Eagle Mountain City v. Parsons Kinghorn & Harris, P.C.

This opinion is subject to revision before final
publication in the Pacific Reporter
2017 UT 31
IN THE
SUPREME COURT OF THE STATE OF UTAH
EAGLE MOUNTAIN CITY,
Appellant,
v.
PARSONS KINGHORN & HARRIS, P.C.,
Appellee.
PARSONS KINGHORN & HARRIS, P.C.,
Third-Party Plaintiff,
v.
WILLIAMS & HUNT, P.C.,
Third-Party Defendant.
No. 20150915
Filed June 7, 2017
On Direct Appeal
Fourth District, Spanish Fork
The Honorable James M. Brady
No. 130300194
Attorneys:
Mark O. Morris, Amber M. Mettler, Douglas P. Farr,
Salt Lake City, for appellant
Stuart H. Schultz, Byron G. Martin, Salt Lake City, for appellee
Phillip A Cole, Minneapolis, Minnesota, Timothy K. Conde,
Lauren A. Shurman, Salt Lake City, for third-party defendant
CHIEF JUSTICE DURRANT authored the opinion of the Court, in which
ASSOCIATE CHIEF JUSTICE LEE, JUSTICE DURHAM, JUSTICE HIMONAS, and
JUSTICE PEARCE joined.
EAGLE MOUNTAIN v. PARSONS KINGHORN
Opinion of the Court
CHIEF JUSTICE DURRANT, opinion of the Court:
Introduction
¶ 1 Eagle Mountain City (the City) brought this legal
malpractice action in its own name, but the district court concluded
the action is “tainted in some respect” because it was “born of” an
assignment. The court granted summary judgment, dismissing the
case without prejudice on the ground that the assignment of legal
malpractice claims violates public policy. We reverse. We hold that,
even assuming the City assigned its legal malpractice claim, this
assignment does not violate public policy.
¶ 2 The City entered into a contractual arrangement with Cedar
Valley Water Association (Cedar Valley) to share in any recovery
from this legal malpractice action brought against defendant Parsons
Kinghorn & Harris, P.C. (Parsons Kinghorn). The parties frame this
dispute in terms of whether this arrangement transferred sufficient
control over the malpractice claim from the City to Cedar Valley to
constitute an assignment. We view things differently. We conclude
that the more appropriate question is whether the voluntary
assignment of legal malpractice claims violates public policy as a
general matter. If it does not, there is no need to determine whether
the contractual arrangement in this case amounted to an assignment
of such a claim.
¶ 3 We hold that there is a strong presumption that legal
malpractice claims are voluntarily assignable, but we do not
foreclose the possibility that an assignment in a future case could
present such strong public policy concerns that it will be invalidated.
We reach this result because the public policy rationales articulated
by other courts are largely unpersuasive or inapplicable in our
jurisdiction given recent developments in the Utah Rules of Civil
Procedure and the Utah Rules of Professional Conduct. With these
procedural safeguards in place, legal malpractice claims are
presumed to be freely assignable, and the circumstances of this case
do not rebut that presumption.
Background
¶ 4 Cedar Valley sued the City in an earlier proceeding (the
Well Lawsuit), which ended when the City and Cedar Valley entered
into a settlement agreement and a contingent fee agreement
(collectively, Agreements). The Agreements contemplated that the
City would bring the lawsuit that is now before us—a legal
malpractice action—against its former attorneys, Parsons Kinghorn.
We first briefly describe the background of the Well Lawsuit,
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Opinion of the Court
providing details relevant to some of the policy considerations we
discuss below. We then describe the district court’s grant of
summary judgment in this case.
¶ 5 The Well Lawsuit arose out of a contract (the Capacity
Purchase Agreement) where the City agreed to purchase a well from
Cedar Valley. The Capacity Purchase Agreement provided that the
City would have an obligation to remit money to Cedar Valley if
certain triggering conditions occurred. Parsons Kinghorn advised
the City that the triggering conditions had not occurred, and it
accordingly advised the City not to remit any money to Cedar
Valley. Cedar Valley sought payment from the City, but Parsons
Kinghorn repeatedly advised the City that no payment was due.
