Skipper v. ACE Property & Casualty Insurance

THE STATE OF SOUTH CAROLINA
In The Supreme Court
George Skipper, Veronica Skipper, Michael Perry
Bowers, Specialty Logging, LLC, and Harold Moors,
Plaintiffs,
v.
ACE Property and Casualty Insurance Company,
Brantley C. Rowlen, and Erin Lawson Coia, Defendants.
Appellate Case No. 2014-001979
CERTIFIED QUESTION
ON CERTIFICATION FROM THE UNITED STATES
DISTRICT COURT FOR SOUTH CAROLINA
J. Michelle Childs, United States District Judge
Opinion No. 27547
Heard April 7, 2015 – Filed July 15, 2015
CERTIFIED QUESTION ANSWERED
Blake A. Hewitt, of Bluestein Nichols Thompson &
Delgado, of Columbia; Mark B. Tinsley, of Gooding &
Gooding, of Allendale; and Randolph Murdaugh, IV, of
Peters, Murdaugh, Parker, Eltzroth & Detrick, of
Hampton, for Plaintiffs.
Robert H. Hood, Robert H. Hood, Jr., and Deborah
Harrison Sheffield, all of the Hood Law Firm, LLC, of
Charleston, for Defendants Brantley C. Rowlen and Erin
Lawson Coia.
A. Camden Lewis, of Lewis, Babcock & Griffin, L.L.P.,
of Columbia; Ronald K. Wray, II and Gray T. Culbreath,
both of Gallivan, White & Boyd, P.A., of Greenville; and
Robert Rivera, Jr. and Robert S. Safi, both of Susman
Godfrey L.L.P., of Houston, Texas, for Defendant Ace
Property and Casualty Insurance Company.
David C. Marshall, of Turner Padget Graham & Laney
P.A., of Columbia; and Alan G. Jones, of McAngus,
Goudelock & Courie, of Myrtle Beach, for Amicus
Curiae, South Carolina Defense Trial Attorneys'
Association.
David C. Marshall and R. Hawthorne Barrett, of Turner
Padget Graham & Laney P.A., of Columbia, for Amicus
Curiae, Property Casualty Insurance Association of
America.
JUSTICE KITTREDGE: We certified the following question from the United
States District Court for the District of South Carolina: "Can a legal malpractice
claim be assigned between adversaries in litigation in which the alleged legal
malpractice arose?" In answering the question "no," we adopt the majority rule
and hold that such assignments are void as against public policy.
I.
George Skipper, a citizen of Georgia, was involved in a motor vehicle accident
with a logging truck that was driven by Harold Moors and owned by Specialty
Logging, LLC (Specialty). Specialty had a commercial automobile insurance
policy with a $1,000,000 per occurrence limit (the Policy), which was issued by
ACE Property and Casualty Insurance Company (ACE). Following the accident,
Skipper retained an attorney who wrote a demand letter to ACE offering to settle
the case for the limits of the Policy. ACE retained two lawyers from Atlanta,
Brantley C. Rowlen and Erin Lawson Coia, to represent Specialty and Moors.
Specialty and Moors, through counsel, offered Skipper $50,000.
Not satisfied with the $50,000 offer, Skipper and his wife (the Skippers) filed a
lawsuit in the Allendale County Court of Common Pleas against Specialty and
Moors. Additional attempts to settle the case proved fruitless.
Unbeknownst to ACE or its attorneys, the Skippers entered into a settlement with
the allegedly at-fault defendants, Moors and Specialty. Moors, Specialty, and
Specialty's owner Michael Perry Bowers (collectively, Specialty Parties) agreed to
execute a Confession of Judgment for $4,500,000, in which they admitted liability
for the Skippers' injuries and losses. The Specialty Parties also agreed to pursue a
legal malpractice claim against ACE and its attorneys Rowlen and Coia
(collectively, Defendants) and assigned the predominant interest in that claim to
the Skippers.1 In exchange for the Specialty Parties' admission of liability, the
Skippers agreed not to execute the judgment as long as the Specialty Parties
cooperated in the legal malpractice litigation against Defendants.
Armed with the assignment, the Skippers and Specialty Parties (collectively,
Plaintiffs) filed a legal malpractice action against Defendants in the Allendale
County Court of Common Pleas. The case was removed to the United States
District Court for the District of South Carolina. In federal court, Defendants
asserted the assignment of the malpractice claim was invalid and that the Skippers
had no valid claims to assert. The parties filed competing motions, which (we are
informed) turn on whether the assignment to the Skippers was valid.
Because the question of whether a legal malpractice claim can be assigned between
adversaries in litigation in which the alleged malpractice arose is a novel question
in South Carolina, this Court accepted the certified question of United States
District Court Judge J. Michelle Childs.
II.
