FILED

May 6, 1996

Cecil W. Crowson

Appellate Court Clerk

IN THE SUPREME COURT OF TENNESSEE

AT NASHVILLE

FOR PUBLICATION

CAN DO, INC. PENSION AND PROFIT )

SHARING PLAN AND SUCCESSOR )

PLANS, INDIVIDUALLY AND AS A ) Filed: May 6, 1996

TRUSTEE FOR GEORGE W. )

HOLDER, JR., )

)

Plaintiff-Appellee, ) DAVIDSON CHANCERY

)

Vs. )

)

) HON. IRVIN KILCREASE,

MANIER, HEROD, HOLLABAUGH ) CHANCELLOR

& SMITH, a professional corporation, )

C. KINIAN COSNER, JR., and )

H. ROWAN LEATHERS, III, )

)

Defendants-Appellants. ) No. 01-S-01-9501-CH-00013

For Appellants: For Appellee:

Robert L. Trentham Alfred H. Knight

Mark Tyler Seitz WILLIS & KNIGHT

TRABUE, STURDIVANT & DEWITT Nashville, Tennessee

Nashville, Tennessee

O P I N I O N

COURT OF APPEALS REVERSED;

JUDGMENT OF TRIAL COURT 

REINSTATED. ANDERSON,C.J.
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This case presents a question of first impression in Tennessee: whether

or not a legal malpractice claim is assignable. We have determined that sound

public policy reasons militate against allowing assignment of legal malpractice

actions. We, therefore, reverse the Court of Appeals and dismiss the complaint.

BACKGROUND

This appeal arises from the trial court's grant of the defendant law firm's

motion to dismiss the complaint for failure to state a claim. Accordingly, the facts

as alleged in the complaint must be taken as true, and are as follows.

George W. Holder, Jr., employed the defendant law firm, Manier, Herod,

Hollabaugh and Smith, to perform certain legal services for him. Later, Holder

individually filed a voluntary bankruptcy petition. Holder owned all the stock in

Can Do, Inc. and was the primary beneficiary of and served as trustee of the Can

Do, Inc. Pension and Profit Sharing Plan. 

The bankruptcy trustee, William L. Newport, transferred to the Can Do,

Inc. Pension and Profit Sharing Plan certain assets, including an assignment of

"any cause of action or right to payment the bankruptcy estate may have against

the following . . . C. Kinian Cosner, Jr. and Manier, Herod, Hollabaugh and

Smith."

Following the transfer, Can Do, Inc., filed this complaint asserting that the

law firm's mismanagement of Holder's legal affairs resulted in his bankruptcy. 

The law firm moved to dismiss the complaint for failure to state a claim, upon the

grounds that the "claim for legal malpractice, if any, belongs to George W.

Holder and cannot, as a matter of law, be assigned."
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The trial court dismissed the complaint, because "the assignment of a

legal malpractice claim in Tennessee is void and invalid as against public policy

because it constitutes champerty and maintenance and would frustrate, if not

entirely endanger, the attorney -- client relationship." 

The Court of Appeals reversed, concluding that a legal malpractice cause

of action survives the death of the assignor and therefore is assignable, and

adopted the minority view that assignment of such claims does not violate public

policy. 

We granted the defendants' application to consider this important

question of first impression in this State. For the reasons articulated below, we

have concluded that legal malpractice claims are not assignable.

ASSIGNMENT

Because a legal malpractice claim is a chose in action, we begin our

analysis by reviewing the assignability of choses in action. With few exceptions,

at early common law, a chose in action, which is a right of proceeding in a court

of law to procure payment of a sum of money or to recover a debt, was not

assignable. Black's Law Dictionary, 241(6th ed. 1990); Moran v. Adkerson, 168

Tenn. 372, 79 S.W.2d 44 (1935). The rule of nonassignability was so strictly

construed that it applied even though the original promise was made to the

promisee and his assigns. Hutsell v. Citizens' Nat. Bank, 166 Tenn. 598, 64

S.W.2d 188 (1933).

One reason cited to support the rule of nonassignability was that personal

rights are nontransferable. See Picadilly, Inc. v. Raikos, 582 N.E.2d 338 (Ind.