¶ 6 In response, Cedar Valley brought the Well Lawsuit against
the City. That litigation focused on whether the triggering conditions
had occurred, requiring payment under the Capacity Purchase
Agreement. Cedar Valley, through its lawyers Snell & Wilmer,
advanced one interpretation of the contractual language describing
the triggering events, and the City, on the continued advice of
Parsons Kinghorn, offered a contrary interpretation. 1
¶ 7 Shortly before the Well Lawsuit was to go to trial, the City
and Cedar Valley entered into a settlement agreement, which
incorporated by reference a contingent fee agreement. The
Agreements impose conditions on the City’s ability to bring this
malpractice action and give Cedar Valley certain contractual rights
of control over the action. For example, the Agreements provide, in
relevant part:
As part of the Settlement Agreement, [the City] has
agreed to make demand and if needed file and
prosecute a complaint against [Parsons Kinghorn] . . .
alleging negligence and related malpractice claims
(“Lawsuit”), solely on the terms and conditions of this
Agreement.
....
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1 The City apparently continued to consult with Parsons
Kinghorn during the pendency of the Well Lawsuit, but because an
attorney of Parsons Kinghorn was a material witness in that case, the
City was represented by separate counsel, Williams & Hunt, P.C., in
that proceeding.
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EAGLE MOUNTAIN v. PARSONS KINGHORN
Opinion of the Court
[The] City and Cedar Valley desire to retain [Snell &
Wilmer] to bring the lawsuit against [Parsons
Kinghorn] . . . .
[C]ommunications between the jointly represented
Clients [the City and Cedar Valley] and Attorney [Snell
& Wilmer] are privileged as to third parties but are not
privileged as to the Clients which are being jointly
represented.
...
In the Settlement Agreement, [the] City and Cedar
Valley agreed that after payment of costs, each would
receive one-third . . . of the recovery, if any, from
[Parsons Kinghorn] in the Lawsuit.
...
Clients each agree that [Snell & Wilmer] is entitled to
one-third (1/3) of the sums recovered from [Parsons
Kinghorn] (including its insurers), after out of pocket
costs are first deducted from such recovery.
...
[A]ll costs incurred in connection with the Lawsuit
shall be paid by Cedar Valley, but all amount of such
Costs shall be first repaid from any recovery received.
...
In the event that [Parsons Kinghorn] and/or its
insurer(s) make an offer of settlement to Clients, and
they cannot mutually agree on the terms of negotiated
settlement of the Lawsuit, then the clients agree to first
negotiate in good faith. Failing an agreement then, the
parties shall mediate their dispute before a
mediator . . . . In the event the dispute is not resolved
by mediation, each of the Clients shall select an
arbitrator and the two selected arbitrators shall select a
third arbitrator. . . . The decision of the three arbitrators
regarding whether to accept or reject the pending offer
shall be binding on the Clients.
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Opinion of the Court
¶ 8 The City brought the current lawsuit in its own name in
December 2013, pleading legal malpractice under both tort and
contract theories. A little more than a year later, in February 2015,
Parsons Kinghorn filed a motion for summary judgment, seeking to
have the suit dismissed on the ground that the City—through the
Agreements—assigned its legal malpractice claim to Cedar Valley
and that such an assignment violates public policy.
¶ 9 The district court agreed with Parsons Kinghorn that the
Agreements constituted at least a partial assignment of the legal
malpractice claim, which the court determined violated public
policy. In particular, the district court concluded that, although the
Agreements did not “express[ly] assign[]” the legal malpractice
claim, “it is obvious that the Agreements transfer to [Cedar Valley] a
substantial level of control over the litigation decisions and a
substantial portion of [the City’s] property rights.” The court granted
summary judgment in favor of Parsons Kinghorn, dismissing the
case without prejudice, but attaching certain conditions to the City’s
ability to re-file. The court ordered that, as a condition of re-filing,
the City must “satisf[y] the Court that [the legal malpractice claim]
will be prosecuted independently of the settlement agreement. To do
so, at a minimum, [the City] needs to establish that its litigation is
not controlled in any way by [Cedar Valley], and that [the City] is
not represented by attorneys associated with [Cedar Valley.]”
¶ 10 The City appeals. First, it argues that the district court erred
in concluding that the Agreements amounted to an assignment of its
legal malpractice claim. Second, it argues that its contractual
arrangement with Cedar Valley does not violate public policy. We
have jurisdiction under Utah Code section 78A-3-102(3)(j).
