that the trial judge had
erred chose not to except. He was subsequently exonerated, with the
court indicating that in yielding to the opinion of a presiding judge
93Moore v. Tremelling, 78 F.2d 821, 824 (9th Cir. 1935). See Lally v. Kuster, 177
Cal. 783, 786, 171 P. 961, 962 (1918) (quoting 6 C.J.S. Attorney & Client § 225, at
696-97 (1914)): although an attorney "will not be responsible for a mere error of
judgment," this is so only if he is "'fairly capacitated to discharge the duties . . .of his
profession.!"
94 254 So. 2d 79 (La. Ct. App. 1971).
95 Id. at 82.
96 Cf. Cook, Flanagan & Berst v. Clausing, 73 Wash. 2d 393, 438 P.2d 865 (1968)
(though an attorney would not be liable for good faith errors of judgment, he must
avoid negligent errors in arriving at that judgment).
97 W. PROSSER, supra note 18, § 109, at 726-27. See also Lietz v. Primock, 84 Ariz.
273, 276-77, 327 P.2d 288, 290 (1958). Cf. American Hemisphere Marine Agencies, Inc.
v. Kreis, 40 Misc. 2d 1090, 1092, 244 N.Y.S.2d 602, 604 (Sup. Ct. 1963).
98 32 Ala. 227 (1858).
an attorney could not be charged with a want of professional skill. A

decision not to object to a courtroom error is tantalizingly difficult
to review. 9 In some cases where the law is clearly to his client's
advantage, an attorney may well hesitate to register all possible objec-
tions to avoid undue friction with the court. Moreover, an indisputably
erroneous ruling of law may not be erroneous at all if the judge's
analysis of crucial facts differs essentially from the attorney's. None-
theless, in the cases in which an error may be shown clearly negligent
and the proximate cause of loss, liability must attach as elsewhere in
the law. The mere possibility of judgment factors entering into a litiga-
tion mistake cannot override the need for client redress where a
meritorious case has been jeopardized. °00
Hill v. Mynatt' 01 demonstrates the difficulties of the professional
in rendering a correct judgment. The attorneys in Hill had elected to
bring their client's wrongful death action in state court because of
procedural hurdles in federal court, only to find that by the time their
case was heard the defendant's assets were exhausted. Hindsight indi-
cated the claim could have been collected if they had proceeded in
federal court. The court ruled against liability in colorful language:
[A]lthough an attorney has no right to be a clam, and shut
himself up in the seclusion of his own self-conceived knowl-
edge of the law.., the law does not require and never has
required ... that he should be a true Sir Oracle of what the
courts have decided or will decide as the law applicable to
every given state of facts.'
The level of judgment required of attorneys has not demanded that
they be prophetic, particularly when relying upon established prac-
tice. 3 Nor is an attorney answerable for his errors in judgment 0upon
4
"points of new occurrence, or of nice or doubtful construction."
99 A summary of the risks and judgmental decisions involved in determining whether
to object may be found in A.L. LEVIN & H. CRAMER, PROBLEMS AiN MAAis ON TRIAL
ADVOCACY 104-12 (1968).
100 Decisions whether to appeal a loss raise litigation-like problems, although they
allow for study. In Martin v. Burns, 102 Ariz. 341, 429 P.2d 660 (1967), it was deemed
proper for an attorney not to appeal from an adverse determination when the sole result
of appeal would have been the reconsideration of the identical issue. In Childs v.
Comstock, 31 Misc. 250, 74 N.Y.S. 643 (Sup. Ct. 1902), however, the failure of attorneys
to appeal from an adverse decision of a board of appraisers was found negligent, when
clear precedent suggested that commodities taxed by the board were non-dutiable. The
split of authority is more apparent than real. Where, as in Childs, the law is clearly in
the client's favor, failure to appeal resembles mechanical error. Where the law is nebulous,
practical considerations would in some cases justify a refusal to appeal. Where appeal
is unlikely to succeed, the court system would be ill-served by forcing practitioners to
appeal at peril of negligence.
10159 S.W. 163 (Tenn. Ch. App. 1900).
102 Id. at 167.
103See Patterson v. Powell, 31 Misc. 250, 64 N.Y.S. 43 (Sup. Ct. 1900); Hodges
v. Carter, 239 N.C. 517, 80 S.E.2d 144 (1954) (reliance on long-standing procedure for
service of process).
104 Goodman & Mitchell v. Walker, 30 Ala. 482, 496 (1857); accord, Citizens Loan
A final example of a well-known decision on attorney liability

which applied a spurious professional standard indicates the need for
a reenunciation of the professional standard to make clear the dichot-
omy between mechanical or routine matters and matters of judgment.
In Lucas v. Hamm, 0 5 an attorney who drafted a will failed to take into
account the Rule Against Perpetuities, with the result that the will
violated the Rule and was invalidated. The court, however, found no
negligence. Without analyzing the nature of the error, it simply rea-
soned that the complexity of the Rule Against Perpetuities made it a
trap for ordinary attorneys, many of whom easily might have com-
mitted identical error.
The error of the Lucas court has been pointed out in muted but
widespread criticism. One comment on the case, noting that the court
adopted a "surprisingly restrictive view of the standard of care," indi-
cated that two cases had been directly on point to settle the exact
problem the will drafter faced. 10 6 Another writer noted that the court
failed to consider that a doctor in the same jurisdiction would have
been0 7held liable for failing to refer matters beyond his ken to a special-
ist. As still another scholar phrased it,
Although there may be some connection between the com-

plexity and uncertainty of the law on a given question and a
high incidence of error by attorneys dealing with that ques-
tion, it cannot be assumed that the latter is established merely
by proving the former ....1o8
He pointed out that " [n] either complexity nor uncertainty clouded the
meaning of the rule against suspension, in effect in substantially the
same form from 1872.1 °9
The Lucas case seems an exception; 11° in general courts quietly
Fund & Say. Ass'n v. Friedley, 123 Ind. 143, 147, 23 N.E. 1075, 1075 (1890); Gimbel v.
Waldman, 193 Misc. 758, 84 N.Y.S.2d 888 (Sup. Ct. 1948). See also Smith v. St. Paul
Fire & Marine Ins. Co., 344 F. Supp. 555 (M.D. La. 1972) (incorrectness of attorney on
the legal effect of a judgment of possession did not constitute malpractice when there
was a lack of prior judicial determinations of the issue and differences of opinion existed
among Louisiana attorneys); Martin v. Burns, 102 Ariz. 341, 429 P.2d 660 (1967) (when
law that an order of the court was appealable was not well settled, failure to appeal
was not malpractice); Meagher v. Kavli, 256 Minn. 54, 97 N.W.2d 370 (1959).
105 56 Cal. 2d 583, 364 P.2d 685, 15 Cal. Rptr. 821 (1961).
106Note, 75 HAxv. L. Rxv. 620, 621-22 (1962).
10 7 See Note, An Attorney's Liability for Professional Negligence in Georgia, 3 GA.
ST. B.J. 210, 211 (1966).
108 Note, Attorney's Violation of Future Interests Statutes Held Not Actionable, 14
STA_. L. Rxv. 580, 582 (1962) (footnote omitted).
109 Id. n.9.
11o See Ramp v. St. Paul Fire & Marine Ins. Co., 254 So. 2d 79 (La. Ct. App. 1971),
aff'd, 269 So. 2d 239 (La. 1972), in which the court concluded that defendant attorneys
either missed a forced heirship issue in their interpretation of a will, or improperly advised
their clients to sign an instrument compromising these rights. The court did not dwell on
possible complexities surrounding forced heirship, but asserted instead that forced heirship
was one of the most basic concepts of the state's legal system, and that an attorney should
possess such reasonable knowledge of the concept as would enable him to perform
have perceived the differences between mechanical and judgmental

areas, and have applied sensible standards to each. Yet the Lucas case
has not been recognized as erroneous by the California courts. Thus,
until the mechanical/judgmental dichotomy is clearly enunciated, the
risk remains that this case, which has been noted for its progressivity
in extending the concept of privity, may be read as a correct application
of the professional standard.
C. Setting the Standards

1. Standards Set by the Profession
It is the professional community, in both organized and unor-
ganized forms, which is most important in setting the technical stan-
dards by which the professional will be judged. This reflects the fact
that the layman, in entrusting himself to the services of a professional,
relies upon the standards of the profession.
The client, knowing that the person from whom he seeks advice
or serious help has met the profession's standards for certification,
rightfully assumes that the service he receives will conform to those
standards, although he probably is not familiar with the contents of
the standards. 1 '
Following a public protection rationale, in those aspects of a
profession that are subject to mechanical standards, the individual
practitioner deviates from those standards only at his peril. In the
medical profession, for example, the doctor is not free to experiment
upon his patients." 2 Deviation from established procedures should
create a prima facie case of negligence; allowance, of course, should be
made for the possibility of compelling justification based on other com-
peting professional guidelines.
Standards for performance in a professional community can be
established in a formal way, such as a promulgation of rules by an
official organization, 113 or they can develop through the custom of the
community. In the latter case, the new lawyer or doctor is guided in
his professional activities by adhering to the procedures learned in his
apprentice experience; an injured client and a jury seeking to judge
duties he undertook. Accordingly, it held that the conduct of the defendants was
negligent.
1
See, e.g., ABA CODE OF PROFESSIONAL REsPONSIBrrY (1969) [hereinafter cited
as ABA CODEJ; mmRIcAN INsTITuTE or ACCON7TANTS, CODIYICATION OF STATEMENTS
oN AuDITunG PROCEDURE (1951).
11261 AM. JuR. 2D Physicians, Surgeons & Other Healers § 114 (1972). But see
McCoid, supra note 63, at 580.
113 Enactment of such professionally-promulgated guidelines by state legislatures
should pose no serious delegation problems. State courts, while concerned that legislative
power may not be delegated, typically have found the process of "filling up the details"
where legislatures have established a standard to guide the exercise of that process, not
to constitute a delegation. See 1 K. DAVIS, ADMINISTRATIVE LAW TREATISE § 2.15, at 148
(1958).
an errant practitioner must look to experts to discern the proper stan-

dards.
The leaders of a profession may set forth in a formal manner a
portion of the governing, operational standards. Thus the accounting
profession provides a set of precise and detailed technical auditing
procedures, referred to as "generally accepted auditing standards,"114
by which the conduct of any of its members may be judged. These
provide the basis that has generally been used by the courts in estab-
lishing what conduct fails to meet the professional standard. 115 Indeed
it is one of the earmarks of a professional group that courts recognize
its professional standards as legally binding. However, such procedures
are not uniform across the profession, and an accountant in a normal
audit has several methods of compilation and calculation from which
to choose, all of which are acceptable. This lack of uniformity may lead
to varied results and has caused many problems for the courts in deter-
mining in a given case whether an adequate job has been performed.
Systematic issuance by the professions of definitive standards has
the beneficial effect of enabling a client to obtain before the fact a
clearer idea of what he might reasonably expect of his professional
counselor. If a client believes that he has suffered from negligent per-
formance, such standards can alleviate the need for expert testimony
in a suit for malpractice. Obviously, though, standards issuance is no
panacea; it cannot assure a clarification of client expectations. More-
over, a too-detailed set of standards might add new problems for courts
and professionals alike. No generalized standards can totally eliminate
the need to exercise judgment in unusual cases. If minutely-detailed
standards were to suggest to a court that a discretionary area had been
totally eliminated, a court lacking expertise in a particular profession
might find unwarranted liability in some cases. Because of this possi-
bility that a judgmental case might fall between standards which
would seem clearly applicable to a layman, the presumption of negli-
gence that accompanies apparent deviation from such standards should
be rebuttable. But violation of a standard should suffice to prevent a
dispositive motion and allow the case to reach the jury.
2. Standards Set by the Government
As has been noted, the general formula for professional negligence
is a common law development; the more particularized operational
standards derive from the profession itself. There are areas, however,
where government has molded professional standards by statute and
by supervision by administrative agencies." 6
114 See AvEnRiCAN INSTITUTE OF CERTIFiED PUBLIC ACcoUNTANTS, APB ACCOUNTING
PEINCIPLES (1971).
115 See, e.g., Shatterproof Glass Corp. v. James, 466 S.W.2d 873 (Tex. Civ. App.
1971).
116This is in accord with RESTATEM-NT (SECOND) or ToRTs § 285 (1965), which
1973] PROFESSIONAL NEGLIGENCE
In the securities field, Congress' special interest in protecting the

investing public has resulted in a regulatory scheme affecting profes-
sional performance. Two statutorily defined standards affect profes-
sionals involved in securities work: section 18(a) of the Securities
Exchange Act of 193411 and sections 11(b) (3) and 11(c) of the Secu-
rities Act of 1933.18
Section 18 (a) requires the least stringent of all possible standards,
good faith, and accordingly represents no advance over common law
requirements. This has the benefit of not exposing accountants to liabil-
ity to potentially huge classes of investors for activity in which the de-
gree of culpability is low, but it renders the section virtually valueless
as a deterrent to sloppy work and as a vehicle for damaged investors.
While it is true that the presumption is one of culpability, and that the
accountant must prove his good faith, the standard is so loose as to be
meaningless in the normal course of securities work. Rare is the in-
stance, one would expect, when an accountant is actually trying to
defraud an investor.
Section 11 contains a somewhat more useful standard, but it is not
on its face totally satisfactory either. While proscribing untrue state-
ments, it provides a due diligence defense which seems to impose a
simple good faith standard, 119 with the myriad difficulties of having to
prove a state of mind. Negligence is almost assuredly isolated from
liability. However, the statutory definition of reasonableness raises
provocative questions. For the statute declares that in determining what
constitutes reasonable investigation and reasonable ground for belief,
"the standard of reasonableness shall be that required of a prudent
man in the management of his own property."' 2 ° In the absence of
determinative litigation, the extent to which this standard was meant
to depart from the common law is largely speculative.' 2 '
The first case applying section 11 to accountants, Shonts v.
notes that a standard of conduct may be, inter alia, established by judicial decision,
established by a legislative enactment or administrative regulation which so provides, or
adopted by the court from a legislative enactment or an administrative regulation which
does not so provide. When a statute mandating a standard of conduct is constitutional,
the court must apply it. Id. comment b at 21.
117 16 U.S.C. § 78r(a) (1970).
1181d. §§ 77k(b)(3), 77k(c).
9
11 Id. § 77k(b)(3)(B)(i).
20
1 1d. § 77k(c).
121In Martin v. Hull, 92 F.2d 208 (D.C. Cir. 1937), the court rejected the argument
that a lower court had erred in refusing to charge that defendants were obligated to
exercise a high degree of care. The court noted that the statutory standard had emerged
in Congress as a choice between a standard tantamount to insurance and one of reason-
able care.
If it were clear that the court was speaking to the issue of "care," the court's
decision would seem faultless in view of traditional reluctance to require greater than
ordinary care; however, it does not seem that the court was making this nice kind of
distinction. The court's perception of how the reasonable man standard was to relate to
a professional is not recorded; defendants were not accountants and had themselves
relied on experts in creating the misleading documents at issue.
Hirliman,12 2 accepted extremely low-grade accounting practices; re-

covery was denied because the court found no post-certification, pre-
registration duty to disclose newly discovered information. In Escott
v. BarChris Construction Corp.,2 ' Judge McLean refused to accept
this lax standard, and held accountants to a standard allegedly no
higher than that recognized in their profession but also no lower. In
discussing the liability of an accountant who failed to detect false
entries, he noted, after pointing out that the accountant had not spent
an adequate amount of time on an important task and had been too
easily satisfied with glib answers to his inquiries, that "there were
enough danger signals in the materials which he did examine to require
some further investigation on his part. Generally accepted accounting
standards required such further investigation under these circum-
stances."' 24 Although the result in BarChris seems salutary, the rigors
of McLean's standard arguably fall short of the statutory language,
which may well have been intended to require the care and skill of a
prudent accountant without reference to ordinary practice. In BarChris
the difference between "prudent" and "normal" professional practice
was immaterial; in a proper case, the difference could be critical.
Two other sections of the securities acts, sections 17(a)' 2 5 and
10(b) ,126 flatly proscribing the use of deceptive devices, might at first
appearance create a very new standard of liability without fault for
professional securities people. However, it seems apparent that such is
not now the case. While noting that scienter was not to be deemed a
prerequisite to an action for fraud and indicating that securities laws
had expanded the common law, Judge Waterman left room in SEC v.
Texas Gulf Sulphur Co.' 27 for a defense of diligence and good faith
which seems coextensive with normative professional standards. There
may, however, be less reluctance under these sections to declare dubious
professional customs to be negligent. The lack of litigation makes the
outer boundaries here almost entirely speculative.
Legislatures and agencies also play a role in setting standards
through their interaction with professional organizations. In the legal
profession, states may enact the Disciplinary Rules promulgated by the
American Bar Association. 28 Similarly, the American Institute of Cer-
12228 F. Supp. 478 (S.D. Cal. 1939).
123 283 F. Supp. 643 (S.D.N.Y. 1968).
24
1 Id. at 703.
125 15 U.S.C. § 77q(a) (1970).
26
1 1d. § 78j(b).
127401 F.2d 833 (2d Cir. 1968), cert. denied, 394 U.S. 976 (1969).
It seems clear . . . that if corporate management demonstrates that it was
diligent in ascertaining that the information it published was the whole truth
and that such diligently obtained information was disseminated in good faith,
Rule lob-5 would not have been violated.
Id. at 862.
128 See, e.g., Indiana's CODa OF PROFESSIONAL RESPONSIBILITY FOR ATTORNEYS AT
tified Public Accountants often publishes new Statements on Auditing

Procedure,which may be adopted by the SEC as a proper method for
work filed with it.'29 The practical effect of this may be to so discredit
any alternative procedures as to eliminate them quite rapidly.310
3. Standards Set by the Professional

