10-2 Express Assignments

• Jurisdiction: United States

10-2 Express Assignments

The assignability of a legal malpractice claim first was raised in Florida in the case of Washington v. Fireman's Fund Insurance Co.² The Fourth District Court of Appeal, as a matter of public policy, agreed with the "majority of jurisdictions [that] prohibit the assignment of such actions because of the personal nature of legal services which involve highly confidential relationships."³

Although Forgione v. Dennis Pirtle Agency, Inc.⁴ did not involve a claim for legal malpractice, the Florida Supreme Court nevertheless used it as an opportunity to signal that such claims are not assignable:

As an Illinois appellate court noted in Christison v. Jones, 83 Ill. App.3d 334, 39 Ill. Dec. 560, 562, 405 N.E.2d 8, 10 (1980), the duty breached in legal malpractice arises out of a contract for legal services and the resulting injuries are pecuniary injuries to intangible property interests, rather than personal injuries in the strict sense of injuries to the body, feelings, or character of the client. While these aspects might indicate that legal malpractice falls within the class of actions that are assignable, the Illinois court concluded that legal malpractice is not subject to assignment because "the real basis and substance of the malpractice suit" is a breach of the duties within the personal relationship between the attorney and client. Id. Thus, it is "the unique quality of legal services, the personal nature of the attorney's duty to the client[,] and the confidentiality of the attorney-client relationship" that have led other courts to conclude that legal malpractice claims are not subject to assignment. Goodley v. Wank & Wank, Inc., 62 Cal. App. 3d 389, 133 Cal. Rptr. 83, 87 (1976).⁵

In National Union Fire Insurance Co. v. Salter,⁶ an insurance company sued the attorneys who had represented its insured. The dismissal of the case was affirmed on a holding that the same analysis that prohibited the assignment of a legal malpractice claim also prohibited "the subrogation of a debtor's legal malpractice claim."⁷ The fact that the actual client was not a party to the lawsuit was critical to the court's holding, which noted that a client "may not even be interested or believe that it has a legal malpractice action against its attorneys," and the attorneys might need to reveal the client's "work product" and "confidences" to defend themselves.⁸

After acknowledging that a cause of action for legal malpractice is not assignable under Florida law, the court in Northcutt v. BankAtlantic⁹ discussed whether a bankruptcy trustee could assign a legal malpractice claim. The court did not decide the issue, but cited with approval cases from other jurisdictions that prohibit the assignment of tort actions that arise during bankruptcy proceedings.¹⁰

Subsequently, in Northcutt v. Robert J. Bryan, P.A.,¹¹ Northcutt argued that the sale of his legal malpractice claim by the bankruptcy trustee to the attorney he had sued was void. Although the court wrote that Northcutt "may well be correct on his theory that, because legal malpractice claims are not assignable under Florida law, a bankruptcy trustee cannot assign a claim,"¹² it held that Northcutt lacked standing to raise the issue because he had failed to appeal the order approving the sale.¹³

In Cowan Liebowitz & Latman, P.C. v. Kaplan,¹⁴ the Florida Supreme Court came face to face with the issue of "whether a potential plaintiff may assign a legal malpractice claim."¹⁵ After acknowledging its dicta in Forgione v. Dennis Pirtle Agency, Inc.,¹⁶ as well as similar dicta in KPMG Peat Marwick v. National Union Fire Insurance Co. of Pittsburgh, Pennsylvania,¹⁷ it permitted the assignment of a legal malpractice suit arising from the preparation of a private placement memorandum.¹⁸

The Court's rather surprising holding turned on its finding that the attorneys who had prepared the memorandum intended third parties to rely on it, meaning that what was at issue was the publication of corporate information, rather than personal legal services.¹⁹ As such, the public policy concerns discussed in Forgione, as well as the specter of a market for legal malpractice claims, were considered inapposite.²⁰

The Court returned to the issue in Law Office of David J. Stern, P.A. v. Security...