Opinion ID: 1668702
Heading Depth: 2
Heading Rank: 3

Heading: The Specter of a Market for Legal Malpractice Claims

Text: The circumstances of this case do not implicate the public policy concerns behind the prohibition on assignment of legal malpractice claims. The majority of state courts considering this issue prohibit the assignment of legal malpractice claims, mostly based on public policy concerns. [3] See Can Do, Inc. Pension & Profit Sharing Plan v. Manier, Herod, Hollabaugh & Smith, 922 S.W.2d 865, 867 (Tenn.1996) (Public policy is ... the primary consideration upon which courts from other jurisdictions have focused in determining the assignability of a legal malpractice action.); Wagener v. McDonald, 509 N.W.2d 188, 190 (Minn.Ct.App.1993) (same). Courts are mainly concerned about creating a market for legal malpractice claims. As one California court noted: 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. 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.... The commercial aspect of assignability of... legal malpractice [actions] 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. Goodley v. Wank & Wank, Inc., 62 Cal. App.3d 389, 133 Cal.Rptr. 83, 87 (1976); see also Can Do, Inc., 922 S.W.2d at 869 (noting that assignment of legal malpractice actions would both endanger the attorney-client relationship and commercialize legal malpractice lawsuits). We expressed similar concerns in KPMG and Forgione, although much more superficially because those cases did not involve legal malpractice. See KPMG, 765 So.2d at 38 (noting that legal malpractice claims are not assignable because of the personal nature of legal services, involving a confidential, fiduciary relationship of the very highest character, with an undivided duty of loyalty owed to the client); Forgione, 701 So.2d at 559 (noting that Florida law views legal malpractice as a personal tort that cannot be assigned because of the personal nature of legal services which involve highly confidential relationships). We reiterate these concerns. They continue to prevent the assignment of most legal malpractice claims. However, they do not arise in these circumstances. The claim MRI assigned to Kaplan does not involve personal services or implicate confidentiality concerns. As discussed above, the attorney's services for MRI involved publication of information to third parties. The attorneys owed a duty to the public when advising MRI and preparing the private placement memoranda. With respect to confidentiality, this situation parallels that of securities lawyers claiming the attorney-client privilege in third-party suits based on inaccurate or misleading securities filings. The federal cases dealing with securities lawyers stress that information intended for release to third parties is not covered by the privilege. See United States v. Moscony, 927 F.2d 742, 752 (3d Cir.1991) (The ultimate key to determining confidentiality is intent ...). In re Grand Jury Proceedings, 727 F.2d 1352 (4th Cir.1984), involved the disclosure of attorney-client communications about the creation of a prospectus intended for use in a private placement. Even though the prospectus was never released, the court held that the communications were not privileged because the information in the prospectus was intended for public release: [c]ourts have consistently `refused to apply the privilege to information that the client intends his attorney to impart to others ...,' or which the client intends shall be published or made known to others. Id. at 1356 (citing United States v. Pipkins, 528 F.2d 559, 563 (5th Cir.), cert. denied, 426 U.S. 952, 96 S.Ct. 3177, 49 L.Ed.2d 1191 (1976)); see In re Micropro Sec. Litig., No. C-85-7428 EFL, 1988 WL 109973, at  (N.D.Cal. 1988) (citing In re Grand Jury Proceedings and holding that preliminary drafts of public offering materials were not protected by the privilege because there was intent to disclose the information to third parties). In this case, the documents the attorneys prepared not only were intended for release; they were released to third parties. Therefore, communications between MRI and the attorneys would not be protected in a third-party suit and concerns for confidentiality do not apply.