In the course of his dealings with a client, the individual practi-
tioner can alter the expectations of the client, and thus the standard
by which the practitioner's success or failure will be judged. Reason-
able disclaimers of success in areas of uncertainty can reduce friction
and disappointment; but questions about the effectiveness of disclaim-
ers, and of knowing client consent' 8 ' undoubtedly will arise. Certainly,
detailed disclaimers, however sensible, will hardly add to the public
confidence which a professional must enjoy. 2
By his dealings with clients, a practitioner can also elevate his
standard of performance. Where a professional has chosen to engage
in "hard sell" activity, and has generated expectations of infallibility
LAW m JuDICIAL CONDUCr AND E=Cs (1971). In California, while "many 'local' bar
associations expressly adopt" the ABA CODE, supra note 111, by constitution or by-law,
in adopting state rules of professional conduct, the Code was not made binding on all
members of the state bar. Yet when the STATE BAR or CasarourA, CALIFO.NIA STATE
BAR AcT AND Ru CEs Or PROFESSIONAL CONDUCr (1972), does not cover the subject area,
an ABA canon might be adopted by supreme court decision to operate prospectively. See
BOARD or GovEaxoRs & CONFERENCE OF BAMRISTERS, STATE BAR OF CALaORIA, Gums
TO PROFESSIONAL CONDUCT FOR Tim NEW CALFORIA PRACTITIONER 50-51 (undated).
129The SEC has ruled that financial statements will be presumed misleading if not
prepared in accordance with accounting principles which have substantial authoritative
support. Opinions of the Accounting Principles Board of the AICPA are considered as
having such support, and will be deemed acceptable unless the SEC states a different
position on accounting treatment in its rules, regulations, or official releases. 4 CCH FED.
SEC. L. R P. II 68,517.23 (1970).
130An excellent example of litigation on this very issue is Appalachian Power Co. v.
AICPA, 177 F. Supp. 345 (S.D.N.Y.), aff'd, 268 F.2d 844 (2d Cir.), cert. denied, 361 U.S.
887 (1959). Several power companies were denied an injunction that would have re-
strained the AICPA from distributing a statement finding it an improper auditing
procedure to credit earned surplus when recognizing the deferral of income taxes. The
SEC, it was feared, would, by its authority, force the utilities to discontinue past pro-
cedures, with the result that the companies would find their ability to obtain credit
impaired, and their growth accordingly limited.
13 1
For a good analysis of some problems of informed consent, see Salgo v. Leland
Stanford Jr. Univ. Bd. of Trustees, 154 Cal. App. 2d 560, 317 P.2d 170 (Dist. Ct. App.
1957).
132Accordingly, Owen v. Neely, 471 SAV.2d 705, 708 (Ky. 1971), suggests that
reservations as to the soundness of a title are proper only so long as there are no
"reasonable grounds to suspect the actual existence" of defects. The ABA CODE, supra
note 111, flatly excludes the possibility of an attorney limiting his personal liability,
though he may disclaim that of his associates. DR 6-102, at 74. See also 61 Aa . JUR.
2D Physicians, Surgeons & Other Healers § 107 (1972) (contractual exemption from
negligence generally invalid); RESTAT ENT (SECOND) OF TORTS § 545(2) (Tent. Draft
No. 11, 1965). When a "misrepresentation as to a matter of law is solely one of opinion
as to the legal consequences of facts, the recipient is justified in relying upon it [only]
to the same extent as though it were a representation of any other opinion." Id. And
"between bargaining adversaries, there can ordinarily be no justifiable reliance upon the
opinion, as stated in § 542" Id. comment d at 18. But "if the maker of the representation
purports to have special knowledge of the law which the recipient does not have, reliance
upon the opinion may be justified." Id.
by lavish promises, a warranty of success may be implied 33 This

accords with the Restatement approach, allowing the professional stan-
dard to be altered by representations of superior skill or knowledge.3 4
The professional may choose to confine his practice to a limited
area of expertise. Once the professional makes a decision to specialize,
client reliance is necessarily altered. The dimensions of additional
legitimate reliance are most clearly ascertainable in medicine, where in
order to specialize a practitioner must meet special, well-defined, and
identified standards. This does not seem to be the case in most other
professions. The outer edges of various legal specialties, for example,
are vague, and the ABA Code of Professional Responsibility explicitly
33
cautions against the advertising of specialties
A general practitioner will not ordinarily be held to the same
absolute standards as a specialist." 6 Even so, when a lay person con-
sults a general practitioner and that practitioner, recognizing the com-
plexities of the case, still undertakes the case, it is justifiable for the
lay person to expect to be treated with due care and skill or alterna-
tively be referred to one who does possess such skill (except, of course,
in case of emergency) 3 7 Thus, despite a grave reluctance to inhibit or
discourage the much needed general practitioner, the practitioner has
been and will be held to a high standard of skill once he voluntarily
undertakes a case. 8
4. Setting a Standard of Perfection:
The Professional as Insurer?
Although warranties have been, historically, primarily identified
with tangible property, 13 9 and statements have been made to the effect
that the warranty principle is "uniquely applicable to goods,"' 4 the
application of a warranty principle to the professional holds some
promise, and deserves further study particularly in its economic im-
plications. Logically the first place to consider applying an insurance
principle is in those functions which are least professional in nature.
The most inviting application for strict liability in tort, is in the
use or dispensing of defective products that cause injury. Although ob-
133 W. PROSSER, supra note 18, § 109, at 726-27.
134 See RESTATENMNT (SEcoND) or ToiTS, § 299A (1965).
135 ABA CODE, supra note 111, DR 2-105. For a good discussion of related reliance
problems, see Note, supra note 51, at 1302-04.
136See McCoid, supra note 63, at 566.
x3T See id. 597, explaining that the profession itself decides when referral is called
for, in the form of expert testimony to the factfinder. See also Note, supra note 107,
at 216.
138 See McCoid, supra note 63, at 597.
139 Gagne v. Bertran, 43 Cal. 2d 481, 486, 275 P.2d 15, 19 (1954).
140 Audlane Lumber & Builders Supply, Inc. v. D.E. Britt Associates, Inc., 168 So. 2d
333, 335 (Fla. Dist. Ct. App. 1964).
jections have been raised against this extension of strict liability, 41 the
clear analogy to conventional products liability suggests equivalent
liability regardless of the status of the person dispensing a product.
Beyond products liability, the next logical extension would be to the
most mechanistic activities, such as the lawyer's function of drafting a
standard will, a "simple mandate of law that requires no room for ...
interpretation."'
It is fairly apparent that each of the professions grows vastly more
complex with each passing year. The rapid proliferation of technical
sources and available expertise creates problems for the perplexed pro-
fessional who must, like Alice, run frantically just to keep abreast of
new developments. A perfection standard may seem menacing to such
a professional; yet the growing complexity of the professions creates
growing dependence upon the professional, and demands that mere
complexity be no legal justification for non-liability.
In implementing a standard of professional perfection, the prob-
lem of legal causation may in some cases assume huge dimensions. If
the law rigidly requires a plaintiff to prove beyond all doubt that a
mechanical error by the professional defendant caused his injury, then
the scheme of "strict" liability would be effectively emasculated. If, on
the other hand, a relaxed standard of proximate causation encourages
all disgruntled clients with "bad results" to bring suit for minor errors
only incidental to their injury, then the consequent increase, in litigation
could be a dismal prospect. Such a development might seriously impair
professional-client relations, and have the result of increasing the ex-
pense and diminishing the quantity of professional work amid profes-
sional overcaution; few professionals would be willing to venture into
new areas or new problems.
If the focus is shifted from the mechanical operations, to an
emphasis on insuring results, there are strong counterconsiderations
against over-weighing concern for clients' welfare. Professional bad
results-that is, "errors" where no professional standards are violated
and the practitioner's judgment conformed to accepted professional
community levels-do not seem reasonably susceptible to a system of
strict liability. Because the elements of control that exist when dealing
with only mechanical operations are lacking in such cases, such "er-
rors" will be by definition unavoidable, regardless of the amounts of
care and skill exerted. Talking about this lack of control, the court in
14lMagrine v. Krasnica, 94 N.J. Super. 228, 227 A.2d 539 (Hudson County Ct.,
L. Div., 1967), aff'd sub nom. Magrine v. Spector, 100 N.J. Super. 223, 241 A.2d 637
(App. Div. 1968), aff'd, 53 N.J. 259, 250 A.2d 129 (1969). The trial court, in denying
the strict liability of a dentist for personal injuries caused by a latent defect in a
hypodermic needle, pointed to the non-applicability of the UCC and the Uniform Sales
Act, the absence of professional control measures, the non-mercantile quality of the
transaction, and the availability of other recompense for the injured.
142 Broyles v. Brown Eng'r Co., 275 Ala. 35, 39, 151 So. 2d 767, 771 (1963).
Broyles v. Brown Engineering Co.143 pointed out the essential inap-

plicability of the warranty principle to the bad result. Speaking of the
medical profession the court declared:
The practice of medicine ... depends on factors beyond the
control of the practitioner. The medicines prescribed are
usually the products of experiments by scientists or are com-
pounded by other agencies. The same medicine may have
beneficial and favorable results on one patient and unfavor-
able reaction on another. An example is penicillin. One patient
reacts favorably and another unfavorably. The chemistry of
human bodies varies. Some patients respond to surgery while
other patients within the same age bracket respond unfavor-
ably. The response is not yet within human control.' 44
Similarly, the court considered the legal profession and noted:
Lawyers ... are dependent on the legal pronouncements
of judicial agencies .... Interpretation of law is and cannot
be an exact and accurate science. There is generally no for-
mula to follow. Even when Code forms are used in the draft-
ing of a complaint, questions often arise as to whether or not
the correct form for the client's case has been used. The
courts from state to state, and among the judges on a partic-
ular court, often disagree in their interpretation as to the
effect of judicial pronouncements or legislative enactments.
Trial lawyers are dependent on the reactions of jurors to
factual presentations and the application of law thereto....
[A]s a whole, lawyers are dealing with factors that are be-
yond their control .... 11
Given this inability to control the causes of "bad results" and
given the staggering possibilities of economic loss, requiring profes-
sionals to become insurers of good results would portend unhappy
economic consequences for the consumer, adding perhaps astronom-
ically to already high professional costs, and perhaps discouraging
recourse to professional services. It does not appear that public reliance
upon the professional outweighs these considerations.
III. THE SCOPE OF PROFESSIONAL LIABLITY

A. Introduction
The foregoing discussion has assumed that the professional is
liable to some unspecified class of persons for his negligent acts. This
143 275 Ala. 35, 151 So. 2d 767 (1963).

144Id. at 38-39, 151 So. 2d at 771.
145Id. at 39, 151 So. 2d at 771. See Dorf v. Relies, 355 F.2d 488 (7th Cir. 1966),
and Denzer v. Rouse, 48 Wis. 2d 528, 180 N.W.2d 521 (1970), for recent affirmations
of the time-honored rubric that an attorney is not a guarantor of good results.
Comment will now consider the size and character of that class and
explore the possible limits upon it. The traditional limit on professional
liability has been the privity relationship between the professional and
his client.146 Thus, when a negligence action was brought against a
professional, the threshold question was whether the plaintiff had been
the professional's client. A negative answer usually resulted in dismiss-
14 7
al, unless the plaintiff was able to allege more than mere negligence.
Although the privity limit on liability serves the goal of certainty
in the law, it may not serve other goals such as justice or deterrence of
negligent conduct.' 48 Consider the following hypothetical situation.
Homeowner H hires A, an architect, to design and supervise the con-
struction of his house. To finance the project H borrows $50,000 from-
B, a bank, with the house and land as collateral. H takes possession of
the house, later goes bankrupt, and B forecloses the mortgage. When
146 See Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441 (1931); Derry v.
Peek, 14 App. Cas. 337 (1889); Winterbottom v. Wright, 152 Eng. Rep. 402 (Ex. 1842).
When one considers the limitation or extension of liability costs, this can be done in
several ways. First, the class of persons who may sue can be limited so that only those in
a particular relationship with the group in question may sue a member of that group.
The privity limitation is an example of this method. Second, the degree of causation re-
quired to bring suit can be defined so as to limit or extend liability. Courts use this
technique when they speak in terms of proximate cause or legal cause. Third, the def-
inition of what is actionable conduct can be modified so as to change the scope of liabil-
ity. Certain conduct can thus be held nonactionable. Fourth, conduct can be held action-
able by all injured parties, but recoverable damages can be controlled by limiting damage
recovery to only certain damages. Of these methods of controlling liability costs, the first
(the privity limitation) has been used most successfully in limiting professional liability
for negligence. The others have been used no more in the area of professional negligence
than in other areas of negligence. For this reason, only the privity limitation will be dis-
cussed at length in this section, but the reader must keep in mind that the other three
methods of limiting liability are also active.
147An alternative to the privity doctrine was, however, suggested in the very case
that established its dominance in the field of professional liability. In Ultramares Corp.
v. Touche, 255 N.Y. 170, 174 N.E. 441 (1931), Chief judge Cardozo held that privity
was no bar to liability for fraud and ordered a new trial on the question of fraud with
the insight "that negligence or blindness, even when not equivalent to fraud, is none the
less evidence to sustain an inference of fraud. At least this is so if the negligence is gross."
Id. at 190-91, 174 N.E. at 449.
This suggestion that fraud need not be active or deliberate to be actionable, but that
gross negligence or recklessness would suffice to supply the needed inference of fraudulent
intent was later made a basis for liability in State St. Trust Co. v. Ernst, 278 N.Y. 104,
15 N.E.2d 416 (1938), in which the defendant accountant firm knew that the certified
balance sheet it was preparing would be used to obtain credit, and prepared 10 copies.
One month later it prepared a covering letter or supplemental statement expressing severe
doubts about some of its statements in the balance sheet, but made up only a single copy,
which it sent to its employer. Although tltramares might suggest that the accountant
has a duty only to his employer for negligent mistakes, a duty manifestly satisfied by the
covering letter, the court found reckless disregard of consequence in not sending copies to
all to whom the initial certified balance sheet had been exhibited. In its opinion this was
negligence so gross as to constitute an inference of fraud, for "heedlessness and reckless
disregard of consequence may take the place of deliberate intention." Id. at 112, 15 N.E.2d
at 419.
Gross negligence or recklessness became a substitute for the element of intent in fraud
actions; intent, always extremely difficult of proof, could be circumvented.
For other cases decided under a "gross negligence" standard, see C.I.T. Financial
Corp. v. Glover, 224 F.2d 44 (2d Cir. 1955); Duro Sportswear, Inc. v. Cogen, 131
N.Y.S.2d 20 (Sup. Ct. 1954), aff'd mem., 285 App. Div. 867, 137 N.Y.S.2d 829 (1955).
348 See W. PnossER, supra note 18, §§ 3, 4.
B attempts to resell the house it discovers that the house has grossly
defective wiring and plumbing clearly due to A's negligence. As a
result, B cannot resell the house to recover the deficiency and brings
a negligence action against A to recover the balance. In answer to the
suit, A claims that B has no cause of action against himself because it
is not in privity of contract. Under the privity doctrine the suit would
be dismissed. But is that fair to B? A was negligent, and B had no way
of protecting itself from such an occurrence short of the unreasonable
precaution of hiring its own architect. Also, the injury to B resulting
from A's negligence is quite foreseeable. The major interest served by
the denial of liability is the protection of A from the heavy burden of
liability in such circumstances.
But, the privity doctrine is no longer the controlling factor that it
once was.149 Many jurisdictions have modified it or repudiated it in
various circumstances. 5 ° What is the effect of these new developments
on situations such as that above? What new facts or circumstances are
relevant in courts' eyes to the decision to impose liability? What
should be the limits of a professional's liability for negligence? Answer-
ing questions such as these is the goal of the following discussion. 51
B. Possible Limits and Bases of Professional Liability
As a general rule a tortfeasor is liable for the foreseeable conse-
quences of his negligence.' 52 This limitation on the extent of liability
for negligence has been characterized as "[t]he risk reasonably to be
perceived defines the duty to be obeyed, and risk imports relation; it is
risk to another or to others within the range of apprehension,' 53
Foreseeability may be viewed as an alternative basis and limit of
professional liability that could be applied in the absence of the con-
tractual implications of the relationship between professional and
client. The policy that a tortfeasor should be responsible for the fore-
seeable consequences of his acts, so familiar in other areas of our tort
law, could easily form a basis of liability in this field as well. Concur-
rently, this same proposition delineates a convenient, though imprecise,
limit of liability-that of foreseeable harm.
That the foreseeability limitation is different from, and extends
farther than, the privity limitation can be seen by examining cases
149 See notes 224-35 infra & accompanying text.
15o California is the only jurisdiction to have eliminated the privity test altogether
in a significantly large area. See Biakanja v. Irving, 49 Cal. 2d 647, 320 P.2d 16 (1958).
151The reader may find it helpful to compare the analysis and conclusions of this
Comment with the predictions made on the future of professional liability for negligence
in Curran, ProfessionalNegligence-Some General Comments, 12 VAN1. L. REv. 535, 545-
47 (1959). A more comprehensive analysis of some of the cases treated in this Comment
may be found in Prosser, Misrepresentation and Third Persons, 19 VAxD. L. Rav. 231
(1966).52
1 , sTATEm= (SEconn) oF ToRTs § 435 (1965).
153 Palsgraf v. Long Island RA.., 248 N.Y. 339, 344, 162 N.E. 99, 100 (1928) (Car-
dozo, C..).
where the privity limitation has been applied. The most famous of
these is UltramaresCorp. v. Touche5 4 in which the defendant accoun-
tant was held not liable to a plaintiff who, in lending money to the firm
that employed the accountant, had relied on a certified original copy
of defendant's audit. The limitation on liability was based on the lack
of privity between the plaintiff and the defendant. But, if a foresee-
ability standard were applied, liability would certainly have been found,
as prospective reliance on the accountant's statement by lenders to the
accountant's employer was both foreseeable and known by the accoun-
tant. 155 In another case the defendant accountant sent his report to the
plaintiff who then relied on it in business dealings with the accountant's
employer." 6 The accountant was held not liable to the plaintiff for
negligence in preparing the audit because of lack of privity. Under a
foreseeability standard it is clear that liability would have been found,
as the defendant knew both the plaintiff's identity and of his prospec-
tive reliance. Further examples of the wider scope of the foreseeability
limit on liability as compared to the privity standard can be seen 1in
cases treating the liability of attorneys for negligently drawn wills,' T
of engineering companies for negligently prepared engineering reports
used by their employers in securing bids for construction projects,'"s
and of abstractors for negligent title searches.' 59
A second possible test for measuring the extent of liability for
negligence is that of reasonable reliance 60 This means that a profes-
sional would be liable to those who reasonably rely on his negligent ac-
154 255 N.Y. 170, 174 N.E. 441 (1931). For a discussion of the earlier development
of privity concepts, see Levi, An Introduction to Legal Reasoning, 15 U. CHL L. REv. 501,
506-19 (1948).
155 The defendants knew also that in the usual course of business the balance
sheet when certified would be exhibited by the Stern company [the accountant's
employer] to banks, creditors, stockholders, purchasers or sellers, according to
the needs of the occasion, as the basis of financial dealings. Accordingly, when
the balance sheet was made up, the defendants supplied the Stern company with
thirty-two copies certified with serial numbers as counterpart originals.
255 N.Y. at 173-74, 174 N.E. at 442.
156 Investment Corp. v. Buchman, 208 So. 2d 291 (Fla. Dist. Ct. App. 1968).
157 See, e.g., Lucas v. Harem, 56 Cal. 2d 583, 364 P.2d 685, 15 Cal. Rptr. 821 (1961)
(privity limitation would have prevented liability to a named beneficiary although the
likelihood of harm to such a person due to the attorney's negligence was certainly fore-
seeable).
158 See, e.g., Texas Tunneling Co. v. City of Chattanooga, 329 F.2d 402 (6th Cir.
1964), rev'g 204 F. Supp. 821 (ED. Tenn. 1962) (absence of privity between the con-
tractor and the engineering company prevented liability; foreseeability of harm was ob-
vious because of the customary trade practice of contractors' relying upon the engineer-
ing company's reports of underground geological formations to be encountered in the
construction project).
1 ) See, e.g., Anderson v. Boone County Abstract Co., 418 S.W.2d 123 (Mo. 1967)
(abstractor held liable only to the party who purchased his services; foreseeability of
harm to plaintiff, a subsequent purchaser less than 2 years later, may not have been be-
yond question, but the size of the group of foreseeable plaintiffs certainly was larger than
that of the group in privity with the abstractor).
160 For a very early use of this concept in defining the extent of liability for negli-
gence, see Smith, Liability for Negligent Language, 14 HARv. L. REv. 184, 195-97 (1900).
lions to their detriment, regardless of their actual relationship with

