Opinion ID: 1058200
Heading Depth: 2
Heading Rank: 3

Heading: Beneficial Ownership of a Legal Malpractice Claim

Text: Code § 8.01-13 provides in pertinent part, [t]he assignee or beneficial owner of any bond, note, writing or other chose in action, not negotiable may maintain thereon in his own name any action which the original obligee, payee, or contracting party might have brought. On brief, Johnson concedes that Virginia law prohibits the assignment of legal malpractice claims, notwithstanding Code § 8.01-26. [2] Similarly, we hold today that Code § 8.01-13 does not permit beneficial ownership of a cause of action for legal malpractice. Virginia has adopted the strict privity doctrine in legal malpractice cases; as a threshold requirement, a plaintiff must demonstrate the existence of an attorney-client relationship. It is settled in the Commonwealth that no cause of action exists in cases [involving a claim solely for economic losses] absent privity of contract. Copenhaver v. Rogers, 238 Va. 361, 366, 384 S.E.2d 593, 595 (1989). A cause of action for legal malpractice requires the existence of an attorney-client relationship which [gives] rise to a duty, breach of that duty by the defendant attorney, and that the damages claimed by the plaintiff client must have been proximately caused by the defendant attorney's breach. Rutter v. Jones, Blechman, Woltz & Kelly, P.C., 264 Va. 310, 313, 568 S.E.2d 693, 695 (2002). Thus, an action for the negligence of an attorney in the performance of professional services, while sounding in tort, is an action for breach of contract.... Oleyar v. Kerr, 217 Va. 88, 90, 225 S.E.2d 398, 400 (1976); accord Shipman v. Kruck, 267 Va. 495, 501, 593 S.E.2d 319, 322 (2004). It is the contract formed between an attorney and a client that gives rise to the attorney-client relationship; but for the contract, the attorney owes no duty to the client. O'Connell v. Bean, 263 Va. 176, 180, 556 S.E.2d 741, 743 (2002). Cox v. Geary, 271 Va. 141, 152, 624 S.E.2d 16, 22 (2006). In MNC Credit Corp. v. Sickels, 255 Va. 314, 497 S.E.2d 331 (1998), we answered the question whether a claim of legal malpractice against an attorney may be assigned by a former client to a third party. Id. at 316, 497 S.E.2d at 332. We held that Code § 8.01-26 does not abrogate the common law rule which prohibits the assignment of legal malpractice claims in this Commonwealth because the General Assembly did not plainly manifest an intent to do so. Id. at 318, 497 S.E.2d at 333. In view of the highly confidential and fiduciary relationship between an attorney and client, we reasoned, the common law rule which prohibits the assignment of legal malpractice claims safeguards the attorney-client relationship which is an indispensable component of our adversarial system of justice. Id. at 318, 319, 497 S.E.2d at 333, 334. This same policy precludes a testamentary beneficiary from maintaining, in her own name, a legal malpractice action against an attorney with whom an attorney-client relationship never existed. To hold otherwise would implicate the same concerns that counsel against the assignment of legal malpractice claims. Although Code § 8.01-13 permits the beneficial owner of any ... chose in action to maintain in her own name any action the original contracting party might have brought, the common law has long provided that this particular chose in action requires the existence of an attorney-client relationship as a threshold element. See Ayyildiz v. Kidd, 220 Va. 1080, 1086, 266 S.E.2d 108, 112-13 (1980). In this case, no such relationship existed between Johnson and Hart. As the stipulation indicated, Hart was retained to represent the Estate, not Johnson. Additionally, the General Assembly did not plainly manifest an intent in Code § 8.01-13 to abrogate the common law rule which prohibits the assignment of legal malpractice claims in this Commonwealth. MNC Credit Corp., 255 Va. at 318, 497 S.E.2d at 333. Similarly, the trial court erred when it held that Johnson, as a beneficiary [of the Estate,] possesses beneficial ownership of the [E]state's legal malpractice claim. Despite this error, the trial court reached the correct resolution of the issue.