In Goodman v. Kennedy (1976) 18 Cal.3d 335, the plaintiffs sought damages from the defendant, an attorney, for losses they incurred on shares of stock purchased from the defendant's clients. They alleged that the defendant negligently advised his clients that the shares could be issued to them as stock dividends and sold to third persons without jeopardizing the exemption from the requirement of registering the corporation's stock under the Securities Act of 1933. The alleged result of the purchase was an order by the Securities and Exchange Commission suspending the exemption with consequent loss of the stock's value, to the plaintiffs' damage. The court affirmed the judgment of dismissal entered following the sustaining of a general demurrer to the complaint without leave to amend. At page 344 the court stated, "To make an attorney liable for negligent confidential advice not only to the client who enters into a transaction in reliance upon the advice but also to the other parties to the transaction with whom the client deals at arm's length would inject undesirable self-protective reservations into the attorney's counselling role. The attorney's preoccupation or concern with the possibility of claims based on mere negligence (as distinct from fraud or malice) by any with whom his client might deal 'would prevent him from devoting his entire energies to his client's interests' . . . . The result would be both an 'undue burden on the profession' . . . and a diminution in the quality of the legal services received by a client." The Supreme Court refused to impose liability to the plaintiffs on the defendant attorney for negligent confidential advice given to his client who thereafter entered into a transaction with the plaintiffs (parties with whom the client dealt at arms' length) in reliance upon that advice. To impose liability in such a circumstance "would inject undesirable self-protective reservations into the attorney's counseling role. The attorney's preoccupation or concern with the possibility of claims based on mere negligence (as distinct from fraud or malice) by any with whom his client might deal 'would prevent him from devoting his entire energies to his client's interests'." ( Id. at p. 344.) In Goodman v. Kennedy (1976) 18 Cal.3d 335, the California Supreme Court addressed "whether or under what circumstances an attorney's duty of care in giving legal advice to a client extends to persons with whom the client in acting upon the advice deals wholly at arm's length." (Id. at p. 339.) There, the plaintiffs alleged an attorney negligently advised his clients and consciously withheld certain facts relating to stock purchased by the plaintiff from the attorney's clients. (Id. at pp. 339, 341-342.) The court held that an attorney advising a client owes no duty to third parties affected by that advice "in the absence of any showing that the legal advice was foreseeably transmitted to or relied upon by plaintiffs or that plaintiffs were intended beneficiaries of a transaction to which the advice pertained." (Id. at p. 339) In part, Goodman reasoned: "The present defendant had no relationship to plaintiffs that would give rise to his owing plaintiffs any duty of care in advising his clients that they could sell the stock without adverse consequences. There is no allegation that the advice was ever communicated to plaintiffs and hence no basis for any claim that they relied upon it in purchasing or retaining the stock. Nor was the advice given for the purpose of enabling the defendant's clients to discharge any obligation to plaintiffs. Thus, there is no allegation that plaintiffs had any relationship to defendant's clients or to the corporation as stockholders or otherwise when the advice was given." (Id. at pp. 343-344.) The Goodman court rejected the plaintiffs' argument that because the attorney's advice related to a possible sale of stock by his clients, his duty of care in giving advice extended to anyone to whom the sale might be made. It reasoned that the "plaintiffs' only relationship to the proposed transaction was that of parties with whom defendant's clients might negotiate . . . at arm's length. Any buyers' 'potential advantage' from the possible purchase of the stock 'was only a collateral consideration of the transaction' citation and did not put such potential buyers into any relationship with defendant as 'intended beneficiaries' of his clients' anticipated sales." (Goodman, supra, 18 Cal.3d at p. 344.) The court rejected the plaintiffs' argument that the defendant's advice was " 'intended to affect' " them as purchasers and that the harm to them was foreseeable from the adverse effect of the sale: "Plaintiffs were not persons upon defendant's clients had any wish or obligation to confer a benefit in the transaction. Plaintiffs' only relationship to the proposed transaction was that of parties with whom defendant's clients might negotiate a bargain at arm's length." (Ibid.) The court further explained the undesirable public policy underlying plaintiffs position: "To make an attorney liable for negligent confidential advice not only to the client who enters into a transaction in reliance upon the advice but also to the other parties to the transaction with whom the client deals at arm's length would inject undesirable self-protective reservations into the attorney's counseling role. The attorney's preoccupation or concern with the possibility of claims based on mere negligence (as distinct from fraud or malice) by any with whom his client might deal 'would prevent him from devoting his entire energies to his client's interests' citation. The result would be both 'an undue burden on the profession' citation and a diminution in the quality of the legal services received by the client." (Goodman, at p. 344.) In sum, the California Supreme Court discussed an attorney's duty to third parties under circumstances factually similar to the present one. In Goodman, the plaintiffs sought damages from an attorney for losses that they incurred on shares of stock purchased from the attorney's clients. The clients were the officers of the corporation that issued the stock. The attorney negligently advised his clients that they could sell the stock to third parties without jeopardizing the corporation's exemption from the requirement of registering the stock under the securities laws. The court held that an attorney advising a client owes no duty to third persons affected by that advice "in the absence of any showing that the legal advice was foreseeably transmitted to or relied upon by plaintiffs or that plaintiffs were intended beneficiaries of a transaction to which the advice pertained." ( Id. at p. 339.) The Goodman court observed that the attorney "had no relationship to plaintiffs that would give rise to his owing plaintiffs any duty of care in advising his clients that they could sell the stock without adverse consequences. There is no allegation that the advice was ever communicated to plaintiffs and hence no basis for any claim that they relied upon it in purchasing or retaining the stock. Nor was the advice given for the purpose of enabling defendant's clients to discharge any obligation to plaintiffs. Thus, there is no allegation that plaintiffs had any relationship to defendant's clients or to the corporation as stockholders or otherwise when the advice was given." (Goodman, supra, 18 Cal.3d at pp. 343-344, ) The Goodman court rejected the plaintiffs' argument that since the attorney's advice related to a possible sale of stock by his clients, his duty of care in giving advice extended to anyone to whom the sale might be made. The court reasoned that the "plaintiffs' only relationship to the proposed transaction was that of parties with whom defendant's clients might negotiate . . . at arm's length. Any buyers' 'potential advantage' from the possible purchase of the stock 'was only a collateral consideration of the transaction' and did not put such potential buyers into any relationship with defendant as 'intended beneficiaries' of his clients' anticipated sales." (Goodman, supra, 18 Cal.3d at p. 344.) The court also explained why the plaintiffs' position would constitute an undesirable public policy. "To make an attorney liable for negligent confidential advice not only to the client who enters into a transaction in reliance upon the advice but also to the other parties to the transaction with whom the client deals at arm's length would inject undesirable self-protective reservations into the attorney's counseling role. The attorney's preoccupation or concern with the possibility of claims based on mere negligence (as distinct from fraud or malice) by any with whom his client might deal 'would prevent him from devoting his entire energies to his client's interests' . The result would be both 'an undue burden on the profession' and a diminution in the quality of the legal services received by the client. " (Goodman, supra, 18 Cal.3d at p. 344, )