Chapter 10 Assignability of Legal Malpractice Claims

• Library: The Law of Legal Malpractice in South Carolina (SCBar) (2021 Ed.)

CHAPTER 10 Assignability of Legal Malpractice Claims

Until relatively recently, South Carolina courts had not addressed the assignability of legal malpractice claims. However, in Skipper v. ACE Property and Cas. Ins. Co., the Supreme Court adopted the majority rule and held that assignment of claims between adversaries in the litigation in which the alleged legal malpractice arose is prohibited as against public policy.¹

In Skipper, the underlying case involved a motor vehicle accident between an individual and a logging truck.² The insurance company retained lawyers to represent the logging company and the driver of the truck. Subsequently, the insurance company offered to settle the claim for $50,000, which was well below the policy limits.³ The plaintiff declined the settlement offer.⁴

Later, unbeknownst to the insurance company or the defense attorneys, the plaintiff and defendants entered into an agreement in which the defendants admitted liability.⁵ In return, the defendants agreed to pursue a legal malpractice action against the insurance company and its attorneys, and assigned the predominant interest in that malpractice claim to the plaintiff in the underlying litigation.⁶

The Supreme Court recognized that "[t]he majority rule in other jurisdictions is to prohibit the assignment of legal malpractice claims between adversaries in the litigation in which the alleged malpractice arose."⁷ The court noted "[t]he most common reason other courts have declined to permit assignments of legal malpractice claims is to avoid the risk of collusion between the parties."⁸ The Supreme Court joined the majority of other jurisdictions and held that the defendants in the underlying case could not assign their interest in the later malpractice claim to the original plaintiff.⁹

South Carolina appellate courts have not addressed whether a legal malpractice cause of action may be assigned in a context other than between adversaries in the underlying litigation. Most courts that have addressed this issue have held, however, that legal malpractice causes of action are not assignable.¹⁰

Similar to the Supreme Court's determination that the assignment of a legal malpractice claim to an adversary is against public policy, courts in other jurisdictions have recognized several policy reasons for barring the assignment of legal malpractice claims in general. "Most courts view the unique personal nature of the relationship between an attorney and his client to be the most compelling public policy reason for prohibiting the assignment of legal malpractice claims."¹¹ This concern was expressed in the seminal case of Goodley v. Wank & Wank, Inc.,¹² in which the court stated as follows:

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 invoke public policy considerations in our conclusion that malpractice claims should not be subject to assignment.¹³

Courts adopting the majority view have also recognized that the assignment of legal malpractice claims is incompatible with the duties of loyalty and confidentiality attorneys owe to their clients.¹⁴ "An attorney's loyalty is likely to be weakened by the knowledge that a client can sell off a malpractice claim, particularly if an adversary can buy it."¹⁵

As for the duty of confidentiality, once the case is assigned, the client loses control over the disclosure of confidential information, which the attorney may reveal as reasonably necessary to establish a defense.¹⁶ "The client is relegated to observing from the sidelines as the assignee pursues the attorney," which "erodes the principles fostered by the duty of confidentiality."¹⁷ Assigning a legal malpractice claim could certainly lead to similar problems with the duty of loyalty.

In...