him. Reliance as a justification for imposing liability espouses a policy
decision that those who innocently and reasonably rely on a profes-
sional's work should not be required to bear a loss admittedly caused
by another's negligence. 61 And it limits liability so that a professional
is liable only to those who reasonably rely on his work. This reasonable
reliance limit may -simply be another characterization of the fore-
seeability limit in many cases, as reasonable reliance is foreseeable, and
the only foreseeable harm in many circumstances is only that which
is caused by reasonable reliance on a professional's negligent acts' 6
But the two policies are analytically separate, and the result may
63
differ.1
The limit on liability imposed by the application of the reasonable
reliance test is again wider than and different from, the privity limita-
tion. An example is found in Craig v. Everett M. Brooks Co. 64 The
defendant civil engineering and surveying company was hired by a
project owner to survey the project and set stakes. The defendant per-
formed the work negligently and the plaintiff, the contractor on the
project, was damaged because of his reliance on the defendant's er-
roneously placed stakes.165 There was no privity of contract between
the parties, but the court applied the reasonable reliance standard and
concluded that as the defendant knew that the plaintiff would rely on
the negligently set stakes the defendant should be liable for the result-
ing losses to the plaintiff.
The fear of economic harm due to excessive liability has often lead6
the courts to limit narrowly liability for professional negligence.-
This pragmatic policy tends to operate contrary to the expansive scope
of liability of foreseeability and reasonable reliance, and has in the past
controlled the extent of liability. Fear of a crushing burden of liability
was best expressed in Ultramaresby Chief Judge Cardozo who stated:
161 See Rhode Island Hosp. Trust Nat'l Bank v. Swartz, Bresenoff, Yavner & Jacobs,
455 F.2d 847 (4th Cir. 1972); Craig v. Everett M. Brooks Co., 351 Mass. 497, 222 N.E.2d
752 (1967); Du Rite Laundry, Inc. v. Washington Elec. Co., 263 App. Div. 396, 33
N.Y.S.2d 925 (1942).
162 See Texas Tunneling Co. v. City of Chattanooga, 329 F.2d 402 (6th Cir. 1964),
rev'g 204 F. Supp. 821 (E.D. Tenn. 1962); M. Miller Co. v. Dames & Moore, 198 Cal.
App. 2d 305, 18 Cal. Rptr. 13 (Dist. Ct. App. 1961); Anderson v. Boone County Abstract
Co., 418 S.W.2d 123 (Mo. 1967).
163 Do beneficiaries under a will, a class whose potential injury is foreseeable, rely
in any sense upon the skills of the attorney who prepares the document? See Lucas v.
Harn, 56 Cal. 2d 583, 364 P.2d 685, 15 Cal. Rptr. 821 (1961).
164 351 Mass. 497, 222 N.E.2d 752 (1967).
165 Plaintiff was compelled to relocate and rebuild 2 catchbasins and a road originally
misplaced in reliance upon defendant's negligent placing of "offset stakes" on the con-
struction site. The cost of relocation was sought as damages. Id.
166 See, e.g., Anthony v. Vaughan, 356 Mass. 673, 255 N.E.2d 602 (1970). This basis
for the limitation of tort liability arising out of the breach of a contractual duty was
first articulated in the English case of Winterbottom v. Wright, 152 Eng. Rep. 402 (Ex.
1842).
If liability for negligence exists [without privity], a thought-

less slip or blunder, the failure to detect a theft or forgery
beneath the cover of deceptive entries, may expose accoun-
tants to a liability in an indeterminate amount for an indeter-
inate time to an indeterminate class. The hazards of a busi-
ness conducted on these terms are so extreme as to enkindle
doubt whether a flaw may not exist in the implication of a
duty that exposes to these consequences. 0 7
The fear expressed in these cases is that once the privity limitation on
liability is broken, no other limit on liability would be possible, and
negligence in carrying out a contract would result in liability to all who
are remotely affected by the negligent act without regard to their rela-
tionship with the defendant. Thus, a liability is envisioned that is out of
all proportion to the magnitude or importance of the duty undertaken
in the contract and to the degree of fault of the professional in neg-
ligently performing his duties.
In the particular case of professionals, such crushing liability could
have disastrous effects; it could drive the more responsible practition-
ers out of the profession, leaving only those who are irresponsible and
unaffected by their potentially great liability."' The resultant lowering
of professional standards would certainly be a high price to pay for the
benefits to the public of more extensive liability. There is also the
remote possibility that some activities or professions would not be
engaged in at all if the weight of potential liability became too great. 6
Whether one considers this result desirable or not must depend upon
whether an activity that creates such great potential liability is better
not engaged in precisely because of the great potential for harm in its
7
practiceY.1
This fear of unlimited liability for breach of a contractual duty
remains a major consideration for some courts in cases where an exten-
sion of such liability has been soughtY.7 Others have made no mention
72
of the problem when extending liability to third parties not in privityY
16 7 Ultramares Corp. v. Touche, 255 N.Y. 170, 179-80, 174 N.E. 441, 444 (1931).
1 08
See C. MORRIS, TORTS, 207-08 (1953).
169 See id.
170 See generally G. CAAnBRnsr, Tmn COST oP ACcmENTS: A LEGAL AND Ecouomnc
ANALYSIS (1970).
171See Anthony v. Vaughan, 356 Mass. 673, 255 N.E.2d 602 (1970) (extension of
liability denied due to problem of liability to an indeterminate group of people) ; Wester-
hold v. Caroll, 419 S.W.2d 73 (Mo. 1967) (explaining why unlimited liability did not
result from the decision); Rozny v. Marnul, 43 Ill. 2d 54, 250 N.E.2d 656 (1969) (noting
that unlimited liability would not result from its decision).
For a discussion of the extent of liability for negligence in particular areas that
recognized this consideration as a limit on liability, see Note, Liability of a Testing Com-
pany to Third Parties, 1964 WASH. UL.Q. 77; Comment, Accountants' Liability for Non-
disclosure of Post-CertificationDiscovery of Error,116 U. PA. L. REv. 800, 511-12 (1968).
172E.g., Biakanja v. Irving, 49 Cal. 2d 647, 320 P.2d 16 (1958) (although standards
were given for expanded liability, no mention of unlimited liability was made); Han-
berry v. Hearst Corp., 276 Cal. App. 2d 680, 81 Cal. Rptr. 519 (Dist. Ct. App. 1969) (no
mention of standards or problem of unlimited liability).
When courts have confronted this reason for limiting liability it has
been persuasive in some cases in confining liability to limits near priv-
ity,"7 while in others it has been held inapplicable in the particular
17 4
circumstances of the case.
One possible solution to the problem of unduly burdensome liabil-
ity is liability insurance for professionals which would essentially pass
on the burden of liability to all who use the professional's services.175
Although there has been some discussion of the relationship between
the availability of such insurance and professional liability to third
parties for negligence in legal literature, 176 the courts seem to have
generally ignored the subject.1 7 7 Thus, any statement concerning the
effect of such insurance on the decisions of courts would be purely
speculative.
Although the courts have generally ignored the existence of pro-
fessional liability insurance in their discussions of the propriety of
extending liability for professional negligence, an examination of an
area where such insurance was not ignored in the extension of liability
demonstrates its possible effects on judges' thinking. Such an area is
that of charitable immunity to negligence actions. Charitable immunity
had several different bases, 178 but the one relevant here is the argument
that the imposition of liability for negligence would allow damage
recoveries which would so deplete the funds of the charities as to
deprive the public of their benefit.17 9 This argument raises fears re-
markably similar to those expressed concerning the effects on the pro-
fessions of liability for negligence to parties not in privity.
In the jurisdictions which have rejected charitable immunity in
the past thirty years the existence of liability insurance which protects
the charity's assets from sudden depletion has been significant in reach-
ing that decision. One of the earliest and most comprehensive cases to
178 See, e.g., Anthony v. Vaughan, 356 Mass. 673, 255 N.E.2d 602 (1970).
174 See cases cited note 171 supra.
75
3 See C. Moasas, supra note 168, at 16-17, 246-55. See also G. CALABREsi, Tn
CosT oF AccmExTs: A LEGAL AND EcONO c ANALySIS (1970).
76
1 See Comment, Auditors' Responsibility for Misrepresentation: Inadequate Pro-
tection for Users of FinancialStatements, 44 WAsHr. L. REv. 139, 181-82 n.228 (1968).
17 7 The only case explicitly mentioning liability insurance as a means of relieving the
burden of professional liability for negligence is Rusch Factors, Inc. v. Levin, 284 F. Supp.
85 (D.R.I. 1968). In De Bardeleben Marine Corp. v. United States, 451 F.2d 140 (5th
Cir. 1971), the court noted that the problem of burdensome liability was not present as
the United States was the defendant. The United States of course is a self-insurer.
178 See Bing v. Thunig, 2 N.Y.2d 656, 143 N.E.2d 3, 163 N.Y.S.2d 3 (1957). The
court mentioned 4 arguments that had been used to support charitable immunity: 1) the
funds given to the charity create a charitable trust that cannot be diverted to pay tort
claims; 2) the recipient of charity waives his right to damages for injuries suffered
through the negligence of the charity's servants; 3) the rule of respondeat superior does
not apply to doctors and nurses employed in charity hospitals as they are to be regarded
as independent contractors because of their special skill; 4) the possibility that a sub-
stantial damage award would do irreparable harm to the charity and discourage the
generosity of donors.
179 See, e.g., Foster v. Roman Catholic Diocese, 116 Vt. 124, 70 A.2d 230 (1950).
deal with the problem is Presidentand Directorsof Georgetown College

v. Hughes.'80 The court, in answer to fears of dissipation of the defen-
dant hospital's charitable trust funds and deterrence of new donations
to the charity, stated:
Further, if there is danger of dissipation, insurance is
now available to guard against it and prudent management
will provide the protection. It is highly doubtful that any
substantial charity would be destroyed or donation deterred
by the cost required to pay the premiums. While insurance
should not, perhaps, be made a criterion of responsibility, its
prevalence and low cost are important considerations in
evaluating 8the fears, or supposed ones, of dissipation or
deterrence.1 .
The court recognized that the real burden of imposing liability on the
charity was the cost of liability insurance premiums and not the risk
of depleting the charity's assets in satisfying damage awards, as would
also be the case with professionals. As such premiums are essentially a
cost of doing business, the court found little danger of ruining the
charity in imposing liability for negligence. This result and its sup-
portive reasoning have been followed in many other jurisdictions8"
so that charitable immunity has largely disappeared. 3
This reasoning would seem to apply to professionals' third party
liability with equal force, and one can only speculate why the courts
have not recognized the similarities between the situations in profes-
sional liability and charitable immunity. It is perhaps because liability
insurance for institutions has been generally available for some time
and its cost is reasonable and well established, making it rather easy
to require charitable institutions to carry it. But liability insurance for
professionals is not as well established, and its cost, when liability to
third parties is added, will be wholely speculative and possibly prohib-
itive. 84 Perhaps as professional liability insurance becomes more com-
mon and the rates stabilize, the example of how liability insurance
180 130 F.2d 810 (D.C. Cir. 1942). The existence of such immunity in the District of
Columbia had never been decided, and the court was able to examine the question with-
out the constraint of precedent.
1811d. at 823-24.
182
See Bing v. Thunig, 2 N.Y.2d 656, 143 N.E.2d 3, 163 N.Y.S.2d 3 (1957) (existing
charitable immunity removed); Avellone v. St. John's Hosp., 165 Ohio St. 467, 135
N.E.2d 410 (1956) (existing charitable immunity removed); Pierce v. Yakima Valley
Memorial Hosp. Ass'n, 43 Wash. 2d 162, 260 P.2d 765 (1953) (existing charitable im-
munity removed).
83
1 See RESTATEmENT (SEcoaN) or TORTS § 895F (Tent. Draft No. 18, 1972).
184
See generally Comment, Auditor's Third Party Liability: An Ill-Considered Ex-
tension of the Law, 46 WAsir. L. REv. 675, 682-85 (1971). For a discussion of the factors
influencing liability insurance rates for attorneys, see Denenberg, Ehre & Hiling, Law-
yers' Professional Liability Insurance: The Peril, the Protection, and the Price, 1970
INS. L.J. 389; Note, 15 HAST. L.J. 574 (1964).
affected the rejection of charitable immunity will become increasingly

persuasive.
C. Emerging Limits of Professional Liability
for Negligence-Beyond Privity
"The assault upon the citadel of privity is proceeding in these
days apace. How far the inroads shall extend is now a favorite subject
of juridical discussion."'8 5 Although this statement was made in 1931
it could just as well be made about the most recent developments con-
cerning professional liability for negligence. This "assault" will be
analyzed in several professions to illuminate exactly where the scope
of liability has advanced and where it might be proceeding.,
1. Accountants
Under the privity doctrine, accountants are liable for negligence
only to the person or firm that hires them.187 This boundary of liability
has remained remarkably stable until the last few years. 88 As recently
as 1968 a court was able to assert that, "[n]o appellate court, English
or American has even [sic] held an accountant liable in negligence to
reliant parties not in privity."'1 9 Yet in that very case the dam began
to break, and an accountant was held liable to a third party who relied
to his detriment on an audit done by the accountant, who had been
apprised that the audit was being prepared specifically to facilitate the
borrowing of money from the plaintiff.'
18 Ultramares Corp. v. Touche, 255 N.Y. 170, 180, 174 N.E. 441, 445 (1931)
(Cardozo, C.J.) (citations omitted).
186 For a discussion of recent English developments in the extent of liability for negli-
gence of several professions, see North, Liability for Professional Negligence: Some Com-
parisons, 1963 J. Bus. L. 131.
187 Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441 (1931).
188 A comprehensive treatment of the law during this period of relative stability may
be found in the following: Coakley, Accountants' Legal Liability, 126 J. ACCoThrTAi cY
July 1968, at 58; Hawkins, Professional Negligence Liability of Public Accountants, 12
VA-n. L. REv. 797 (1959); Katsoris, Accountants' Third Paity Liability-How Far Do
We Go?, 36 FORDA L. Rv. 191 (1967); Kurland, Accountant's Legal Liability-Ultra-
mares to BarChris, 25 Bus. LAW. 155 (1969); Levitin, Accountants' Scope of Liability
For Defective Financial Reports, 15 HAST. L.J. 436 (1964); Solomon, Ultramares Re-
visited: A Modern Study of Accountants' Liability to the Public, 18 DE PAuL L. REv. 56
(1968); Comment, Accountants' Liabilities to Third Parties Under Common Law and
Federal Securities Law, 9 B.C. INn. & Coax. L. REv. 137 (1967); Note, Accountants'
Liabilities for False and Misleading FinancialStatements, 67 CoLur. L. Rav. 1437 (1967) ;
Comment, Auditor's Third Party Liability: An Ill-Considered Extension of the Law, 46
WAsr. L. Rav. 675 (1971).
It is worth noting that one simple way for a reliant party to protect himself in the
face of the privity limitation is by placing himself in privity with the accountant by
splitting the cost of the accountant's services with the party being audited, as was done
in Gammel v. Ernst & Ernst, 245 Minn. 249, 72 N.W.2d 364 (1955). This procedure
would only be available, of course, to those very close to the party being audited.
189 Rusch Factors, Inc. v. Levin, 284 F. Supp. 85, 90 (D.R.I. 1968).
190 The court claimed that this result was in harmony with Rhode Island law, which
followed Ultramares, because the plaintiff and his intended reliance were specifically
known to the accountant while the plaintiff in Ultramares was simply a member of an
undefined class of prospective lenders. The court felt that principles embodied in Rn-
This general line of expansion of liability has been adopted in