Standard of Review
¶ 11 The issue on appeal is whether the district court properly
granted summary judgment in favor of Parsons Kinghorn on the
City’s legal malpractice claim. Summary judgment is appropriate
only where “there is no genuine dispute as to any material fact and
the moving party is entitled to judgment as a matter of law.” 2 We
“review[] a summary judgment for correctness, giving no deference
to the [district] court’s decision.” 3
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2 UTAH R. CIV. P. 56(a).
3 Bahr v. Imus, 2011 UT 19, ¶ 15, 250 P.3d 56.
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EAGLE MOUNTAIN v. PARSONS KINGHORN
Opinion of the Court
Analysis
¶ 12 We begin by explaining why we need not consider the
parties’ arguments regarding whether the City relinquished
sufficient rights to control its legal malpractice claim that it can be
said to have assigned that claim. We instead assume that the City’s
arrangement with Cedar Valley amounted to an assignment. We
then consider the public policy concerns articulated by other courts,
concluding that they are unpersuasive in view of the current
procedural and ethical safeguards of our legal system. Because we
view our system as well-equipped to sort the wheat of these claims
from the chaff—whether the action is brought by the alleged victim
of malpractice or the victim’s assignee—we hold that legal
malpractice claims are presumed to be voluntarily assignable. But
we leave open the possibility that in a future case such an
assignment could violate clearly expressed and compelling public
policy concerns and thus be invalid.
I. We Assume the Contractual Arrangement Between the City and
Cedar Valley Amounted to an Assignment of a
Legal Malpractice Claim
¶ 13 The parties have focused their arguments on whether the
Agreements amounted to an assignment of a legal malpractice
claim. 4 We think this approach asks the wrong question. These
arguments are based on caselaw from other jurisdictions that have
expressly concluded that the assignment of legal malpractice claims
_____________________________________________________________
4 The City argues that the Agreements did not transfer sufficient
control over the litigation to amount to an assignment. It claims that
Cedar Valley received only a right to recover a portion of the
proceeds from the claim, not the claim itself. Parsons Kinghorn
counters that Cedar Valley received contractual rights of control over
numerous aspects of the malpractice action, in addition to a portion
of the proceeds, and therefore received a partial assignment of the
legal malpractice claim. For example, Parsons Kinghorn argues that
Cedar Valley received the contractual right to compel this lawsuit to
be brought. It also points out that the City is required to “obtain
prior approval by [Cedar Valley] before it can settle the claim, or if
the parties disagree, ultimately submit its rights to settle its case to
binding arbitration.” Finally, it notes that Cedar Valley has the
contractual right to receive a portion of the recovery obtained in this
suit, and it is responsible for fronting all costs in the malpractice
action, to be reimbursed out of any recovery.
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Opinion of the Court
violates public policy. In those cases, courts have been forced to
draw lines between permissible and impermissible levels of control
over a legal malpractice claim. 5 But these arguments and the difficult
line-drawing they entail signal to us that we should hesitate to
embark on this path unless we are first convinced that the
assignment of legal malpractice claims violates public policy. If it
does not, arguments regarding how much control is sufficient to
constitute an assignment are simply irrelevant.
¶ 14 We conclude that the better approach is to first determine
whether the assignment of legal malpractice claims violates public
policy as a general matter. We turn to that task now, examining
public policy rationales that have been articulated by other courts.
II. There Is a Strong Presumption that the Voluntary Assignment of a
Legal Malpractice Claim Does Not Violate Public Policy
¶ 15 The question is whether public policy prohibits the
voluntary assignment of legal malpractice claims. We first note that,
before wading into the public policy arena, this court, like many
others, indulges in a strong presumption of freedom of contract. We
have long held that “[f]or a contract to be void on the basis of public
policy, ‘there must be a showing free from doubt that the contract is
against public policy.’” 6 A corollary of this principle is that a contract
will be held to violate public policy only where it violates a “well-
defined and dominant” policy. 7 When pressed at oral argument,
counsel for Parsons Kinghorn described the assignment of legal
malpractice claims as—at worst—“unseemly.” But even if we agreed
_____________________________________________________________
5 Compare Davis v. Scott, 320 S.W.3d 87, 91 (Ky. 2010) (“This level
of control over a lawsuit is consistent with an assignment of the
entire cause of action, not merely the proceeds of the litigation.”),
with Weston v. Dowty, 414 N.W.2d 165, 167 (Mich. Ct. App. 1987)
(“Since plaintiffs agreed to assign only a portion of their recovery, if
any, from the malpractice suit, and since they did not specifically
assign the claim or cause of action . . . , we conclude that no
assignment of a legal malpractice action occurred.”).