1991). However, the major purpose of the rule was to prevent champerty and
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maintenance. In Tennessee, "champerty" has been defined as "a bargain with a

plaintiff or defendant in a cause to divide the matter sued for, if they prevail,

whereupon the champertor is to carry on the party's suit at his own expense;" 

whereas, "maintenance” has been defined as "an officious intermeddling in a suit

which no way belongs to one by maintaining or assisting either party, with money

or otherwise, to prosecute or defeat it." Spicer v. Jarrett, 61 Tenn. 454, 457

(1873) (citations omitted). 

The rule of nonassignability began to gradually erode over time as the

public need to expand the quantity of transferable property in commerce

increased. Under modern statutes and decisions, the assignability of a chose in

action is now the general rule, and nonassignability the exception. 6A C.J.S.,

Assignments §§ 6 and 7 (1975). For example, in Tennessee, any contractbased chose in action, except those involving matters purely personal in nature,

is assignable. See Tenn. Code Ann. § 47-50-102 (1995); Berger v. Paalzow, 40

Tenn. App. 153, 289 S.W.2d 861 (1956). Tort actions involving injuries to

property are also assignable, East Tenn G. & V.R.R. v. Henderson, 69 Tenn. 1

(1878); Tenn. Code Ann. § 20-5-120 (1994), while tort actions involving personal

injuries and wrongs done to the person, reputation, or feelings of the injured

party continue to be unassignable. See Annotation, Assignability of Claim for

Personal Injury or Death, 40 A.L.R.2d 500 (1975); 6A C.J.S. § 7, Assignments

(1975).

In the absence of a statute, courts determining whether a chose in action

is assignable generally apply the traditional common law test - whether the action

would survive the death of the assignor and pass to the personal representative. 

See e.g., Haymes v Halliday, 151 Tenn. 115, 268 S.W. 130 (1925). For

example, in this case, the Court of Appeals applied that traditional survivability
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test and determined that legal malpractice actions survive the death of the

assignor and are assignable.

Although a chose in action must survive to be assignable, not every action

that survives is assignable. For example, claims for personal injuries survive,

pursuant to Tenn. Code Ann. § 20-5-102 (1994), but generally are not

assignable. 

In modern times, the common law test of determining the issue of

assignability solely by whether the claim survives the assignor's death seems

outdated and misplaced. Other state courts have experienced difficulty in

applying the survival test and have approached this issue by considering factors

such as public policy considerations, which vary depending upon the particular

type of action under examination. Joos v. Drillock, 338 N.W.2d 736, 738 (Mich.

App. 1983).

Public policy is, in fact, the primary consideration upon which courts from

other jurisdictions have focused in determining the assignability of a legal

malpractice action. For example, the Indiana Supreme Court stated:

Today, it seems anachronistic to resolve the issue of

the assignability of a legal malpractice claim by deciding whether

such a claim would survive the client's death. . . . As is sometimes

the case with the common law, the rule has outlived the reason for

its creation. The customs, beliefs, or needs of a primitive time

establish a rule or a formula. In the course of the centuries the

custom, belief or necessity disappears, but the rule remains. 

Where such is the case, this Court has been willing to reexamine

the basis of the rule. 

Assignment should be permitted or prohibited based on the

effect it will likely have on modern society, and the legal system in

particular.
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Picadilly, Inc. v. Raikos, 582 N.E.2d at 341 (internal citations and quotations

omitted). 

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.

Employing that analysis, a majority of jurisdictions have concluded that

public policy considerations militate against allowing assignment of legal

malpractice actions. Francis M. Dougherty, Annotation, Assignability of Claim for

Legal Malpractice, 40 A.L.R.4th 684 (1985 & Supp. 1995); Picadilly, Inc. v.

Raikos, supra; Bank IV Wichita, Nat'l Ass'n v. Arn, Mullins, Unruh, Kuhn &

Wilson, 827 P.2d 758 (Kan. 1992); Earth Science Laboratories, Inc. v. Adkins &

Wondra, P.C., 523 N.W.2d 254 (Neb. 1994); Chaffee v. Smith, 645 P.2d 966

(Nev. 1982); Schroeder v. Hudgins, 690 P.2d 114 (Ariz. App. 1984); Goodley v.