several other cases,19 ' but no courts appear to have gone past it in fur-
ther extending an accountant's liability to third persons. Shatterproof
Glass Corp. v. James'9 2 held the defendant accountant liable to a dam-
aged third party where the accountant was specifically told by his
employer to supply information to the plaintiff, thus making the plain-
tiff's reliance upon the accountant's work both foreseen and certain. In
reaching that result the court embraced the scope of liability embodied
in section 552 of the Restatement (Second) of Torts. 9
The common circumstance upon which liability is based in these
cases is that the plaintiff's reliance on the accountant's work is specifi-
cally known to the accountant. Not merely foreseen reliance, but known
reliance has become the outer, common law limit for accountants, yet
this expansion of liability is not a universal trend. Recent cases still
adhere to the classic privity standard of Ultramares,19 4 but at least an
initial break from the old common law limit has been signaled. 95
2. Architects
The variety of services provided by architects in modern society
and the effect of their work upon a large number of people means that
negligence by an architect can result in a variety of injuries and eco-
nomic losses to several different classes of persons. Under either a strict
privity standard or under the broader standard found in the field of
STATEMENT (SECOND) OF TORTS § 552 (Tent. Draft No. 12, 1966), note 193 infra, were
more on point.
19 1
E.g., Rhode Island Hosp. Trust Natl Bank v. Swartz, Bresenoff, Yavner &
Jacobs, 455 F.2d 847 (4th Cir. 1972) (accounting firm held liable to plaintiff lender who
relied on the firm's financial reports; accounting firm knew of and acknowledged the
lender's reliance); accord, Ryan v. Kanne, - Iowa -, 170 N.W.2d 395 (1969).
192 466 S.W.2d 873 (Tex. Civ. App. 1971).
193 (Tent. Draft No. 12, 1966).
Information Negligently Supplied for the Guidance of Others.
(1) One who, in the course of his business, profession or employment, or in
a transaction in which he has a pecuniary interest, supplies false information for
the guidance of others in their business transactions, is subject to liability for
pecuniary loss caused to them by their justifiable reliance upon the information,
if he fails to exercise reasonable care or competence in obtaining or communicat-
ing the information.
(2) Except as stated in subsection (3), the liability stated in subsection (1)
is limited to loss suffered
(a) by the person or one of the persons for whose benefit and guidance he
intends to supply the information, or knows that the recipient intends to supply
it; and
(b) through reliance upon it in a transaction which he intends the informa-
tion to influence, or knows that the recipient so intends, or in a substantially
similar transaction.
(3) The liability of one who is under a public duty to give the information
extends to loss suffered by any of the class of persons for whose benefit the duty
is created, in any of the transactions in which it is intended to protect them.
194E.g., Stephens Indus., Inc. v. Raskins & Sells, 438 F.2d 357 (10th Cir. 1971)
(applying Colorado law); Investment Corp. v. Buchman, 208 So. 2d 291 (Fla. Dist. Ct.
App. 1968).
195 For a discussion of recent English developments in this area, see Goodhart, Liabil-
ity for Innocent But Negligent Misrepresentations, 74 Y= L.J. 286 (1964).
accountancy, the hypothetical situation posed at the beginning of this

section would be one of non-liability. The lender's reliance on the
architect's work was not prospectively known to the architect, and the
lender was not a member of that small class of possible plaintiffs pecu-
liarly dependent upon his work. 9" But in this area, the strict privity
limit is now almost nonexistent, 19 and new limits are emerging.
One of the many services that an architect provides is the super-
vision of construction projects. This is usually done after the architect
has designed the project and is normally a matter of assuring that the
contractors on the job conform to blueprints and specifications. Both
the designing and the supervision are contractual undertakings and
the scope of the duty to the employer is defined by the contract.
From these contractual undertakings courts have derived a duty
of due care to third parties the breach of which will give rise to a liabil-
ity on the part of the architect. The leading case of Miller v. DeWit 98
imposed liability on an architect for injuries to workmen on the job
based solely on his contractual duty to supervise the work. The court
reasoned that:
Privity of contract is not a prerequisite to liability. They [the
architects] were under a duty to exercise ordinary, reason-
able care, technical skill, and ability and diligence, as are
ordinarily required of architects, in the course of their plans,
inspections, and supervision during construction for the pro-
tection of any person who foreseeably and with reasonable ,
certainty might be injured by their failure to do so . . .99
196A possible example of such a class would be the family of the owner of the
house which relies on the architect to see that the house is safe. It is at least arguable that
even the lender is in such a small reliant class. Compare the lender's situation with note
204 infra & accompanying text.
Another basis of architects' liability to third persons could be strict liability for un-
reasonably dangerous products, as prescribed by REsTATEMENT (SEcom) oF ToRTS §
402A (1965). This theory of liability (phrased in terms of an implied warranty) was
held applicable to a builder in Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314
(1965), in which the court held that a builder would be liable for injuries caused by a
defectively designed hot water system, upon proof that the design was unreasonably
dangerous and proximately caused the injury in question. There seems little reason for
a different result, especially in view of the foregoing discussion of the professional stan-
dard of care above, if instead of designing the system itself, the defendant had employed
an architect or engineer for that purpose.
197 See generally Greenstone, Liability of Architects and Engineers for Negligent and
Defective Design and Construction, 1968 TRiAL TORt TRa s 136 (M. Belli ed.);
Witherspoon, When is an Architect Liable?, 48 A.B.A.J. 321 (1962); Note, 15 HAsT. L.J.
579 (1964).
19859 Ill. App. 2d 38, 208 N.E.2d 249 (1965), aff'd, 37 11. 2d 273, 226 N.E.2d 630
(1967). The employee, Miller, was injured when temporary shoring for the roof of a
building being remodeled collapsed under the weight of the roof. The defendant architect
had done the design work and had general supervision and control of the project, includ-
ing the right to halt the work in order to insure compliance with the plans and specifica-
tions, but had neither designed the shoring that collapsed nor approved its use. Extent of
liability was not an issue before the supreme court but it was discussed at some length
by the lower appellate court.
'99iMiller v. DeWitt, 59 Ill. App. 2d 38, 112, 208 N.E.2d 249, 284 (1965), aff'd, 37
Ill. 2d 273, 226 N.E.2d 630 (1967).
The same result has been reached in a suit by the user of a finished
building for injuries caused by an architect's negligent design defect in
remodeling the building 0 0 and where death resulted from the failure to
indicate the location of a buried power line on project plans20 l
The common holding of these cases is that an architect is under
a duty to use due care and skill in providing his various services and
that his duty is owed to all who may be foreseeably injured by his
negligence. This duty would generally extend to anyone legitimately
on the construction site or anyone legally using the finished building
or project. 20 2 Though the scope of the architect's employment is limited
by the contract with his employer, the scope of his duty to use due care
in carrying out his duties under the contract is defined by law.2" 3
An architect's liability for economic harm to third parties gen-
erally arises out of his supervisory activities. The typical situation is
that of State ex rel. National Surety Corp. v. Malvaney0 4 in which the
architect's duties included the certification of progress payments to
the contractor. The contractor defaulted on the job and the plaintiff
surety was required to finish it. The surety brought an action against
the architect for negligently certifying the progress payments. The
architect was bound by contract to the owner and the surety was obli-
gated to the owner for any defaults by the contractor.
Given these arrangements, any negligence on the part of the archi-
tect in certifying the progress payments was certain to result in damage
to the surety upon the contractor's default, a circumstance of which
the architect had constructive notice. The certification procedure was
as much for the benefit of the surety as for the benefit of the owner. 205
The court held that even though the parties were not in contractual
privity the entire scheme created a duty on the architect's part to the
surety to use due care in certifying payments.
200
See Montijo v. Swift, 219 CaL App. 2d 351, 33 Cal. Rptr. 133 (Dist. Ct. App.
1963).
20 1
See Mallow v. Tucker, Sadler & Bennett, Archs. & Engs., Inc., 245 Cal. App. 2d
700, 54 Cal. Rptr. 174 (Dist. Ct. App. 1966); accord, Geer v. Bennett, 237 So. 2d 311
(Fla. Dist. Ct. App. 1970); Inman v. Binghamton Housing Auth., 3 N.Y.2d 137, 143
N.E.2d 895, 164 N.Y.S.2d 699 (1957) (the court noted that the architect's liability for
personal injuries is based on principles developed in MacPherson v. Buick Motor Co., 217
N.Y. 382, 111 N.E. 1050 (1916)).
202 Cf. RESTATEIMT (SacoND) or ToPTS §§ 341, 341A, 342 (1965).
203 Contra, Reber v. Chandler High School Dist. No. 202, 13 Ariz. App. 133, 474 P.2d
852 (1970).
In our opinion these cases [Miller, Montijo, etc.] have disregarded fundamental
contractual principles in attempting to parlay general inspection or supervision
clauses which give the owner or architect a right to stop observed unsafe con-
struction processes into a duty which is neither consistent with generally accepted
usage nor contemplated by the contract or the parties.
Id. at 135-36, 474 P.2d at 854-55.
204 221 Miss. 190, 72 So. 2d 424 (1954).
205 Cf. Peerless Ins. Co. v. Cerny & Associates, Inc., 199 F. Supp. 951 (D. Minn.
1961); Westerhold v. Carroll, 419 S.W.2d 73 (Mo. 1967).
The liability of an architect for economic injury due to negligent

supervision thus is predicated on the certainty of harm to the plaintiff
resulting from the architect's negligence 0 6 The standard certainly is
more limited than foreseeability but less limited than privity and can
perhaps be characterized as one of reasonable certainty. Applying this
standard to the hypothetical situation given at the beginning of this
section, one basic question presents itself. Is the certainty of harm to
the lender resulting from the architect's negligence the same or greater
than the degree of certainty in Malvaney? The answer appears to be
that it is not, as the harm to the lender is dependent upon the owner's
failure to repay, which is itself unforeseeable and unrelated to the
architect's work. Thus liability would exist only when the economic
harm to the plaintiff is almost certain to result from the architect's
negligence because of the plaintiff's known (or constructively known)
reliance on the architect's work.
3. Attorneys
Liability of attorneys for negligence has been traditionally limited
to clients and parties for whose direct benefit a transaction was carried
out 20 7 (under third party beneficiary theory 208 ). These limits were shat-
tered several years ago, however, in Biakanja v. Irving.0° A notary
had acted as an attorney in preparing a will, and due to his negligence
the will was not properly witnessed 21 0 and was therefore denied probate.
The intended beneficiary under the invalid will sued the notary for her
lost legacy. The court, finding the notary negligent, enumerated the
following six criteria compelling plaintiff's recovery:
The determination whether in a specific case the defen-
dant will be held liable to a third person not in privity is a
matter of policy and involves the balancing of various factors,
among which are the extent to which the transaction was in-
20
6 See Aetna Ins. Co. v. Hellmuth, Obata & Kassabaum, Inc., 392 F.2d 472 (8th
Cir. 1968); Calandro Dev., Inc. v. R.M. Butler Contr., Inc., 249 So. 2d 254 (La. Ct. App.
1971) (supervising engineer).
207 On attorney's liability generally, see Averill, Attorney's Liability to Third Per-
sons for Negligent Malpractice, 2 LAND & WATER L. REV. 379 (1967); Meehan, Careless
Lawyers and Careworn Third Parties, 28 BRooxLsyN L. REV. 99 (1961); Wade, The At-
torney's Liability for Negligence, 12 VA=n. L. Rxv. 755 (1959); Comment, Attorney's
Negligence, 5 LiNcow L. R-v. 154 (1970); Note, Public Accountants and Attorneys:
Negligence and the Third Party, 47 Nor=a DAmm LAW. 588 (1972).
208 See, e.g., Lawrence v. Fox, 20 N.Y. 268 (1859). Third party beneficiary theory
could perhaps provide a remedy in contract in some of the attorney cases mentioned in
this section. See notes 209-14 infra. Also, recovery in Malvaney might have been possible
under this theory, although the holding was not based on it. But the remedy is usually
dependent upon the existence of a contract and upon the explicit or implicit intent of the
parties to benefit the third person. Hence, its application is far more limited than the tort
doctrines discussed and used here. See RasrATr 2= or CoNTRACTS §§ 133-47 (1932).
20949 Cal. 2d 647, 320 P.2d 16 (1958).
210 The notary failed to have the testator subscribe to the will in the presence of the
two witnesses required to sign the will in the testator's presence. See CAL. PROB. CODE
§ 50 (West 1956).
tended to affect the plaintiff, the foreseeability of harm to

him, the degree of certainty that the plaintiff suffered injury,
the closeness of the connection between the defendant's con-
duct and the injury suffered, the moral blame attached to the
defendant's
211
conduct, and the policy of preventing future
harm.
The court found that the goal of the transaction had been to transfer
the estate to the plaintiff and that this circumstance satisfied the first
four criteria. That the harm had been caused by the notary's unautho-
rized practice of law satisfied the last two. Using this standard of extent
of liability, actual attorneys have subsequently been found potentially
liable to beneficiaries under wills for alleged errors in their prepara-
tion. 12 Influential in the decision was the fact that a contrary conclu-
sion would have caused the innocent plaintiff to bear the loss.
Liability has also been found possible where the attorney, regu-
larly employed by a collection agency to collect debts, instituted a suit
that was dismissed for lack of diligent prosecution. The attorney's
negligence resulted in the loss to the plaintiff creditor of recovery on a
valid and collectible claim. 18 The Biakanja criteria were met as the
transaction in which the attorney's negligence occurred was intended
primarily for the benefit of the plaintiff, the harm to the plaintiff due
to negligence in prosecuting the action was certaintly foreseeable,
there was a direct connection between the defendant's negligence and
the plaintiff's injury, lack of diligence in prosecuting actions carries
some moral blame, and the policy of encouraging diligence in prosecut-
ing actions would be furthered by the imposition of liability in such a
situation.2 14
Thus, under the influence of Biakanja the extent of attorneys'
liability for negligence has expanded to include those whose injury due
to the attorney's negligence is foreseeable. Foreseeability is essentially
21149 Cal. 2d at 650, 320 P.2d at 19.
212
See Heyer v. Flaig, 70 Cal. 2d 223, 449 P.2d 161, 74 Cal. Rptr. 225 (1969);
Licata v. Spector, 26 Conn. Supp. 378, 225 A.2d 28 (C.P. Windham Co. 1966) ; cf. Robin-
son v. Colebrook Guar. Say. Bank, 109 N.H. 382, 254 A.2d 837 (1969) (holding the bank
to a duty to the plaintiff to correctly advise its depositor how to carry out the depositor's
wish that the plaintiff receive his savings account upon his death). Contra, Maneri v.
Amodeo, 38 Misc. 2d 190, 238 N.Y.S.2d 302 (Sup. Ct. Duchess Co. 1963).
213 Donald v. Garry, 19 Cal. App. 3d 769, 97 Cal. Rptr. 191 (Dist. Ct. App. 1971).
214Id. at 772, 97 Cal. Rptr. at 192. Alternatively the court based its holding on RE-
STATEMENT (SECOND) OF TORTS § 324A (1965) which provides:
Liability to Third Person for Negligent Performance of Undertaking
One who undertakes, gratuitously or for consideration, to render services
to another which he should recognize as necessary for the protection of a third
person or his things, is subject to liability to the third person for physical harm
resulting from his failure to exercise reasonable care to protect his undertaking,
if
(a) his failure to exercise reasonable care increases the risk of such harm, or
(b) he has undertaken to perform a duty owed by the other to the third
person, or
(c) the harm is suffered because of reliance of the other or third person
upon the undertaking.
knowing the names or existence of the people who would be injured by

any negligence,215 and an attorney cannot draw a will without knowing
who the intended beneficiaries will be or institute a suit for the collec-
tion of a debt without knowing of the creditor.
4. Surveyors
As with the professions discussed above, the scope of liability of
surveyors for negligence has expanded from the privity limitation in
the past few years.2 16 The farthest courts have gone in this area has
been to hold a surveyor liable to subsequent purchasers of property
nine years after the original erroneous survey.2 17 In reaching this result
the court considered the following factors important:
(1) An express, unrestricted, and wholly voluntary guarantee of
accuracy appearing on the face of the inaccurate plat;
(2) Defendant's knowledge that the plat would be used and relied
on by others than the person ordering it, including plaintiffs;
(3) The fact that potential liability was restricted to a compara-
tively small group, and that, ordinarily, only one member of that group
would suffer loss;
(4) The absence of proof that copies of a corrected plat prepared
by defendant when he discovered the inaccuracy one week after the
original survey were ever distributed;21 8
215 Liability has been extended considerably further under Biakanja in other areas.
See Barrera v. State Farm Mut. Auto. Ins. Co., 71 Cal. 2d 659, 456 P.2d 674, 79 Cal.
Rptr. 106 (1969) (insurer held to owe a duty to potential accident victims to investigate
automobile insurance applications within a reasonable amount of time); Connor v. Great
W. Say. & Loan Ass'n, 69 Cal. 2d 850, 447 P.2d 609, 73 Cal. Rptr. 369 (1968) (lender
held liable to purchasers of homes in a development it financed for failure to prevent
defective design and construction); State Farm Mut. Auto. Ins. Co. v. Wood, 25 Utah
2d 427, 483 P.2d 892 (1971) (following Barrera).
The foreseeability standard applied in these cases was considerably wider in scope
than that used in the attorney cases as the lender and insurer were said to owe a duty to
a general group rather than specific, known persons. Whether this difference is due to
inherent differences between professions and corporations or to the more limited re-
sources of an individual professional to meet a damage judgment is uncertain. But, in
discussing the imposition of new liability in these cases the courts seemed to disregard the
burdensome liability problem mentioned in the text. See text accompanying notes 166-74
supra.
216
See generally Comment, I LoYoLA U.LJ. 176 (1970); Comment, Pecuniary Lia-
bility to Third Parties for Negligent Misrepresentation, 64 Nw. U.L. Rav. 903 (1970);
Note, 37 TEam. L. Rav. 827 (1970).
217 Rozny v. Marnul, 43 Ill. 2d 54, 250 N.E.2d 656 (1969). In Rozny, a surveyor,
without knowing for whom his work was specifically intended, surveyed a lot, which was
subsequently sold by his employer to a builder. Three years after the survey, the builder
sold the lot and a house on it to the plaintiffs, who subsequently constructed further im-
provements on the property, relying on the original survey. Nine years after the original
survey, the inaccuracy was discovered.
218 The defendant testified at trial that he had no record or recollection of sending
a corrected survey to the person who had ordered the original, in accordance with his
regular procedure. Id. at 57, 250 N.E.2d at 658.
The surveyor's failure to send out the corrected survey is similar to the problem of
post-certification discovery of error and failure to appraise reliant parties of that dis-
covery in the area of accountants' liability. See Fischer v. Kletz, 266 F. Supp. 180
(S.D.N.Y. 1967); State St. Trust Co. v. Ernst, 278 N.Y. 104, 15 N.E.2d 416 (1938). See
(5) The undesirability of requiring an innocent reliant party to