Ockey v. Lehmer, 2008 UT 37, ¶ 21, 189 P.3d 51 (quoting Frailey v.
6
McGarry, 211 P.2d 840, 847 (Utah 1949)).
7 See, e.g., State Farm Mut. Auto. Ins. Co. v. Koshy, 995 A.2d 651, 665
(Me. 2010) (“A contract is unenforceable as violating public policy
. . . only if it violates a well-defined and dominant policy that may be
ascertained from the law and legal precedent.”).
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EAGLE MOUNTAIN v. PARSONS KINGHORN
Opinion of the Court
with that characterization, there is no basis in our law for overriding
freedom of contract simply because the result would be “unseemly.”
Instead, we approach this task by asking whether the assignment of
legal malpractice claims violates a clear and compelling public
policy.
¶ 16 In looking for such a policy against the assignment of legal
malpractice claims, we start with the fact that we have already
recognized that the involuntary assignment of these claims through
bankruptcy does not violate public policy. 8 In upholding these
involuntary assignments, we recognized that the public policy
interest in allowing access to our courts outweighed any
countervailing policy concerns. 9
¶ 17 Parsons Kinghorn asks us to take a different approach to
voluntary assignments. It contends that the voluntary assignment of
legal malpractice claims violates public policy as a general matter.
The implication of this argument is that we need not look to the
specific circumstances of a case to see whether any particular public
policy concerns are implicated by its facts, but that there should
simply be a blanket prohibition.
¶ 18 We reject this invitation to make such a categorical
prohibition. Instead, we examine the concerns articulated by other
courts, explaining that each of these concerns is significantly
mitigated by safeguards found in the Utah Rules of Professional
Conduct and the Utah Rules of Civil Procedure. The concerns can be
summarized into four general categories: 1) commoditizing and
merchandising of legal malpractice claims; 2) despoiling the sanctity
of the attorney-client relationship; 3) sowing the opportunity and
incentive for collusion; and 4) fostering public loss of respect for the
legal profession. After considering each in turn, we conclude that
these concerns do not justify prohibiting the assignment of legal
malpractice claims.
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8 See, e.g., Snow, Nuffer, Engstrom & Drake v. Tanasse, 1999 UT 49,
¶ 13, 980 P.2d 208.
9 Id. (“We are reluctant to permit the denial of access to our courts
by persons asserting negligence claims against lawyers in this
fashion.”).
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Opinion of the Court
A. Concerns Regarding Commoditizing or Merchandising of Legal
Malpractice Claims
¶ 19 Many courts expressing commoditization concerns about
the assignment of legal malpractice claims base their reasoning on a
1976 opinion by the California Court of Appeals, Goodley v. Wank &
Wank, Inc. 10 There, the court reasoned, without citation to authority,
that permitting the assignment of legal malpractice claims would
spawn a flurry of meritless litigation and debase the legal profession.
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, and
who have never had any prior connection with the
assignor or his rights. The commercial aspect of
assignability of choses in action arising out of legal
malpractice 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.11
¶ 20 As an initial matter, courts that express these types of
concerns typically echo the Goodley court’s qualms about the
marketing of legal malpractice claims to investors who are
essentially strangers to the underlying subject matter. Some courts
have recognized that where the purchaser of a legal malpractice
claim has an “intimate connection” with the underlying case, the
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10 133 Cal. Rptr. 83 (Cal. Ct. App. 1976).
11 Id. at 87.
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EAGLE MOUNTAIN v. PARSONS KINGHORN
Opinion of the Court
concerns of commoditization are not present. 12 In the case at hand,
Cedar Valley had an “intimate connection” with the underlying case
by virtue of being a party in the underlying contract that formed the
basis for the malpractice action; so we are not presented with
concerns of open market commoditization.
¶ 21 But even if Cedar Valley were a stranger to the underlying
transaction, we still would not conclude that these concerns are
justified. First, the California Court of Appeals has, in dicta,
questioned the continued validity of the Goodley court’s holding:
Yet there is a legitimate question whether [the Goodley
court’s] view of the legal profession comports with the
evolved attorney client relationship of today. The
explanation that allowing the assignment of claims
would unduly “debase” and “commercialize” the
profession may very well have reflected the popular
view in 1976. However, the fears which motivated
Goodley’s defense of an idealized attorney-client
relationship are open to some doubt 25 years later.