Wank & Wank, Inc, 133 Cal. Rptr. 83 (Cal. App. 1976); Roberts v. Holland &

Hart, 857 P.2d 492 ( Colo. App. 1993); Washington v. Fireman's Fund Ins. Co.,

459 So.2d 1148 (Fla. App. 1984); Christison v. Jones, 405 N.E.2d 8 (Ill. App.

1980); Coffey v. Jefferson County Bd. of Educ., 756 S.W.2d 155 (Ky. App.
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1988); Joos v. Drillock, supra; Wagener v. McDonald, supra; City of Garland v.

Booth, 895 S.W.2d 766 (Tex. App. 1995); Continental Cas. Co. v. Pullman,

Comley, Bradley & Reeves, 709 F. Supp. 44 (D. Conn. 1989), aff'd 929 F.2d 103

(2nd Cir. 1999); Scarlett v. Barnes, 121 B.R. 578 (W.D. Mo. 1990); contra

Thurston v. Continental Cas. Co., 567 A.2d 922 (Me. 1989); Collins v. Fitzwater,

560 P.2d 1074 (Or. 1977), overruled on other grounds Lancaster v. Royal Ins.

Co., 726 P.2d 371 (Or. 1986); Hedlund Mfg. Co., Inc. v. Weiser, Stapler &

Spivak, 539 A.2d 357 (Pa. 1988); American Hemisphere Marine Agencies, Inc. v.

Kreis, 244 N.Y.S.2d 602 (N.Y. Sup. 1963).

The many public policy reasons underlying these courts' rejection of

assignability of legal malpractice claims was perhaps best summarized by the

California appellate court in Goodley, which was the first to flatly confront the

issue. There, the court focused on the unique character of legal services, the

personal nature of the attorney's duty to the client, and the confidentiality of the

attorney-client relationship.

The assignment of such claims could relegate the legal malpractice

action to the market place and convert it to a commodity to be

exploited and transferred to economic bidders who have never had

a professional relationship with the attorney and to whom the

attorney has never owed a legal duty, and who have never had any

prior connection with the assignor or his rights. The commercial

aspect of assignability of choses in action arising out of legal

malpractice is rife with probabilities that could only debase the legal

profession. The almost certain end result of merchandizing such

causes of action is the lucrative business of factoring malpractice

claims which would encourage unjustified lawsuits against

members of the legal profession, generate an increase in legal

malpractice litigation, promote champerty and force attorneys to

defend themselves against strangers. The endless complications

and litigious intricacies arising out of such commercial activities

would place an undue burden on not only the legal profession but

the already overburdened judicial system, restrict the availability of

competent legal services, embarrass the attorney-client relationship

and imperil the sanctity of the highly confidential and fiduciary

relationship existing between attorney and client.
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Id, 133 Cal. Rptr. at 87.

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.

As the Indiana Supreme Court recognized, "[a]n adversary might well

make a favorable settlement offer to a judgment-proof or financially strapped

client in exchange for the assignment of that client's right to bring a malpractice

claim against his attorney. Lawyers involved in such negotiations would quickly

realize that the interests of their clients were incompatible with their own selfinterest." Picadilly, Inc. v. Raikos, 582 N.E.2d at 343; City of Garland v. Booth,

895 S.W.2d at 770. The risk that allowing assignments of claims would impair

an attorney's loyalty would be present therefore, not only in those cases in which

a client assigned a malpractice claim, but in all other cases as well. 

Moreover, assignment would compromise the duty of confidentiality. 
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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. 

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.

CONCLUSION
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Because we have determined that the public policy of this State should

prohibit the assignment of legal malpractice actions, the judgment of the Court of

Appeals is reversed, and the judgment of the trial court dismissing this action is

reinstated. Costs of this appeal are taxed to the plaintiff-appellee, Can Do, Inc.,

for which execution may issue if necessary. 

________________________________

RILEY ANDERSON, CHIEF JUSTICE

CONCUR:

Drowota, Reid, Birch, and White, JJ.