bear the burden of a surveyor's professional mistakes;
(6) The impact that recovery here would have in promoting
cautionary techniques among surveyors. 219
The standard for determining extent of liability expressed by these
factors is apparently one of foreseeable reliance. The surveyor who
guarantees his work is liable to future purchasers or lenders who rely
on it.22 How far this standard can be applied beyond the facts of this
case is not clear. The relatively short time between the survey and the
plaintiff's purchase,22I the guarantee of accuracy, and the surveyor's
failure to send out the corrected survey are unique circumstances that
had some effect on the decision. The existence of a guarantee seems
critical. As the original negligence was at least as blameworthy as the
failure to send out the corrected survey, perhaps the lack of the second
negligent act in another case would not be critical. Then the standard
would be liability to those who will foreseeably rely on the guaranteed
work for some reasonable length of time after it is originally done.
Reasonableness here could take into account such factors as changes
in surveying techniques and the cost of resurveying for the reliant
party. A more recent case222 allowed recovery under the standard ad-
vanced by section 552 of the Restatement (Second) of Torts22 3 with
the court noting that the defendant had full knowledge of how his
work would be used and the plaintiff's intended reliance upon it. This
standard of liability is apparently one of known reliance, somewhat
more limited, however, than the one derived above.
5. Summary
The emerging limits of liability beyond strict privity outlined
above are generally controlled by the three policies of foreseeability,
reasonable reliance, and burdensome liability. The treatment and use
also note 147 supra for a discussion of an inference of fraud sometimes found in such
cases.
219 Rozny v. Marnul, 43 DlI. 2d 54, 67-68, 250 N.E.2d 656, 663 (1969).
220 Liability for reliance of a different type is also possible. In Craig v. Everett M.
Brooks Co., 351 Mass. 497, 222 N.E.2d 752 (1967), a surveyor was held potentially
liable to a contractor who relied to his foreseeable detriment upon stakes negligently
placed by the surveyor for the owner of the project.
221
But cf. Howell v. Betts, 211 Tenn. 134, 362 S.W.2d 924 (1962) (24 years elapsed
between the inaccurate survey and the plaintiff's reliance; the court held that too much
had elapsed for the plaintiff to recover).
time 222
Tartera v. Palumbo, 224 Tenn. 262, 453 S.W.2d 780 (1970).
223 (Tent. Draft No. 12, 1966) ; set forth in note 193 supra.
It is clear from comment h and illustrations following the Restatement section that
the liability envisioned is to a person or group (no matter how large) whose reliance
upon the incorrect information in a particular transaction was known or expected. Use
of the information by a person or group is not within the scope of liability if the use is
merely foreseeable as opposed to known or expected or if the particular transaction in
which the information is used is not the transaction for which it was intended, whether
the use of the information in that transaction was foreseeable or not. Thus, the standard
is somewhere between privity and reasonable foreseeability.
of these policy considerations, however, have not been uniform among

those jurisdictions that so far have extended liability, and seemingly
different meanings and limits stem from the same concepts. 24
For this
reason, it will be helpful to reexamine briefly the limits of liability just
outlined to see if any consistent results have been reached.
In all of the professions discussed above the twin policy concepts
of foreseeability and reasonable reliance have been used in extending
liability.225 The emerging limits of liability in three areas are generally
consistent. Accountants are liable for foreseeable harm to specific third
persons; architects are liable for economic injury when they know, or
should know, that their negligence will, with a reasonable certainty,
result in injury to third parties; and attorneys are liable for foreseeable
harm to known persons. In each of these situations the professional
has been held liable to a very limited group which varies with the
peculiar characteristics of the factual situation. The basic character-
istic of each group is that their reliance on the professional's work is
both expected and practically unavoidable 2 6 The developing standard
is, then, that in these three areas the professional is liable for negligence
only to those whose reliance is expected and practically unavoidable.
As noted before, use of this standard in the above hypothetical would
result in no liability.
The apparition of the burden of excessive liability has accounted
for the reluctance of many courts to extend liability even to these
modest limits. In the particular instance of accountants it defeated
attempts at imposing liability for negligence to unknown third per-
sons 227 and surely accounts for the stress courts place upon the fore-
seen factor in cases where liability is extended.2 In cases involving
the other professions, the courts have been careful to explain how an
extension of liability will not result in unduly excessive liability.2 9 A
particularly good example is presented by Westerkold v. Carrollv9 in
which the court discussed the two bases of the ancient holding in
224 Compare Lucas v. Hamm, 56 Cal. 2d 583, 364 P.2d 685, 15 Cal. Rptr. 821 (1961),
with Rozny v. Marnul, 43 "iI.2d 54, 250 N.E.2d 656 (1969).
225 See, e.g., Biakanja v. Irving, 49 Cal. 2d 647, 650, 320 P.2d 16, 19 (1952) (of the
6 factors set out as affecting the determination of liability, 4 are related to the fore-
seeability-reasonable reliance policies). See text accompanying note 211 supra.
226 This limit is practically that discussed in note 223 supra. Thus, at least for the
present time, RZSTATE NT (SEcoND) OP TORTS § 552 (Tent. Draft No. 12, 1966) could
be very
227
useful in persuading courts to accept this modest extension of liability.
See cases cited note 194 supra. See also Anthony v. Vaughan, 356 Mass. 673, 255
N.E.2d
2 28
602 (1970).
See Rhode Island Hosp. Trust Nat'l Bank v. Swartz, Bresenoff, Yavner &
Jacobs, 455 F.2d 847 (4th Cir. 1072); Rusch Factors, Inc. V. Levin, 284 F. Supp. 85
(D.R.I. 1968); Ryan v. Kanne, - Iowa -, 170 N.W.2d 399 (1969); Shatterproof Glass
Corp. v. James, 466 S.W.2d 873 (Tex. Civ. App. 1971).
229 See Lucas v. Hamm,56 Cal. 2d 583, 364 P.2d 685, 15 Cal. Rptr. 821 (1961);
Rozny v. Marnul, 43 Ill. 2d 54, 250 N.E.2d 656 (1969).
280 419 S.W.2d 73 (Mo. 1967).
Winterbottom v. Wright231 -economic burden and possible judicial

infringement of contract-and then carefully explained why its hold-
ing was not inconsistent with that case.
The scope of liability that has been applied to surveyors in at
least one case is somewhat wider than that explained above. The group
to whom a duty is owed consists generally of those who acquire a finan-
cial interest in the property for a reasonable length of time after it is
surveyed. This definitely can encompass a larger group than that de-
scribed above, as members of this group need not necessarily rely on
the surveyor's work and are certainly not expected to do so. But, the
applicability of this standard beyond the case where it developed is
questionable 2 and a better argument can probably be made for the
application of the narrower standard applied to the other three pro-
fessions above.2 8 The only circumstance in which one of the profes-
sions examined is held to a true foreseeability standard in most juris-
dictions is that of the architect whose work precipitates personal in-
juries. He is essentially liable to all those who could be foreseeably
injured because of his negligence in the design or supervision of a
project. This scope of liability is akin to that applied in common per-
sonal injury cases and is most likely an outgrowth of the principles
imposing liability without regard to privity for injuries resulting from
dangerous instrumentalities expressed in MacPhersonv. Buick Motor
Co. 3 4 rather than an expansion of the limits set in Ultramares.2 35
D. Statutes and the Scope of Professional Liability

An appreciation of the full scope, and the potential future scope,
of professional liability requires an examination of the impact of
statutory limits of liability. Legislatures may determine the extent of
liability, either by altering or codifying the common law. Liability to
third persons has been imposed, for example, under statutes such as
one in Kansas which requires the bonding and purchase by abstracters
of "error and omissions" insurance "for the payment . . . of any and
all actual damages that may be sustained or accrue to any person or
personsrelying [upon his work] by reason of . . . any error, deficiency
or mistake in any abstract or continuation thereof . . . . M Yet the
231 152 Eng. Rep. 402 (Ex. 1842).
232 Notes 220-21 supra & accompanying text.
238 See notes 222-23 supra & accompanying text.
234217 N.Y. 382, 111 N.E. 1050 (1916) (manufacturer of negligently made goods
held liable, irrespective of privity of contract, for injuries to the ultimate user caused
by the defect when the goods are likely to cause injury if negligently made and when
the ultimate user would not he likely to inspect the goods before use).
235 See, e.g., Inman v. Binghamton Housing Auth., 3 N.Y.2d 137, 143 N.E.2d 895,
164 N.Y.S.2d
236
699 (1957).
KAN. STAT. Asu. § 58-2802 (Supp. 1972) (emphasis added); see E.T. Arnold
& Co. v. Barner, 91 Kan. 768, 139 P. 404 (1914); Gate City Abstract Co. v. Post, 55
statutes most affecting professional liability, and which have been the
subject of much recent litigation,1 7 are those federal laws regulating
the issuance and sale of securities.
1. Federal Securities Acts
Consider the following hypothetical. Buying corporation B wishes
to acquire selling corporation S. B employs lawyer L to accomplish
this task. Lawyer L hires accountant A to audit S's operations, and on
the basis of that report the acquisition is completed. Subsequently, L,
using A's earlier evaluation of S corporation's financial status, prepares
the necessary registration statements, and B corporation issues shares
of stock to the public. Investor I buys some of the stock. Subsequently,
it is learned that A failed to discover substantial operating losses of S
corporation which cause B's bankruptcy and I's loss of fortune. I then
brings an action against L and A to recover his loss. Under the common
law rules discussed above,m8 the liability of lawyer L and accountant
A is quite doubtful. None of the information about S corporation sup-
plied to B corporation by L and A was intended to be relied upon by
I. But, as will be seen, this whole situation can be changed by statute. 9
Professionals have been held liable under four distinct provisions
of the federal securities laws: sections 11 and 17(a) of the Securities
Act of 1933,240 section 18 of the Securities and Exchange Act of 1934241
and section 10(b) of the latter act 242 with SEC regulation 10b-5
promulgated pursuant thereto.24 3 Of these, the last has ultimately proved
the most useful. These provisions of the securities legislation sweep
aside common law concepts of privity or reasonable foreseeability.
Their raison d'gtre is investor protection, 24 4 and it is from this perspec-
tive that the issue of professional liability has in general been ap-
proached.
Section 11 of the Securities Act of 1933 is a radical departure from
the common law in numerous aspects. It provides a statutory basis for
civil suit by "any person" acquiring a registered security 5 against
Neb. 742, 76 N.W. 471 (1898); Sackett v. Rose, 55 Okla. 398, 154 P. 1177 (1916); Gold-
berg v. Sisseton Loan & Title Co., 24 S.D. 49, 123 N.W. 266 (1909); W. PRossES, supra
note 2318, § 107, at 709.
7
See Ruder, Multiple Defendants in Securities Law Fraud Cases: Aiding and
Abetting, Conspiracy, In Pari Delicto, Indemnification, and Contribution, 120 U. PA. L.
Rnv.238597, 598 n.1 (1972).
See notes 225-26 supra & accompanying text.
239For the purpose of brevity, the following discussion of statutes will be limited to
the federal area, although the analysis itself is equally applicable to similarly worded
state statutes. See, e.g., CAL. CoRP. CODE §§ 25,000-04 (West Supp. 1972); Pennsylvania
Securities Act of 1972 (Pa. Legis. Serv. 924 (1973)).
240 15 U.S.C. §§ 77k, 77q (1970).
241
Id. § 78r.
242
1d. § 78j.
243 17 C.F.R. § 240.10b-5 (1972).
2 44
24515 U.S.C. § 77k(a) (1970).
"every person who signed the registration statement, ' 246 and "every
accountant, engineer, or appraiser, or any person whose profession
gives aiuthority to a statement made by him" who prepared or certified
any part of the statement or any report or valuation used in its prep-
aration.24 7 Section 11 has no requirement of scienter; nor are privity or
reliance necessary for a finding of third party liability. It is enough
that the statement be materially misleading. However, the provision's
effectiveness as a vehicle for recovery is limited to the purchasers of
newly registered securities, and it is of no benefit to an investor who
has otherwise made a bad investment in reliance on a negligently pre-
pared audit. He is relegated to the common law.248 Section 11 is appli-
cable only to registration statements filed with the Commission,2 49 and
does not pertain generally to all misleading statements in the securities
field. Thus not only is a commercial lender excluded from the ambit
of its coverage, but also one who purchases a security in reliance on an
annual report, press release, or other document not a registration state-
ment (when the registration statement is not materially misleading)
may not rely on section 11 as a basis of liability.""
Section 18 of the Securities and Exchange Act of 1934 is a less
effective instrument for dealing with professional misbehavior than is
either section 11 or the varied doctrines of the common law. Section
18(a) expressly provides a civil damage remedy to any reliant party
damaged by the purchase or sale of a security whose price is affected
by false and misleading statements of a material fact, contained in any
document filed with the Commission or any exchange, and made by
"any person."12 1' Its operation is not exclusively limited, however, to
registration statements. Thus section 18(a) is applicable in theory to
many more factual situations than section 11, which is limited to one
who buys a newly registered security. For example, both a purchaser
who bought a security in reliance upon a fraudulent annual report filed
with an exchange, and an owner who sold short in reliance on a mis-
leading press release may recover. Unfortunately, its operation is
limited to the purchase or sale of securities at an affected price; again
no protection is afforded the commercial lender.
Section 18(a) does require scienter, causation, and reliance to
maintain a cause of action. Thus, like the common law its effectiveness
is limited to fraud. The twin requisites of causation and reliance, and
a liberal good faith defense make section 18 of no new significance as
a vehicle for recovery against negligent professionals.
246Id. § 77k(a) (1).

24
7Id. § 77k(a)(4).
248 Cf. id. § 77p.
24
9Id. § 77k(a).
250
See Montague v. Electronic Corp., 76 F. Supp. 933 (S.D.N.Y. 1948).
25 15 U.S.C. § 78r(a) (1970).
Section 10(b) of the Securities and Exchange Act of 1934,...

providing criminal sanctions, with its operative rule 10b-5.5 has been
the most far reaching and effective provision of the securities laws in
dealing with professionals. Kardon v. National Gypsum Co. 25 4 early
found an implied civil remedy for violation. Although the Supreme
Court has never conclusively ruled on the issue, it has noted that "[i] t
is now established that a private right of action is implied under §
10(b).'255 Accountants, therefore, on numerous occasions have been
held to fall within the intended ambit of rule 10b- 2 56 The coverage
contemplated by the rule 10b-5 is broad and comprehensive, and has
been construed as such by the SEC25 and the courts. Its effectiveness
is not limited to statements filed with an exchange, but it proscribes
any device, scheme or artifice to defraud in connection with the pur-
chase or sale of securities which has been interpreted to apply to
assertions made "in8 a manner reasonably calculated to influence the
25
investing public.1
It seems that the decisive issue is whether the professional foresaw
or reasonably should have foreseen that his work would influence the
investing public. This approximates quite closely the full limits of
foreseeability rule which no court has yet been willing to impose under
the common law, and which may in fact be a real breakthrough in pro-
fessional liability. 259 Although neither the 1933 Act nor the 1934 Act is
2 52
1d. § 78j(b).
253 17 C.F.R. § 240.10b-5 (1972).
254 69 F. Supp. 512 (E.D. Pa. 1946). The court based its finding of civil liability on
the classic doctrine of negligence per se. Id. at 513. This doctrine allows a court to adopt
a statute or administrative regulation as the standard of conduct of a reasonable man
if (1) plaintiff is a member of the class of persons intended to be protected by the
statute or administrative regulation and (2) the interest invaded was intended to be
protected (3) against the harm that resulted (4) from the particular hazard. RESTATE-
MIENT (SEcoND) Or TORTS § 286 (1965). See also id. §§ 287-88C (1965); W. PROSSER,
supra note 18, § 36; Lowndes, Civil Liability Created by Criminal Legislation, 16 M-um.
L. Rav. 361 (1932); Morris, The Relation of Criminal Statutes to Tort Liability, 46
H v.L. Rav. 453 (1933); Thayer, Public Wrong and Private Action, 27 HARv. L. Rav.
317 (1914).
255 Superintendent of Ins. v. Bankers Life & Cas. Co., 404 U.S. 6, 13 n.9 (1971) ; cf.
J.i. Case Co. v. Borak, 377 U.S. 426 (1964).
The scope and coverage of the criminal section of the 1933 Act, § 17(a), 15 U.S.C.
§ 77q(a) (1970), though initially felt to be a basis only for injunctive relief and criminal
liability, see Landis, Liability Sections of Securities Act Authoritatively Discussed, 18
Am. ACCOUNTNr
T 330, 331 (1933), is probably coextensive with that of § 10(b) of the
1934 Act, and civil actions have been based upon the violation of this criminal statute
as well. See Barnes v. Peat, Marwick, Mitchell & Co., 69 Misc. 2d 1068, 332 N.Y.S.2d
281 (Sup. Ct. 1972).
256E.g., Fischer v. Kletz, 266 F. Supp. 180 (S.D.N.Y. 1967); H.L. Green Co. v.
Childree, 185 F. Supp. 95 (S.D.N.Y. 1960).
257 In re Cady, Roberts & Co., 40 S.E.C. 907, 910 (1961).
258 SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 862 (2d Cir. 1968), cert. denied,
394 U.S. 976 (1969).
259 This broad scope of liability is not accepted by all circuits. In Wessel v. Buhler,
437 F.2d 279 (9th Cir. 1971), prospectuses were prepared from accountants' statements
which were not themselves ever publicly disseminated, nor had any investor ever seen
the statements before the litigation began. The Ninth Circuit held that preparation of the
statements did not have a sufficient connection with the purchase or sale of securities
generally thought to protect commercial lenders, the definition of

