Q: Can malpractice claims be assigned to other persons?
Suppose a client with a malpractice claim wishes to assign or sell his malpractice claim for somebody else to pursue. Would the assigned malpractice claim be allowed to proceed?
Nationwide, the cases from state courts which hold that legal malpractice claims may never be assigned generally cite five concerns: (1) the fear of creating a market in malpractice; (2) the risk of collusion that would exist between the assignor and assignee; (3) the concern that the increased possibility of assignment may deter attorneys from zealously advocating their client's interests; (4) the concern that assignments would increase the frequency with which legal malpractice claims are brought, thereby providing a disincentive to supplying legal services to those who need them; and (5) the risk that, if legal malpractice claims were assignable as part of a settlement, a party could sue the adverse party's attorney, thereby threatening attorney-client confidentiality. The underlying theme running through these concerns is the perceived threat to the attorney-client relationship that could accompany the assignments of legal malpractice claims.
A minority of states have declined to adopt an absolute prohibition on assigning malpractice claims because those concerns are not present in every case. Oregon and Washington are among these states.
In Oregon, assignments are allowed if the assignee has a bona fide interest in the subject of the malpractice action. Gregory v Lovelien, 174 Or App 483, 26 P.3d 180 (2001). In Gregory, the clients' assignment of their legal malpractice claim to a disbarred attorney did not violate public policy, where the attorney allegedly had a bona fide interest in the malpractice claim through joint ownership of real estate that was the subject of the malpractice action.
Similarly, Washington does not bar assignments of malpractice claims wholesale. Kenco Enterprises Northwest, LLC v Wiese, 172 Wash.App. 607, 291 P.3d 261 (2013). In Kenco, the assignment was disallowed only because it was to an adversary in litigation, which presented heightened public policy concerns. Specifically, the court cited Kommavongsa v Haskell, 149 Wash.App. 288, 67 P.3d 1068 (2003), which held that assignments between adversaries could give rise to potential conflicts of interest and could harm the legal profession by making lawyers reluctant to represent potentially judgment-proof clients. In the process of holding the assignment to be ineffective, the court in Kenco expressly noted that Washington is among the minority of jurisdictions that do not prohibit assignment of legal malpractice claims, and that instead hold that a case-by-case determination is appropriate where public policy concerns are implicated.
Under what circumstances might an assignment reasonably be sought? One example is where there are several clients on a matter in which malpractice was committed, and each of the clients possesses some divisible piece of the damages. For instance, suppose a lawyer represents several beneficiaries of a will in litigation to contest a new will as the product of undue influence and set it aside. Suppose this lawyer commits malpractice and the claim is lost. Each client's damages would correspond to their expectancy interest in the first will. Sometimes one or more clients in such circumstances may not want to pursue a lawsuit for malpractice, for instance because they reside far away, or do not wish to expose themselves to the vexation of litigation, or cannot afford to fund the costs of litigation. Under those circumstances, it may be desirable for the client who intends to pursue a claim for malpractice to take assignment (or purchase) the claim of the non-participating client(s). These circumstances present the strongest case for assignment, because the assigning party was a client too and possessed a malpractice claim based on the same conduct.