It’s a great thing when lawyers receive clear direction from the Supreme Court on a change of the law, right? According to Skipper v. ACE Property and Casualty Insurance Company (Opinion No. 27547), the South Carolina Supreme Court made crystal clear that legal malpractice cases in South Carolina are not assignable … well, perhaps crystal is overstating the matter a bit. In fact, peering into the crystal ball of Skipper raises questions both for what it says and what it fails to say.
Here’s the quick set up. Skipper was severely injured in a motor vehicle accident. The good news is that the vehicle which struck Skipper was owned by a logging company with a $1,000,000.00 commercial liability policy. The story took a dark turn when Skipper’s demand for policy limits was answered by an offer of $50,000.00. This exchange seems to have inspired the Skipper team and the logging team to view the carrier and its legal counsel as a common enemy. As a result, Skipper and the logging company entered into a settlement agreement in which a) the logging company confessed judgment to Skipper for $4,500,000.00 (yes – $4,500,000.00); b) the logging company admitted liability (this only works with an admission of fault); c) the parties entered into an assignment of claims, including logging co.’s dubious legal malpractice claim against its attorneys; and of course there’s d) the logging company was obligated to assist in the prosecution of the legal malpractice claim.
Armed with the assignment, a legal malpractice action was filed. In response to a motion to dismiss the claim on the grounds that the assignment of the malpractice claim was invalid, the Federal District Court certified a very narrow question to our Supremes: “whether a legal malpractice claim can be assigned between adversaries in litigation in which the alleged malpractice claim arose.” After considering the law from other jurisdictions, the South Carolina Supreme Court held that “the assignment of a legal malpractice claim between adversaries in litigation in which the alleged malpractice arose is prohibited.” The basis for the decision is founded upon a concern for collusion between the parties, collusion in which the parties would in essence “transmute a claim against a penniless adversary into a claim against the adversary’s wealthier lawyer.”
As it relates to the Skipper case, our Court had already warned us about collusion in the assignment of claims. In Fowler v. Hunter, 388 S.C. 255, 697 S.E.2d 531 (2010), our Supremes upheld the assignment of a “professional negligence” claim against an insurance agency in large part because there was “no collusion involved in the settlement” which gave rise to the assignment. Having been forewarned that the Court would likely take a dim view of an assignment of claims that appeared collusive in nature, perhaps the Skipper parties were a bit aggressive in confessing judgment for $4,500,000.00 and requiring that the logging company cooperate in the prosecution of the assigned claim. Collusive? You be the judge. Of course, while Skipper involved the assignment of a “professional negligence” claim like Fowler, the Skipper case dealt with a far more sacred cow – the assignment of a legal malpractice claim.
So where then does the Skipper ruling fall short and what questions does it invite? The first question is why the opinion lacks any reference to privity. If the first element of a legal malpractice claim is the existence of an attorney client relationship (ie. privity between the parties), why analyze the matter at all beyond simply invoking the “rule” that privity is required in legal malpractice claims and dismissing the case? We submit that the reason is simple: privity in legal malpractice is dead. A review of the cases over the recent past shows a gradual decline of privity in legal malpractice and its replacement by a more esoteric discussion of duty (ie. to whom does a lawyer owe duties in various circumstances). If privity were on life support, the Court pulled the plug in Fabian v. Lindsay, 410 S.C. 475, 765 S.E.2d 132 (2014), by recognizing the right of a will beneficiary to sue the drafting lawyer as a third party beneficiary when errors made by the attorney defeat or diminish the client/testator’s intent. Rest in peace privity.
While Skipper is very clear in what it says, the opinion ultimately says very little. This is true because of the many qualifiers to the opinion that cage Skipper into a tight little box. It is not as simple as “legal malpractice claims are not assignable.” To the contrary, the Skipper test involves a) an assignment of the claim, b) between adversaries in litigation, c) in which the malpractice arose. What about the assignment of a claim to a true third party? What if the malpractice arose in related but separate litigation such that the role reversal is not quite so stark, obvious and offensive? What about a simple lien interest against the future proceeds of a legal malpractice case without an assignment at all? Surely, this would pass muster. What about the assignment of a legal malpractice claim arising out of a transactional setting, an estate setting, a tax advice setting, etc., etc. One can only surmise that if our Court intended a broad, sweeping and bright-line test,Skipper afforded every opportunity to provide one.
Here’s an alternative and simple holding for Skipper: you can’t assign legal malpractice claims. Ah, but if life were so simple, we’d have nothing to blog about now would we?
Ronnie Richter and Eric Bland