((securities" in the two Acts is broad enough to include many trans-
actions normally thought of as loans, 20 with the exception of notes
which mature in nine months or less, which are specifically not covered
by the Acts. 2 1 Thus, while normal short-term commercial loans are
not covered by the Acts, the possibility is raised that notes of longer
duration may be within the scope of the statutes.26 2
The inclusion of civil liability in the two acts was intended to
achieve two goals. First, because criminal penalties are only partially
effective in the enforcement of such laws, civil liability was intended to
be a strong deterrent to their violation. Second, it was intended to pro-
vide a vehicle whereby injured investors could be repaid their losses," 3
a reason which partially explains why lenders are afforded no protec-
tion under the acts. These goals are essentially the same as those gen-
erally advanced as justification for common tort law.2 64
In imposing this broad civil liability, Congress was not creating a
new theory but was just redefining its scope to advance certain social
goals. Such an advance can also be made by courts, as in the case law
just discussed, and Congress is governed by the same policy considera-
tions as those affecting advances made by courts. 2 5 Hence, rather than
offering a new application of civil liability to accomplish new goals,
these statutes simply constitute an instance where the Congress, instead
of the courts, weighs the various considerations and decides whether or
not to impose liability to advance common goals. That Congress can
move more rapidly in the process because it is unrestrained by judicial
precedents is obvious, but the goals and guiding considerations are es-
sentially the same.
to establish a basis for liability. In thus reading rule 10b-5 narrowly, the court said,
"[w]e perceive no reason, consonant with the congressional purpose in enacting the
Securities and Exchange Act of 1934, thus to expand Rule lob-5 liability." Id. at 283.
In this jurisdiction the accountant A in the hypothetical would thus not be liable under
rule 10b-5.
260 15 U.S.C. §§ 77b(1), 78c(10) (1970).
261Id. §§ 77c(a) (3), 78c(lO).
262 See MacAndrews & Forbes Co. v. American Barmag Corp., 339 F. Supp. 1401
(D.S.C. 1972).
2 63
See SENATE Cor. ON BA=xo & CuRRENCY, FEDERAL SECUmrIES EXCHCANGE
ACT or 1934, S. REP. No. 792, 73d Cong., 2d Sess. 12-13 (1934); HOUSE CoMM. ON
INTERsTATE & FoREIGN Conmc, FEDERAL SuPERVISION orT RAFc I N _INVESTmENT
SECURITIES INTERSTATE CO MERCE, H.R. REP. No. 85, 73d Cong., Ist Sess. 9-10
(1933); Legislation, FederalRegulation of Securities: Some Problems of Civil Liability,
48 HAuv. L. REv. 107, 108 (1934); Comment, Civil Liability for Misstatements in Docu-
ments Filed Under Securities Act and Securities Exchange Act, 44 YALE L.J. 456, 457
(1935).
264See W. PRoSsER, supra note 18, §§ 1-6.
265 The considerations of both reliance and unduly burdensome liability affected
Congress' drafting of these statutes, especially the 1934 Act. See Comment, Civil Liability
for Misstatements in Documents Filed Under Securities Act and Securities Exchange Act,
44 YALE L.J. 456, 476-77 (1935), in which the author notes the insertion of reliance
requirements in the 1934 Act and suggests that congressional concern over paralyzing
business with excessive liability contributed to an easing of the Act's civil liability features
before it was finally passed.
2. Federal Immunity Statutes

A particularly interesting interplay between the common law,
statutes, and courts affects the scope of liability of professionals em-
ployed by the federal government-the statutory expansion of liability
to a party otherwise immune from suits at common law. Though the
authors of the Restatement disfavor immunities generally, 266 the United
States Government itself is immune from tort damage suits unless it
has given its consent through a legislative enactment to an action
against it.26 7 This immunity does not commonly extend to government
officials and employees, but it has been used to prevent suits against
some higher government officials.2 68 Without a legislative enactment,
lower government officials and government employees (professionals
most often fall into this group) are liable for their own acts in their
employment, while their employer, the Government, is not so liable.
Thus, without a legislative enactment, the victim of such negligence
has only the remedy of suit against the actual tortfeasor (who may be
judgment proof) or relief through a private bill.
Due to the unfairness to individuals with otherwise just claims
against the Government who could only get relief through private
bills, and the concomitant heavy burden on Congress caused by the
many private bills, 6 9 Congress enacted the Federal Tort Claims Act
in 19 4 6 .21° The heart of this enactment is section 2674 in which the
United States waives its immunity to tort actions so that it is liable
"respecting the provisions of this title [title 28] relating to tort claims,
in the same manner and to the same extent as a private individual
under like circumstances .... ,71
Through a combination of statutes and judicial holdings, federal
officers and employees are generally no longer subject to tort actions
in the areas where the United States has waived its immunity. This
is true for the following reasons. First, as the United States is always
financially solvent, and as a judgment in a suit or an administrative
adjustment of a claim against the United States bars a subsequent
action against the individual officer or employee, 2 a plaintiff will
almost invariably sue only the United States in a tort claim to which it
has waived immunity. Second, in two large classes of cases where a
plaintiff might choose to sue the individual officer or employee, that of
266 RESTATEMENT (SECOND) ox TORTS 59 (Tent. Draft No. 18, 1972) (Note to
Institute).
2 67
See W. PROSSER, supra note 18, § 131. A similar immunity extends to the states.
Id. 268
See McCord, Fault Without Liability: Immunity of Federal Employees, 1966
U. ILL.
2 69
L.F. 849, 851-52.
See Comment, The Federal Tort Claims Act, 56 YALE L.J. 534, 535 n.9 (1947).
2 0
7 Act of Aug. 2, 1946, ch. 753, §§ 401-24, 60 Stat. 842.
27128 U.S.C. § 2674 (1970).
2 72
Id. §§ 2672, 2676.
motor vehicle accidents and medical malpractice of Veterans Adminis-

tration employees, where the officer or employee is probably insured,
the remedy against the United States is exclusive of any action against
the individual officer or employee.- 3 And third, the Supreme Court has
held that the United States does not have a right of indemnity against
negligent employees whose negligence caused damage for which the
United States is held financially liable. 4
Governmental protection of its professionals, and governmental
liability for their acts, is not complete though. Judicial construction of
the statute has excluded negligent misrepresentation from its scope.
Specific exceptions to the general waiver of governmental immunity
are found in section 2680(h),271 this section has been interpreted by
the courts, possibly erroneously, to retain immunity from suits for
negligent misrepresentation.2 6 Thus government professionals are still
likely to be sued personally for the type of tort which they are most
278
likely to commit,277 the tort of negligent misrepresentation.
A further complication has developed with respect to medical
malpractice suits against Veterans Administration medical personnel.
As noted above, the remedy against the United States in these cases
is exclusive of any action against the individual at fault. The problem
has arisen as to whether this statute shrinks federal immunity so as to
make the United States subject to suit where the malpractice charged
is one of negligent misrepresentation. Two federal courts that have
2 73
Id. § 2679(b); 38 U.S.C. § 4116 (1970). See McCord, supra note 268, at 890-
918, with regard to the former section.
274 United States v. Gilman, 347 U.S. 507 (1954).
2 5
7 This section provides that immunity is not waived for "[alny claim arising out
of assault, battery, false imprisonment, false arrest, malicious prosecution, abuse of
process, libel, slander, misrepresentation, deceit, or interference with contract rights."
28 U.S.C.
27
§ 2680(h) (1970).
- 6See United States v. Neustadt, 366 U.S. 696 (1961).
The sparse legislative history of § 2680(h) suggests that the section was meant to
except from the waiver of immunity "a type of [tort] which would be difficult to make
a defense against, and which [is] easily exaggerated." Hearings on S. 2690 Before a
Subcomm. of the Senate Comm. on the Judiciary, 76th Cong., 3d Sess. 39 (1940). The
section was also once referred to as one which retains immunity for "deliberate torts."
HousE Comm. ox Thm JuDDicray, ToRT CLAius AGA NsT THE UN=zm STATEs, H.R. REP.
No. 2245, 77th Cong., 2d Sess. 10 (1942). These clues, along with the fact that the
section mostly lists intentional torts, leads to the conclusion that it was meant to retain
immunity only for intentional misrepresentation and not negligent misrepresentation. See
2 F. HARPER & F. JAMES, THE LAW OF ToRTS § 29.13, at 1655 (1956); Gelhorn &
Schenck, Tort Actions Against the Federal Government, 47 CoLUm. L. Rxv. 722, 730
(1947); Gottlieb, The FederalTort Claims Act-A Statutory Interpretation,35 GEo. L.J.
1, 49-50 (1947); Comment, The FederalTort Claims Act, 42 ILL. L. Rev. 344, 361 (1947).
277
An anomaly of liability has developed in this area of federal tort immunity. The
United States is liable for negligent misrepresentation in suits brought under admiralty
jurisdiction and is not liable for suits brought under normal civil jurisdiction. Compare
De Bardeleben Marine Corp. v. United States, 451 F.2d 140 (5th Cir. 1971), with
Vaughan v. United States, 259 F. Supp. 286 (N.D. Miss. 1966). See also Kommanvit-
tselskapet Harwi v. United States, 467 F.2d 456 (3d Cir. 1972), petition for cert. filed,
41 U.S.L.W. 3425 (US. Jan. 29, 1973) (finding liability in admiralty for negligent mis-
representation, but holding, on rehearing, that no causation or reliance had been proven).
27t8 See C. MoPars, supra note 168, at 256-83.
handled this problem have reached opposite results, one finding the
United States immune from suit and the other finding the United
States liable.1 This problem of statutory interpretation is of some
importance to the medical profession and should be resolved by the
courts as soon as possible.
E. Conclusion-Toward a Clearer Limit of Liability

The one clear point that emerges from the melange of cases dis-
cussed above is that the scope of professional liability for negligence is
in a state of flux. Some jurisdictions still cling to the old limits of liability
announced in Ultramares Corp. v. Touche, s° while others have dis-
carded the old ideas and developed their own criteria for determining
the extent of liability.2 81 As seen before,282 a new limit of foreseen
reliance is slowly emerging in the changing jurisdictions. But, this is
far short of the full foreseeability standard applied in tort law gen-
erally.
The social utility rationale underlying the decision in Ultra-
mares,288 while it may have been necessary and accurate in that day,
no longer should stand as an obstacle to the extension of professional
liability to the full limits of foreseeability. Many professionals are
now organized into large firms of national import and stature. 8 4 Pro-
fessionals generally are in a better risk bearer capacity than the inno-
cent reliant plaintiff who would otherwise bear the loss281 and usually
are in a better position to obtain insurance and spread the cost of law-
suits than are the potential plaintiffs.
To permit professionals to escape liability for negligent misstate-
ment is to ignore professional pretensions and the great reliance placed
by the public on them. Limiting their liability under even the modern
"foreseen reliance" standard ignores the trust placed in their work
by all of society. Even the liability imposed under the federal securities
statutes is too limited, as it unfairly protects only investors and not
other reliant groups. As stated by one commentator in discussing ac-
279 Compare Wright v. Doe, 347 F. Supp. 833 (M.D. Fla. 1972), wiuh Smith v.
DiCara, 329 F. Supp. 439 (E.D.N.Y. 1971).
280 255 N.Y. 170, 174 N.E. 441 (1931). See, e.g., Investment Corp. v. Buchman, 208
So. 2d 291 (Fla. Dist. Ct. App. 1968) (re-affirming Florida's adherence to Ultramares).
281 See, e.g., Biakanja v. Irving, 49 Cal. 2d 647, 320 P.2d 16 (1958), where the court
developed
2 82
its own standards of extent of liability without reference to Ultramares.
See notes 224-39 supra & accompanying text.
283 See text accompanying note 167 supra.
284 Recent legislative enactments now allow for professional incorporation. See, e.g.,
PA. STAT. Ax. tit. 18, §§ 2901-14 (Supp. 1972). One of the advantages of the profes-
sional corporation is that the other members of the corporation will not be held jointly
and severally liable for the torts of their associates, as is the case in a professional associa-
tion. Compare id. § 1609 with id. § 12,617 (1967).
285 Discussion of the theory of the better risk bearer appears in C. MORaIS, supra
note 168, at 16-17, 246-55. See also G. CALABREsI, TAE COST OF AccmDENs: A LEGAL AND
Ecowoinc ANALYsIs (1970).
countants, "[t] he legal duties of the auditor ought to be co-existensive

with his professional pretensions."2 6
Extending professionals' liability to the full limits of foresee-
ability certainly would be no radical departure from generally ac-
cepted tort principles. On the contrary, it would correct the present
anomaly. Such a development would close the gap between the law
of sales or products liability and that now governing negligent service.
Manufacturers ever since MacPkersonM have been exposed to an in-
creasing scope of liability with few if any debilitating effects. The fear
of burdening defendants with a crushing or indeterminate liability is
unfounded. The crushing liability was feared equally at the institution
of liability for negligent manufacture but has never materialized in that
theater." 8 There is no sufficient reason for distinguishing physical loss
from intangible economic harm. 8 9 The underlying rationale of protec-
tion to the innocent party is equally applicable to either.
The limit of professional liability thus advocated for both the
common law and statutes is one based on foreseeability-reasonable reli-
ance. The only problem with such a standard is that it is excessively
imprecise. Thus, it is necessary to give some indication of what factors
are relevant in applying the terms to real situations. Perhaps the most
important factor bearing on the reasonableness of reliance on a pro-
fessional's work should be whether a reliant party, not in privity, has
another reasonable method of obtaining the information produced
or the work done by the professional. Reliance on a map or chart is
certainly reasonable as the normal user cannot get the information sup-
plied by the map without incurring enormous expense compared with
the cost of the map. On the other hand, the reliance of a purchaser of
land on an abstract of the title done for a previous owner may not be
reasonable if the cost of having a new abstract done is insignificant
compared to the possible loss if the abstract was badly prepared. A
second factor should be the relationship between the relative costs of
reliance (cost to the professional of carrying liability insurance) and
of nonreliance (having the work done again).29 If it is generally
cheaper to insure against the possible loss than to always have work
done over, reliance would seem reasonable. If, on the other hand, it is
286 Bradley, Liability to Third Persons for Negligent Audit, 1966 J. Bus. L. 190, 196.
287
MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (1916). Cf. note
234 supra.
288 See Seavey, Mr. Jstice Cardozo and the Law of Torts, 39 CoLum. L. REv.
20, 24-27 (1939), 52 HIAv. L. Rav. 372, 376-79 (1939), 48 YA'n LJ. 390, 394-97 (1939).
289 According to Professor Morris, a loss in any case should lie where it falls unless
some affirmative public good will result from shifting it. C. Momus, supra note 168, at 9.
In both situations in the text, the imposition of the loss on the parties usually responsible
for the loss and most able to prevent future losses would result in the greatest public
good. Those parties are, of course, the manufacturers and the professionals.
290 This of course assumes that the reliant party has a choice of whether or not to
rely on the professional's work. If he does not have such a choice then the reliance would
be reasonable if it is also foreseeable.
cheaper to repeat work than to insure against mistakes, reliance would

be unreasonable. A third factor should be the way in which a profes-
sional presents his work to the public. If he presents it in a way that
tends to induce reliance by third parties, he should be held liable for
damage due to the reliance so induced. But, if he warns that it should
not be relied on, it should tend to show that reliance was unreasonable.
A fourth factor should be whether the techniques of the profession in-
volved have changed significantly between the time the work was done
and the time of reliance. No professional should be held liable for
damage due to obsolete work. Unfortunately the foreseeability standard
is essentially impossible of definition when the reliance factor is absent,
as in the negligently-drawn-will case.2 91 The only thing of practical
value that can be said is that the closeness of the relationship between
the professional's negligence and the plaintiff's harm is the essential
element of foreseeability.
The standard of extent of liability created is simply that a pro-
fessional is liable for harm due to his negligence to those who reason-
ably rely on his work or those who will be foreseeably injured through
reliance on his work. This, of course, is fleshed out by the factors
listed above for determining the meaning of these limits. Although
these limits are wide, they are not excessive in view of the complexity
of modern society and certainly do not impose unlimited liability. Also,
they create a scope of liability that is fair to both the professional who
can anticipate and insure against his liability and innocent third
parties who increasingly must rely on the professional's work.
IV. REmED S
"The charlatan and rogue may assume to heal the sick. The knave
and criminal may pose as a minister of justice. Such things cannot have
been intended, and will not be allowed." 29' Judge Cardozo thus aptly
expressed the frustration and indignation of those who relied upon
the expertise of a professional and suffered due to his negligence.
Although the doctrine of privity may serve to make redress difficult,29 3
the wronged individual generally has three avenues of satisfaction open
to him: a civil damage suit, a criminal action, and review before the ap-
propriate licensing or certification board. A summary of'each of these
remedies follows.
As these remedies serve varied purposes, they are generally not
exclusive of each other. Only the civil damage suit is compensatory,
but all of them to differing degrees involve punitive and deterrent ele-
ments. These latter two purposes are served both directly through tort
judgments, license suspensions, fines, and jail sentences, as well as in-
291 See, e.g., Lucas v. Hamm, 56 Cal. 2d 583, 364 P.2d 685, 15 Cal. Rptr. 821 (1961).
292 In re Rouss, 221 N.Y. 81, 91, 116 N.E. 782, 786 (1917) (Cardozo, J.).
293
,See text accompanying notes 146-47 supra.
directly through damage to the professionals' reputations and a con-