The majority rule in other jurisdictions is to prohibit the assignment of legal
malpractice claims between adversaries in the litigation in which the alleged
malpractice arose. See Edens Techs., LLC v. Kile Goekjian Reed & McManus,
PLLC, 675 F. Supp. 2d 75, 79 (D.D.C. 2009) ("[T]he majority of courts have found
that the costs to society outweigh the benefits and that overriding public policy
1
The terms of the assignment indicated that the Skippers would receive between
eighty-five and ninety-five percent of any proceeds from a settlement or judgment
in the legal malpractice case, even if that amount was less than the $4,500,000
Confession of Judgment.
concerns render these types of assignments invalid."). The most common reason
other courts have declined to permit assignments of legal malpractice claims is to
avoid the risk of collusion between the parties. Were we to permit such
assignments, plaintiffs and defendants would be incentivized to collude against the
defendant's attorney. When an original defendant is essentially relieved of
liability, there is little incentive for the consent judgment to reflect the actual loss.
As courts around the country have recognized, the potential for inflated damages in
such consent judgments is manifest. See id. ("Because the 'losing' party in the
consent judgment will never have to pay, nothing prevents the parties from
stipulating to artificially inflated damages that could serve as the basis for unjustly
high damages in the 'trial within a trial' phase of the subsequent malpractice
action."). This potential for collusion and inflated consent judgments undermines
the very nature of the jury system. See Prince v. Peterson, 538 P.2d 1325, 1329
(Utah 1975) (noting "[w]e frequently declare our commitment to the jury system,
under which it is the prerogative of lay citizens to determine questions of fact, both
as to liability and the fixing of damages"). Simply put, "[a] party should not be
permitted to transmute a claim against a penniless adversary into a claim against
the adversary's wealthier lawyer based on the lawyer's supposed negligence
towards the adversary." Alcman Servs. Corp. v. Bullock, 925 F. Supp. 252, 258
(D.N.J. 1996).
In addition to the heightened risk for collusion, permitting the assignment of legal
malpractice claims between adversaries threatens the integrity of the attorney-
client relationship. The relationship between an attorney and a client is a fiduciary
one by nature and "is founded on the trust and confidence reposed by one person in
the integrity and fidelity of another." Moore v. Moore, 360 S.C. 241, 250, 599
S.E.2d 467, 472 (Ct. App. 2004) (citations omitted). Permitting these assignments
would allow plaintiffs "to drive a wedge between the defense attorney and his
client by creating a conflict of interest." Zuniga v. Groce, Locke & Hebdon, 878
S.W.2d 313, 317 (Tex. App. 1994).
Moreover, permitting an assignment of a legal malpractice claim between
adversaries in litigation in which the alleged malpractice arose would lead to
disreputable role reversals in which the plaintiff-assignee would be required to take
a position "diametrically opposed" to its position in the underlying litigation. Id.The Court of Appeals of Texas detailed this role reversal in Zuniga:
In each assigned malpractice case, there would be a demeaning
reversal of roles. The two litigants would have to take positions
diametrically opposed to their positions during the underlying
litigation because the legal malpractice case requires a "suit within a
suit." To prove proximate cause, the client must show that his lawsuit
or defense would have been successful "but for" the attorney's
negligence. In the malpractice suit, the [plaintiff-assignees] would
argue that [the defendant-assignor] suffered judgment not on the
strength of the [plaintiff-assignees'] claim but because of attorney
negligence.
In the underlying tort case, the [plaintiff-assignees'] position was: we
have a valid tort case involving a defective . . . ladder [built by the
defendant assignor], and we will win the case on the merits even if
[the defendant-assignor's] lawyer represents it capably. But to prove
proximate cause in the legal malpractice case, the [plaintiff-assignees]
would have to take the contrary position: we would have lost our tort
case and [the defendant-assignor] would have prevailed if its lawyers
had capably defended our suit. [The defendant-assignor] would have
won the defective-ladder case if only its lawyers had used due care
and competence.
For the law to countenance this abrupt and shameless shift of
positions would give prominence (and substance) to the image that
lawyers will take any position, depending upon where the money lies,
and that litigation is a mere game and not a search for truth. It is one
thing for lawyers in our adversary system to represent clients with
whom they personally disagree; it is something quite different for
lawyers (and clients) to switch positions concerning the same incident
simply because an assignment and the law of proximate cause have
given them a financial interest in switching.
Id. (internal citations omitted).
We have carefully considered the arguments of Plaintiffs' able counsel urging this
Court to adopt the minority rule, but we find the majority rule more compelling
and persuasive. Accordingly, in South Carolina, the assignment of a legal
malpractice claim between adversaries in litigation in which the alleged
malpractice arose is prohibited.
CERTIFIED QUESTION ANSWERED.
TOAL, C.J., PLEICONES, BEATTY and HEARN, JJ., concur.