§41.2 Assignment of Legal Malpractice Claims

The Case: Can Do, Inc. Pension and Profit Sharing Plan and Successor Plans v. Manier, Herod, Hollabaugh and Smith , 922 S.W.2d 865 (Tenn. 1996).

The Basic Facts: Plaintiffs, corporation and trustee for the corporation's only shareholder, brought a legal malpractice action that had been assigned to one of the plaintiffs by a bankruptcy trustee against defendant law firm.

The Bottom Line:

• "We agree with the Indiana Supreme Court that in resolving the question of assignability of legal malpractice actions, public policy considerations, rather than the traditional survivability test, should guide the analysis. Indeed, it is particularly appropriate for this Court to examine the public policy considerations that bear upon this question as we have exclusive original jurisdiction over matters relating to the practice of law. Petition of Burson, 909 S.W.2d 768 (Tenn. 1995). Likewise, we conclude that resolution of the question should not turn on whether a claim for legal malpractice is classified as a breach of contract claim or a personal injury claim. Wagener v. McDonald, 509 N.W.2d 188, 190 (Minn. App. 1993). Rather than straining to fit the claim into a category, we think the better approach is to resolve the question on public policy grounds." 922 S.W.2d at 868.
• "We generally agree with the Goodley court and conclude that assignment of legal malpractice actions would both endanger the attorney-client relationship and commercialize legal malpractice lawsuits. We are particularly concerned that the relationship between an attorney and client remain a fiduciary relationship of the very highest character. As a result of that relationship, the attorney owes the client not only the duty to use skill, prudence and diligence in the rendition of services, but also the duty to act loyally towards the client and to maintain client confidences. [Tenn. Sup. Ct. R. 8, Canons 4 and 5]. These rules and their enforcement by this Court protect the public, and a violation may result in disciplinary action, as well as a legal malpractice claim. See also Wagener v. McDonald, 509 N.W.2d at 191. Allowing free assignment would be a disservice to the public by compromising both the attorney's duty of loyalty and the duty of confidentiality, resulting in a weakened attorney-client relationship." Id. at 869.
• "Moreover, assignment would compromise the duty of confidentiality. Whenever an attorney is sued by a client for legal malpractice, the attorney is permitted to reveal confidential client information reasonably necessary to establish a defense. [Tenn. Sup. Ct. R. 8, DR 4-101(C)(4)]. So long as the client brings the malpractice claim, the client has the power to drop the lawsuit to avoid the disclosure of embarrassing confidential communications. Id. Once a legal malpractice claim is assigned, however, the client loses control of the litigation. The assignee controls the claim and may have little or no concern for the client's sensitivities. The client could thereby be harmed and such disclosures would foster disrespect for the attorney-client relationship in general. Picadilly, Inc. v. Raikos, 582 N.E.2d at 343-44; Wagener v. McDonald, 509 N.W.2d at 192." Id.
• "Finally, in our view, the commercialization of legal malpractice claims that would be fostered by allowing assignment is inimical to the legal profession and the administration of justice. 'Unlike any other commercial transaction, the client-lawyer relationship is structured to function within an adversarial legal system. In order to operate within this system, the relationship must do more than bind together a client and a lawyer. It must also work to repel attacks from legal adversaries. Those who are not privy to the relationship are often purposefully excluded because they are pursuing interests adverse to the client's interests.' Picadilly, Inc. v. Raikos, 582 N.E.2d at 343-44. Assignment would undermine the fundamental structure and function of the relationship and create a risk of collusion that must not be countenanced. City of Garland v. Booth, 895 S.W.2d at 770; Wagener v. McDonald, 509 N.W.2d at 191. Accordingly, we conclude that considerations of public policy prohibit the assignment of legal malpractice claims in Tennessee." Id.