20 4
comitant loss of business.
A. Civil Damage Suits
A civil damage action may be brought against a negligent profes-
sional in either contract or tort,29 5 depending upon the circumstances of
the injury, the nature of the profession, and the relationship between
the professional and the injured party. Recovery in contract is limited
to those who are in privity of contract with the professional, or who
are third party beneficiaries of that contract. An excellent example of
the latter is a beneficiary under a will, who, although not in privity be-
cause the contract is between the testator and the attorney, is entitled
to recovery as a third party beneficiary of that contract.2 96
Conformance to the standard of the profession207 is considered to
be an implicit term of the contract between the professional and his
client.2 98 Thus if a professional does not act in a manner consistent
with the requisite standard of care, through his "failure, without justi-
fication, to perform all or any part of what is promised, '209 he has
breached his contract.3 00 Compensatory damages, sufficient to put the
plaintiff in as good a position as he would have been had the contract
been performed, are recoverable for a breach.30' Compensation for the
failure to act as promised is their purpose, and punitive damages are
not recoverable in an action in contract. 0 2 Any monetary recovery,
however, inherently involves a measure of both punishment and deter-
rence. The attendant publicity of a trial and consequent damage to the
reputation of the individual involved provide further deterrence.
Recovery of damages against a professional in tort may be pre-
294
See Memorandum of Points & Authorities in Support of Motion to Dismiss at 4,
SEC v. National Student Mktg. Corp., Civil No. 225-72, [1971-1972 Transfer Binder]
CCH FED. SEC. L. REP. ff 93,451 (D.D.C., filed Feb. 3, 1972).
We would hope that, in view of the injury to the reputation of [defendant
attorneys] caused by the filing of the complaint and the widespread publicity
given thereto, the SEC would [exercise restraint] in deciding whether to file a
new complaint ....
295For a discussion of the relation between and the relative advantages of the 2
actions, see W. PROSSER, supra note 18, § 92, at 619-22. "Generally speaking, the tort
remedy is likely to be more advantageous to the injured party in the greater number of
cases, if only because it will so often permit the recovery of greater damages." Id. § 92,
at 619.
290
See Lucas v. Hamm, 56 Cal. 2d 583, 364 P.2d 685, 15 Cal. Rptr. 821 (1961).
297 See text accompanying notes 64-110 supra.
298
See Lucas v. Hamn, 56 Cal. 2d 583, 364 P.2d 685, 15 Cal. Rptr. 821 (1961).
For an excellent discussion of this point, see Farnsworth, Implied Warranties of Quality
in Non-Sales Cases, 57 CoLum. L. Rv. 653 (1957); cf. RESTATEMENT (SEcoND) OF
TORTS
29 9
§ 299A (1965).
P_,STATEWMNT OF CONTRACTS § 314 (1932).
30 0
Id. § 312.
3o Id. § 329. The defendant, however, will not be charged with "harms that he
had no sufficient reason to foresee when he made the contract." Id. Explanatory Notes
§ 329, comment a at 504.
802 Id. § 342.
mised on either a common law negligence theory or negligence in the

violation of a statute." 3 An excellent example of statutes which affect
many professional groups may be found in the anti-fraud provisions
of the securities laws. 4 Courts have consistently implied a civil dam-
age remedy for the violation of these statutes. 30 5 As Judge Kirkpatrick
concluded in the first such case: "[t]he disregard of the command of
a statute is a wrongful act and a tort." 8 ' Although there was initially
some doubt, °7 more recent decisions have suggested that the right to
recompense for negligent as well as fraudulent behavior falls within
the ambit of these provisions.03 3
Recovery in a common law tort action against a professional is
limited either by the doctrine of privity or by some alternative formula-
tion of foreseeability or reasonable reliance. 0 9 Compensatory damages
are available, 1 ° and although punitive "damages are not given for
mere inadvertence," '1 1 they may be awarded at the jury's discretion if
the defendant's conduct was done "with a reckless indifference to the
interests of others."312
' Such factors as the character of the defendant's
act, the nature and extent of the harm to the plaintiff, and the wealth
of the defendant are properly considered in the assessment of punitive
damages. 13 They have been awarded in medical malpractice actions,
in one case against a doctor who ignored a patient's rectal hemorrhage
for over forty-eight hours,3 1 4 and in another case, against a doctor who
reassured a patient that there was no danger of addiction to the mor-
phine he had prescribed.31 5
Although the patent purpose of punitive damages is punishment,
they neither preclude a criminal conviction for the same act, nor are
they precluded by one. 1 ' They most effectively serve compensatory,
303 See C. Momus, supra note 168, at 179-85.
304 Securities Act of 1933 §§ 11, 17(a), 15 U.S.C.
§§ 77k, 77q(a) (1970); Securities
Exchange Act of 1934 § 18, 15 U.S.C. § 78r (1970); id. § 10(b), 15 U.S.C. § 78j(b)
(1970), and rule 10b-5, 17 C.F.R. § 240.10b-5 (1972), promulgated pursuant thereto.
305
See note 255 s-upra & accompanying text.
306 Kardon v. National Gypsum Co., 69 F. Supp. 512, 513 (E.D. Pa. 1946).
307
See Fischman v. Raytheon Mfg. Co., 188 F.2d 783 (2d Cir. 1951).
308 See, e.g., SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968), cert.
denied, 394 U.S. 976 (1969); Myzel v. Fields, 386 F.2d 718 (8th Cir. 1967); Ellis v.
Carter, 291 F.2d 270 (9th Cir. 1961).
309 See text accompanying notes 153-84 supra.
310 RESTATENMNT or TORTS §§ 901-03 (1939).
311 Id. § 908, comment b at 555.
312 1d. comment c at 557.
3 13
Id. § 908(2).
31
4 Rennewanz v. Dean, 114 Ore. 259, 229 P. 372 (1924).
315 Los Alamos Medical Center, Inc. v. Coe, 58 N.M. 686, 275 P.2d 175 (1954).
But see Gill v. Selling, 125 Ore. 587, 262 P. 812 (1928) (punitive damages denied to a
patient who came to a doctor's office to pick up the results of a test, and who was
mistaken for another and given a spine puncture test).
31
6RsTArTnT or TORTs § 908, comment a at 554 (1939).
19731 PROFESSIONAL NVEOLIGENCE
deterrent, and punitive functions, as the fears of crushing liability

in the profession today attests. 1 Punitive damages compensate the
outraged plaintiff for the expense of suit, and other elements of dam-
age not legally compensable.3 1" Plaintiffs are thus encouraged to seek
compensation in cases which might not otherwise merit the trouble or
expense of a lawsuit. 19
B. Criminal Sanctions
In addition to seeking damages from a negligent professional, an
injured party in certain circumstances may seek the intervention of
the strong arm of the criminal law.3 20 The effect of a criminal prosecu-
tion, whether or not a conviction be obtained, becomes especially
poignant when the "defendants have been men 3 21
of blameless lives and
respected members of a learned profession."
Physicians may be found guilty of manslaughter for "gross and
reckless negligence '' 22 or mere performance of their duties without due
caution and circumspection. 23 An extreme but illustrative example is
Commonwealth v. Pierce,124 in which a doctor had directed that a sick
woman's clothes be saturated with kerosene. The woman died as a
result of the treatment, and the doctor was convicted despite the ab-
sence of any bad faith or evil intent on his part. The case raises some
serious questions as to the extent to which a professional may experi-
ment with new techniques, or follow a minority school of thought, with-
out incurring liability for failure. 25 Generally the presence or absence
of a license to practice has been held to be irrelevant in the man-
317See text accompanying notes 1-7 supra.
Even in the absence of punitive damages, the amounts sought in damages may be
extremely high. Two examples of recent suits against large accounting firms demonstrate
the magnitude of the potential recoveries sought against professionals. Several insurance
companies recently filed a $10.27 million suit against a New York firm, see N.Y. Times,
Sept. 11, 1971, at 33, col. 7, and in another suit that was eventually settled out of court,
the Bank of America and 3 other banks sued Peat, Marwick, Mitchell & Co. for over
$6 million. Bank of America v. Peat, Marwick, Mitchell & Co., No. 42,748 (Super. Ct.
Marin Co., Cal. 1968) (settled).
818
See IV. PRossER, supra note 18, § 2, at 9-11.
819 See id. § 2, at 11; Morris, Punitive Damages in Tort Cases, 44 HeRv. L. REv.
1173 32(1931).
oSee Ruder, supra note 237. See generally Note, Federal Criminal and Administra-
tive Controls for Auditors: The Need for a Consistent Standard, 1969 WAsH. U.L.Q. 187.
The reader may find the conclusions drawn therein interesting to compare with those of
this Comment, although the focus is different.
321United States v. Simon, 425 F.2d 796, 799 (2d Cir. 1969) (Friendly, J.), cert.
denied, 397 U.S. 1006 (1970).
322 Commonwealth v. Pierce, 138 Mass. 165, 174 (1884). See generally Fletcher, The
Theory of Criminal Negligence: A Comparative Analysis, 119 U. PA. L. Rv.401 (1971).
32 3
See State v. Hardister, 38 Ark. 605 (1882); Hampton v. State, 50 Fla. 55, 39
So. 421 (1905); State v. Weiner, 41 N.J. 21, 194 A.2d 467 (1963).
324 138 Mass. 165 (1884).
325 For a discussion of this problem in the context of civil liabilities, see RSTATE-
MENT (SECOND) or TORTS § 299A, comment f at 75 (1965).
slaughter cases,8 26 although in some instances the absence of a license

has been held to be proper evidence of culpable negligence. 2
Although corporate insiders have been prime targets of criminal
prosecution in the past, 28 the criminal provisions of the federal secur-
ities laws 2 9 may have application to attorneys, accountants, appraisers,
engineers, and broker-dealers, who may be subjected to a maximum fine
of 10,000 dollars, and a maximum prison sentence of five years for
their professional misdeeds. 830
An example of accountants' criminal liability may be found in
United States v. Simon,3 31 in which fines totaling 17,000 dollars were
imposed on three defendants. The case is noteworthy for the inter-
action of accepted professional standards with the judgment of the
community as expressed by a jury. With but one exception the de-
fendants had conformed to generally accepted accounting principles,
but the court noted that:
Proof of compliance with generally accepted standards was
"evidence which may be very persuasive but not necessarily
conclusive that he acted in good faith, and that the332 facts as
certified were not materially false or misleading."
Simon also raises the possibility of the courts, through the application
of criminal sanctions, dictating the standards of the profession and
affording a very stern measure of deterrence to future negligent be-
326 See People v. Phillips, 270 Cal. App. 2d 381, 75 Cal. Rptr. 720 (Dist. Ct. App.
1969), cert. denied, 396 U.S. 1021 (1970); Gian-Cursio v. State, 180 So. 2d 396 (Fla.
App. 1965), cert. dismissed, 196 So. 2d 105 (Fla. 1966), cert. denied, 389 U.S. 819 (1967);
State v. Karsunky, 197 Wash. 87, 84 P.2d 390 (1938).
327 See State v. Catellier, 63 Wyo. 123, 179 P.2d 203 (1947).
828 See, e.g., Kopald-Quinn & Co. v. United States, 101 F.2d 628 (5th Cir.), cert.
denied, 307 U.S. 628 (1939); United States v. Baker, 291 F. Supp. 989 (S.D. Tex. 1968);
United States v. Custer Channel Wing Corp., 247 F. Supp. 481 (D. Md. 1965), cert.
denied, 389 U.S. 850 (1967). But see United States v. Simon, 425 F.2d 796 (2d Cir. 1969),
cert. denied, 397 U.S. 1006 (1970).
829 E.g., 15 U.S.C. §§ 77e, 77q, 77w, 78n, 78z (1970).
8 0
3 Id. See also Ur meR SECuorTms AcT § 409, providing maximum penalties of
3 years or $5000 or both. Section 410 of the act also provides civil sanctions. This act
has been influential in the drafting of other state "blue sky laws." See State v. Russell,
119 N.J. Super. 344, 291 A.2d 586 (App. Div. 1971).
881425 F.2d 796 (2d Cir. 1969), cert. denied, 397 U.S. 1006 (1970). A brief treat-
ment of the case will be found in Recent Cases, 23 VAin L. Rav. 809 (1970). The
district court opinion and the broader question of auditor's criminal and administrative
liability generally is discussed in Note, Federal Criminal and Administrative Controls
for Auditors: The Need for a Consistent Standard, 1969 WAsH. UL.Q. 187.
Other cases involving criminal sanctions against accountants are United States v.
Benjamin, 328 F.2d 854 (2d Cir.), cert. denied, 377 U.S. 953 (1964) (conviction);
United States v. Gitchell, 282 F.2d 681 (5th Cir. 1960) (acquittal on appeal); United
States v. White, 124 F.2d 181 (2d Cir. 1941) (conviction); United States v. Olen, 183
F. Supp. 212 (S.D.N.Y. 1960) (motion for a change of venue granted; disposition un-
known, although one of the defendants subsequently submitted his resignation from
further practice before the S.E.C. See Homer F. Kerlin, S.E.C. Acct. Series Rel. No.
105, 4 CCH FED. SEc. L. REP. 1172,127 (1966)).
332 425 F.2d at 805-06.
havior 33 Dicta in a civil case 34 points to much the same possibility of

external control of the standards of the accounting profession.
C. Professional Review
Almost all states have certification boards,.85 responsible for
the initial licensing of the professions and continuing review of com-
plaints of unethical conduct and unacceptably poor quality work. Al-
though much time is spent reviewing complaints about the moral and
ethical character of individuals,336 the boards also determine if chal-
lenged work meets professional standards. The New York statute, ap-
plicable to a broad spectrum of professions, is illustrative of the
remedial powers and sanctions possessed by such boards:
The penalties which may be imposed by the board of regents
on a present or former licensee found guilty of professional
misconduct . . . are: (1) censure and reprimand, (2) sus-
pension of license, (3) revocation of license, (4) annulment
of license or registration, and (5) limitation on registration
or issuance of any further license. The board of regents may
stay such penalties and place the licensee on probation and
may restore a license which has been revoked.3 3
The board has no power to order compensation to an injured party;
in effect its power is limited to revocation of the license or lesser vari-
ants thereof. The possible loss of one's means of livelihood, however,
should serve a significant deterrent function. This deterrence is prob-
ably quite ineffectual in cases of conduct in a nonprofessional capacity;
criminal sanctions have consistently failed to deter similar conduct.
3 33
See also Recent Cases, 23 VAND. L. REV. 809, 812 (1970).
334 1136 Tenants' Corp. v. Max Rothenberg & Co., 36 App. Div. 2d 804, 319 N.Y.S.2d
1007 (1971).
335See, e.g., ARiz. Rxv. STAT. AiN. §§ 32-101 to -109 (Supp. 1972) (creating a
board of technical registration with the authority to pass on applications and hear com-
plaints for architects, engineers, assayers, geologists, and surveyors); N.Y. EDuc. LAw
§§ 6500-15 (professions-general provisions), 6520 (medicine), 7200 (engineering and
land surveying), 7300 (architecture), 7400 (public accountancy), 7600 (psychology),
7880 (massage) (McKinney 1972); PA. STAT. ANN. tit. 63 (Supp. 1972) (all professions,
including architects, engineers, dentists, pharmacists, accountants, and real estate brokers);
WAsn. REv. CODE AN. ch. 2.48 (1961) (State Bar Act).
336 See, e.g., Fellner v. Bar As'n, 213 Md. 243, 131 A.2d 729 (1957) (attorney dis-
barred for habitual use of slugs in parking meters); In re Welansky, 319 Mass. 205, 65
NXE.2d 202 (1946) (attorney disbarred for manslaughter); In re Wesler, 1 N.J. 573, 64
A.2d 880 (1949) (carnal abuse); Palmer v. Spaulding, 299 N.Y. 368, 87 N.E.2d 301
(1949) (doctor's license suspended due to his addiction to narcotics); Weinreb v. Beier,
294 N.Y. 628, 64 N.E.2d 175 (1945) (dentist's license revoked for first degree assault) ;
In re Dubinsky, 256 App. Div. 102, 7 N.Y.S.2d 387 (1938) (attorney disbarred for
passing bad checks). For a more complete discussion of disbarment for unprofessional
conduct in a non-professional capacity, see Note, 43 CoRNTEL L.Q. 489 (1958), noting
that private vices are generally not sufficient grounds for disbarment, but when public
become sufficient, because of the public notoriety and resultant adverse reflection on the
profession as a whole.
37
3 N.Y. EDuc. LAw § 6511 (McKinney 1972).
In such cases protection of the reputation of the entire profession

should be the guiding rationale. But the sanctions possessed by the
regents are admirably designed to protect the public from negligence,
through deterrence and removal of the offender from a position in
which he can cause harm.
The New York statute also provides an elaborate prehearing pro-
cedure by the professional committee on conduct for the particular
profession,338 and a review of the regents' decision by the appellate
division of the supreme court.3 89 The burden of proof in these pro-
ceedings, despite their quasi-criminal nature, 40 is not the criminal
burden of "beyond a reasonable doubt," but rather one of "substantial
legal evidence." '41 Thus, an acquittal in a criminal prosecution has
been held to be not determinative of the result in a license revocation
proceeding. 42 The determination of the board of regents will generally
be left untouched on appeal to the courts, unless it is not supported by
substantial evidence." Likewise the punishment meted out will re-
main undisturbed unless so disproportionate to the conduct involved
as to be shocking to one's sense of fairness. 44 The board of regents
is thus afforded a fair measure of independence in setting standards
and determining policy.
Delicensing eliminates the offender from a position in which he
can cause harm, and additionally serves by public example to warn
other members of the profession. If it is fully utilized by the public,
it ought to be a means of weeding out the misfits. In addressing the
question of disbarment, the Arizona Supreme Court has opined, how-
ever, that the proper policy should be "[t]he protection of the public,
not the punishment of the attorney guilty of unprofessional conduct
. ,,345 Thus traditionally neither punishment nor compensation of
the injured party, but only prospective protection, has been viewed as
a proper part of the delicensing function served by review boards.
This is quite consistent with the lesser burden of proof necessary in de-
licensing proceedings. 46
338
The regents are directed to appoint a board for each profession within their
jurisdiction, as well as a committee or committees on professional conduct within each
board. Id. § 6508(1).
339d. § 6510.
340See In re Ruffalo, 390 U.S. 544, 551 (1968) (denominating disbarment as
"adversary proceedings of a quasi-criminal nature," and holding any attorney charged
with disbarment or misconduct entitled to due process, including notice).
841 N.Y. EDuc. LAW § 6510(2) (b) (McKinney 1972).
342
Strizak v. Board of Regents, 29 App. Div. 2d 1013, 289 N.Y.S.2d 481 (1968).
343E.g., Corwin v. Nyquist, 37 App. Div. 2d 656, 322 N.Y.S.2d 405 (1971).
844E.g., Shander v. Allen, 28 App. Div. 2d 1150, 284 N.Y.S.2d 142 (1967).
345 In re Tanner, 107 Ariz. 534, 535, 490 P.2d 6, 7 (1971) (quoting In re Russel,
57 Ariz. 395, 406, 114 P.2d 241, 245 (1941)) (attorney was consistently negligent in
handling his clients' affairs, while running his practice from the phone and premises of
a cocktail lounge and a used car dealership).
346 See text accompanying note 341 supra.
Another delicensing remedy is disqualification from practice before

a federal agency, which may in turn result in the revocation of the
practitioner's license. The SEC, for example, may suspend or per-
manently withdraw the privilege of appearing or practicing before it
from such professionals as attorneys, accountants, or engineers. 4 7 Dis-
ciplinary hearings to disqualify professionals from practice are usually
held in private, 4 8 and only those of great public interest, involving
gross violations, are reported.3 40 The threat of this sanction can exert
considerably leverage on the improvement of standards within the
profession and influence individuals to practice a greater degree of
care. Imposition of this sanction can have more drastic impact; in
Pennsylvania, for example, disqualification from practice before the
SEC is grounds for the revocation of an accountant's state license."'
Conversely, no disbarred attorney and no accountant, engineer, or
"other expert" whose license has been suspended or revoked else-
where, may practice before the SEC.- 5'
The internal apparatus for review of the bar is distinct from that
of other professions, as the courts have inherent common law jurisdic-
tion over attorneys as officers of the court."' In many states and juris-
dictions, either by statute or rule, the bar association or a committee
of censors has quasi-official powers, sometimes as a supplement to the
courts' police powers. 3 A North Carolina statute, for example, which
expressly directs the nature of the discipline and disbarment pro-
ceedings, also provides that "[n]othing contained in this article shall
be construed as disabling or abridging the inherent powers of the court
to deal with its attorneys."35' 4 The fact that judges are attorneys means
that the legal profession is effectively isolated from outside review.
The isolation of lawyers from effective external control has had
disastrous effects on disciplinary enforcement, and has contributed
to widespread public dissatisfaction with the entire profession. The
ABA Special Committee on Evaluation of Disciplinary Enforcement
has termed lawyers' self-discipline a "scandalous situation that re-
quires the immediate attention of the profession."3'55 Most attorneys
34717 C.F.R. § 201,2(e) (1972).
34 8
1d. § (e) (7).
349 See, e.g., In re Kessler, SEC Acct. Series Rel. No. 129, 4 CCH FED. SEC. L. REP.
1172,151 (Sept. 26, 1972); In re Weiner, SEC Acct. Series Rel. No. 110, 4 CCH FED.
SEc. L. REP. ff 72,132 (1968); In re Aronowitz, SEC Acct. Series Rel. No. 109, 4 CCH
FED. SEc. L. REP. 1 72,131 (1967).
35
oSee PA. STAT. ANN. tit. 63, § 9.9(a) (1968).
35117 C.F.R. § 201.2(e)(2) (1972).
3 52
See, e.g., In re Tracy, 197 Minn. 35, 266 N.W. 88 (1936).
353 See, e.g., ARIz. REV. STAT. ANN. §§ 32-201 to -275 (1956 & Supp. 1971); N.C.
GEN. STAT. §§ 84-28 to -36 (1965), as amended (Supp. 1972); WAsH. REv. CODE Am.
§ 2.48.230 (1961) (specifically adopting the ABA code of ethics); P=A. C.P.R. 200(c),
(d), as amended, 1970.
354 N.C. GEN. STAT. § 84-36 (1965).
3 55
!AzIcAN BAR AssocIATioN SrEcmr CO MUITTEE ON EVALuATION or D.scimw-
are unwilling to report unethical or negligent conduct of those with

whom they are professionally and socially well acquainted.3 56 The
situation is analogous to the "conspiracy of silence" of doctors in their
malpractice cases."' As the ABA Special Committee found,
the public dissatisfaction with the bar and the courts is
much more intense than is generally believed within the pro-
fession. The supreme court of one state recently withdrew
disciplinary jurisdiction from the bar and placed it in a state-
wide disciplinary
3 58
board of seven members, two of whom are
laymen.
The addition of nonprofessionals into the disciplinary process can
help to give more weight to the public's interest in this review process.
Hopefully this move portends a trend not only within the legal pro-
fession but among all the professions which suffer from public distrust
of the self-disciplinary process.
Signs of dissatisfaction with traditional procedures in medical mal-
practice cases have also been mounting. Several local medical associa-
tions have organized medical review committees to hear charges of
malpractice.3 5 9 These are doctor-staffed panels that report only to the
defendant, recommending an equitable settlement. They do not call
witnesses. These panels, while possibly helpful in maintaining the good
reputation of the unjustly accused, are unresponsive to the central
problem. Understandably, these attempts have met with little apprecia-
tion from the public. They are simply another form of professional
self-discipline.
Alternative attempts to improve the quality and speed of the
liability determination process seem more promising. The Pima County
(Arizona) screening plan"6 ° employs a panel of nine doctors and nine
attorneys who hold an informal hearing with witnesses, full evidence,
and disclosure. Referral to the panel is voluntary by the plaintiff's at-
torney. A negative recommendation from the panel implies that the
attorney should drop the suit; and an affirmative finding is accom-
panied by a promise to provide expert testimony at trial. The Califor-
nia Plan Advisory Panel,3 6' which is in use in several major California
cities, provides a list of qualified physicians willing to serve on a
panel. The claimant's attorney selects one, who becomes his medical
ARY ENFORCEMENT, PROBLEMS AND RECOwmENDATIONS I DISCIPLINARY ENWORCEMENT
1 (Final Draft 1970).
35
6 Id. 1, 2.
357 See, e.g., Comment, Medical Malpractice-Expert Testimony, 60 Nw. U.L. REv.
834, 834-37 (1966).
358 AimcAxc BAR AssocTATioN SS~cxA CoMIaTTEE oN EVAL ATION OF DlsCnmw-
ARE ENFORCEMENT, supra note 355, at 2.
359See J. WALTz & F. INBA'u, MEDICAL JURISPRUDENCE 83 (1971).
360 See id. 83-84.
3 61
See id. 84-85.
advisor. This doctor submits a written report to the attorney after

examining the patient or his medical records. If the attorney is dis-
satisfied, he may obtain another doctor from the panel, but his doing
so waives the confidentiality of the first doctor's report, which may
then be used to discredit the second, more favorable report at trial. If
only a single doctor is selected, he must testify at trial on behalf of the
plaintiff, if called to do so. The system has been fairly well received
and is reported to be a success in making "physicians less reluctant to
testify on behalf of plaintiffs in malpractice actions. 3 62
Both of these plans should improve the speed and size of recovery,
through the strengthening of meritorious cases and the pressure of
contradictory testimony to drop unfounded claims.3 Although the
pressure of peer group censure of gross offenders is present in both
plans, they are primarily aimed at improving the monetary recovery
of a legitimate claim. Neither plan is a very radical departure from the
traditional approach; both are premised upon the use of the judicial
process. However, they should serve to improve the quality of that
process as well as the public image of the medical profession. The Pima
plan has the additional advantage of including nonmembers of the
profession on the panel, whose objectivity will help to instill public
confidence in the plan. At the same time it is responsive to the oft-
heard cry that only members of a profession are qualified to pass judg-
ment on each other.
Yet given this cry, it is interesting to note that the AMA's clinical
convention vehemently opposed the Professional Standards Review
Organization set up by the 1972 amendments to the Social Security
Act.'" The organizations consist of committees of doctors responsible
for settling medicare disputes. Such irresponsibility and inconsistency
on the part of a profession in claiming that it alone is competent to
discipline its members and to set its own standards, while rejecting
such responsibility when it is offered, can well lead to the imposition of
external control either by the courts or by civilian review boards. The
lesson of police abuse of power and the development of civilian review
boards is apposite. 65
An attack on accountants has been progressing also. The Wall
Street Journal recently reported that "the New York Stock Exchange
plans to tighten its examination of accounting practices and financial
reporting . . . 66 The Exchange expressed concern to the profes-
62
0 Id.85.
363 Comment, supra note 357, at 843-44.
364
The Evening Bulletin (Philadelphia), Nov. 28, 1972, at 15, col. 1. See Act of
Oct. 30, 1972, Pub. L. No. 92-603, § 249F, 86 Stat. 1329.
s65 See Aas mcaw Civ LIBERTIES UNION, BEmaEy REPORT: PoLIcE PEasoiwm
Co~iaAnms ArD REDREss REnias 43-46 (1970); Z. GRoss & A. RErrm", PoLIcE
PowRE An CTIZEN'S RIGnTS (1966); A. REIsS, TE POLICE AND =E PuBLIc 187-97
(1971).
366 Wall St. J., Aug. 15, 1972, at 2, col 3.
sional rulemaking body of accounting, the American Institute of Certi-

fied Public Accountants, that its scrutiny had not been sufficient. The
Exchange, a large consumer of accounting services, therefore planned
to add two watchdog CPA's to its department of stock list. Consumer
monitoring of a profession through a hired staff of members of the
profession has potential for other professions as well. Blue Cross, for
example, a medical-services consumer of great size and potential lever-
age, could monitor physicians with a board of well-known and highly
respected physicians. The functions of consumer watchdog groups
could be not unlike those of the certification boards, but they would
have the added advantage of being able to scrutinize closely the pro-
fessionals, without waiting for negligence complaints to be filed. Per-
haps it is in the direction of preventive supervision that efforts at
reform, at least in some quarters, might most profitably be made.
D. Summary
Although many remedies are presently available to one injured
by a professional's negligence, all are unresponsive in some way to
the needs of the injured party or to the distinctive position of the
professional in society. The traditional approach, a civil damage suit,
compensates the injured individual, but the availability of malpractice
insurance has significantly reduced its punitive and deterrent value.
No future protection is offered; the offender may remain in practice,
subjecting the public to the possibility of recurrent negligence.
Criminal prosecution is peculiarly unsuited for dealing with negligent
professionals; it often has too destructive an effect on the reputation
of the defendant. A good reputation, while valuable to anyone, is vital
to the professional, who generally is prohibited from advertising, 0 7 and
must rely solely on his good name and public trust for his livelihood.
Additionally, the attendant notoriety of a prosecution may unfairly
malign the image of the entire profession. Despite these harsh burdens,
the plaintiff remains uncompensated.
A revised form of certification or professional review would be
the most viable alternative. But that also, at this time, leaves the plain-
tiff uncompensated. Certification boards also presently spend most of
their time and resources investigating complaints of moral and ethical
character. Yet it is precisely because the public notoriety attendant
to ethically nonprofessional-and not merely negligently nonprofes-
sional-conduct may stigmatize the entire profession, that the pro-
fessions are most inclined to police morals instead of quality. If cer-
tification boards were given the power of compensation, they could
become the ideal vehicle for dealing with professional negligence.1 8
867 See, e.g., ABA CODE, supra note 111, DR 2-101, -102; AiasxCAN INSTITUTE OP
CERT=D PUBLIC ACCOUNTANTS, CODE OF PROFESSIONAL ETITICS art. 3 (1967).
368 Such a power, however, may be conferred constitutionally on an administrative
They could compensate the plaintiff more quickly, efficiently, and eco-
nomically than the courts with their crowded dockets now doY69
Professionals and nonprofessionals should be utilized in the review
procedure, safeguarding all interests. Delicensing would protect the
public from future occurrences by removal of the offender, and by
serving as a warning to others.
V. CONCLUSION
A brief overview of professional negligence law reveals that we are
dealing with a class-the professions-whose membership is defined
more by history than by logic. Those who practice in a profession are
measured by a standard of care that differs from the layman's standard
only when matters of judgment are involved; the professional's judg-
ment is measured by the professional community norm. When the
professional's conduct falls short of this standard, he is liable for the
resulting damage to his client, and in an increasing number of jurisdic-
tions, to an increasingly larger class of third parties whose reliance on
the professional and whose resulting injury were foreseeable. The ag-
grieved client or third party has to seek his remedy primarily in civil
litigation, facing often insurmountable problems of proof in complex
areas of professional expertise. The profession too has an interest in
remedying the errors of its members and also in preventing future harm
to the profession's reputation; its recourse is to professional review of
its errant members, and promulgation of standards to prevent future
mistakes.
This survey of the present status of the professional negligence
field shows the foundation upon which future developments will be
premised. First, because the very concept of professional is an his-
torical one, the class of professions is subject to continuing expansion,
as more occupations seek the prestige associated with professional
status. Doubtless this expansion will alter the meaning of the concept,
and focus greater attention on the legal consequences of achieving pro-
agency only if the authorized fines may be characterized as "cvil" rather than "criminal."
An administrative agency can never be given the power "to determine guilt or innocence
in criminal cases," because under the federal Constitution, "the criminal defendant is en-
titled to special procedural protection of the kind that is given neither in civil proceedings
in court nor in administrative proceedings." 1 K. DAVIS, ADMTINISTRATIVE LAW TreATISE
§ 2.13, at 133 (1958). A fine is civil if it is "compensatory" rather than "punitive." See
Helvering v. Mitchell, 303 U.S. 391 (1938). If the fines are ultimately paid to an injured
complainant, they are deemed civil. Cf. Southern Ry. v. Melton, 133 Ga. 277, 65 S.E. 665
(1909).
a69See generally A.L. LEvIN &E. WooLLE , DISPATCH AmD DELAY: A FIELD STUDY
or JuDIcIAL ADMnInSTRATION n PzNNsYLv = 65-70 (1961).
A recent study of state court delay in personal injury tort cases tried to a jury re-
veals, for example, in the Philadelphia Court of Common Pleas during 1972 (1st 4
months), an average delay of 49.6 months from ready date to trial; in San Francisco,
38.6 months answer to trial, 31.2 months ready date to trial; in Chicago 58.0 months be-
tween the date of filing to trial. Institute of Judicial Administration, State Trial Courts
of General Jurisdiction: Personal Injury Jury Cases: Calendar Status Study-1972 (Aug.
1, 1972).
690 UNIVERSITY OF PENNSYLVANIA LAW REVIEW
fessional status. At the same time, the increasing complexity of the

subject matter a professional deals with will exacerbate already existing
proof problems in malpractice litigation.
The privity limitation on the scope of professional negligence is
increasingly being eroded-a recognition that the limits of privity do
not correspond to the actual limits of society's reliance upon the pro-
fessional and the need to remedy the harm that professional negligence
can cause. In its place should be the same limit of liability that governs
other areas of negligence law; no sound reason exists for discriminating
against the victims of professional negligence.
With the expansion of the scope of professional liability will come
increased litigation-litigation that places increasingly burdensome
costs on the individual practitioner, puts injured parties through a
formidable obstacle course, and taxes a court system whose dockets
are already overloaded. Malpractice insurance will of necessity be
utilized to spread the practitioner's risks throughout the profession.
But as insurance costs escalate, it begins to appear that the existing
insurance-civil litigation system is inadequate.
Efforts to reform the present scheme of professional accountability
should focus, then, on reducing the social and economic costs of pro-
fessional negligence. Closer, ongoing scrutiny of professional compe-
tence, weeding out those whose shoddy work casts a shadow on the
entire profession, should be of greater concern to the organized profes-
sion. Certification or professional review procedures, including review
boards with the power to compensate complainants, should provide a
viable alternative to lawsuits. Where the judicial route is the only
available path, plans that simplify the presentation of expert testi-
mony and discourage insubstantial claims can reduce the overall costs
of litigation.
Those courts that have resisted the expansion of professional li-
ability have correctly recognized the potential economic dislocation
that accompanies tort litigation. But the answer to this concern should
not be in effect to allow a subsidy of individual negligent practitioners
at the expense of injured clients or third parties. Placing the burden on
the professional, and consequently through insurance rates to the
entire profession, may be the most effective catalyst for replacing the
presently ineffective tort liability system with a scheme that is more
responsive to the interests of the professional and those who rely on
his services.

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COMMENT

duty owed? Do accountants owe a duty to persons other than the

I. PROFESSIONS: PRELIhINARY OBSERVATIONS

The concept of a professional for tort purposes is an elusive one.

training, and the continued use of intellect, discretion, and judgment,

which constitute "that special form of competence which is not part

171d. comment a at 73.

a professional is not an insurer of his work,2 8 there is a special quality

members. "Skilled trades" may become "professions." For example,

II. THE PROFESSIONAL STANDARD

Virtually identical phrasing has been used to express the professional 48

46See, e.g., Gambert v. Hart, 44 Cal. 542, 552 (1872).

an apparent understanding that a professional made no claim to be

professional by community standards is speculative; however, courts

Professionals who err in mechanical functions will not find protec-

practice in actions which he undertakes to bring," an ancient New

in different states differ diametrically upon the conclusions which fol-

an attorney could not be charged with a want of professional skill. A

A final example of a well-known decision on attorney liability

Although there may be some connection between the com-

have perceived the differences between mechanical and judgmental

C. Setting the Standards

an errant practitioner must look to experts to discern the proper stan-

In the securities field, Congress' special interest in protecting the

Hirliman,12 2 accepted extremely low-grade accounting practices; re-

tified Public Accountants often publishes new Statements on Auditing

3. Standards Set by the Professional

by lavish promises, a warranty of success may be implied 33 This

Broyles v. Brown Engineering Co.143 pointed out the essential inap-

III. THE SCOPE OF PROFESSIONAL LIABLITY

143 275 Ala. 35, 151 So. 2d 767 (1963).

lions to their detriment, regardless of their actual relationship with

If liability for negligence exists [without privity], a thought-

deal with the problem is Presidentand Directorsof Georgetown College

affected the rejection of charitable immunity will become increasingly

This general line of expansion of liability has been adopted in

accountancy, the hypothetical situation posed at the beginning of this

The liability of an architect for economic injury due to negligent

tended to affect the plaintiff, the foreseeability of harm to

knowing the names or existence of the people who would be injured by

(5) The undesirability of requiring an innocent reliant party to

of these policy considerations, however, have not been uniform among

Winterbottom v. Wright231 -economic burden and possible judicial

D. Statutes and the Scope of Professional Liability

246Id. § 77k(a) (1).

Section 10(b) of the Securities and Exchange Act of 1934,...

generally thought to protect commercial lenders, the definition of

2. Federal Immunity Statutes

motor vehicle accidents and medical malpractice of Veterans Adminis-

E. Conclusion-Toward a Clearer Limit of Liability

countants, "[t] he legal duties of the auditor ought to be co-existensive

cheaper to repeat work than to insure against mistakes, reliance would

directly through damage to the professionals' reputations and a con-

mised on either a common law negligence theory or negligence in the

deterrent, and punitive functions, as the fears of crushing liability