Legal actions against attorneys are now common, and
the risk that assignments of claims will generate
unfounded litigation unfairly burdening judicial
dockets may be too speculative to justify continuing
the prohibition. . . . [T]he continued viability of this
rule created by intermediate appellate courts, has not
yet been tested by the scrutiny of our high court. 13
¶ 22 Other courts have likewise concluded that these
commoditization concerns are speculative. 14 We agree. The
speculative nature of these concerns is magnified by the fact that
_____________________________________________________________
See, e.g., Thurston v. Cont’l Cas. Co., 567 A.2d 922, 923 (Me. 1989)
12
(“We are not here confronted with the establishment of a general
market for [legal malpractice] claims; this assignee has an intimate
connection with the underlying lawsuit.”).
13 Musser v. Provencher, 109 Cal. Rptr. 2d 214, 227 n.7 (Cal. Ct.
App. 2001), review granted and opinion superseded, 31 P.3d 1271 (Cal.
2001), and aff’d, 48 P.3d 408 (Cal. 2002).
14See, e.g., Kommavongsa v. Haskell, 67 P.3d 1068, 1078 (Wash.
2003) (rejecting the argument that commoditization would be a
concern because “[p]ersonal injury claims have been assignable in
Washington for years” and the court “ha[d] not seen a lucrative
business arise in the factoring of those claims”).
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Opinion of the Court
several states allow assignment of legal malpractice claims in certain
circumstances, and those states have not reported significant
problems or been forced to overrule their precedent and abandon the
practice. 15 We also note that even courts that prohibit the assignment
of legal malpractice claims have allowed the assignment of
malpractice claims against other professionals, such as accountants. 16
We see little reason to single out lawyers for protection against
malpractice claim assignment when the legal system forces other
professionals to face their clients’ assignees for alleged malpractice.
¶ 23 We expect that, as the California Court of Appeals itself has
noted, some of the concerns that animated courts nearly half a
century ago to forbid the assignment of legal malpractice claims are
no longer present in the current legal system. We discuss two
changes of particular importance: first, the evolution of rule 11 as an
effective deterrent of frivolous claims, and second, the trends toward
reduced concerns regarding the ancient doctrine of champerty and
broader acceptance of third-party litigation funding.
¶ 24 First, in the last forty years there have been significant
changes to rule 11 of the rules of civil procedure—a rule that
prohibits attorneys and unrepresented parties from, among other
things, presenting frivolous claims. 17 The Federal Rules of Civil
_____________________________________________________________
15 See, e.g., New Hampshire Ins. Co. v. McCann, 707 N.E.2d 332, 337
(Mass. 1999) (“We suspect that fear of ‘open trading’ is based in part
on outmoded concepts and protectionism. We ‘have long abandoned
the view that litigation is suspect,’ and have recently abolished the
rule against champerty, now permitting the litigation of claims
financed by others in return for their receipt of a portion of the
proceeds of the litigation. There is nothing to show that, in those
jurisdictions that permit the voluntary assignment of a malpractice
claim, there has been an increase in baseless lawsuits.” (citation
omitted)).
16 See, e.g., KPMG Peat Marwick v. Nat’l Union Fire Ins. Co. of
Pittsburgh, Pa., 765 So. 2d 36 (Fla. 2000); First Cmty. Bank & Tr. v.
Kelley, Hardesty, Smith & Co., 663 N.E.2d 218 (Ind. Ct. App. 1996).
17 See UTAH R. CIV. P. 11(c) (“If . . . the court determines that” a
suit is frivolous, “the court may . . . impose an appropriate sanction
upon the attorneys, law firms, or parties that . . . are responsible for
the violation.”).
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Opinion of the Court
Procedure often serve as models for states, 18 and the federal version
of rule 11 was amended in 1983 to specifically give the rule teeth.19
Prior to this amendment, the rule “failed to deter abuses in
litigation,” in part because the rule lacked clarity, which made state
and federal courts hesitant to impose sanctions under it. 20
This ineffectiveness resulted from several deficiencies
in the Rule. For example, the standard requiring ‘good
ground to support’ a pleading was vague. Under this
standard, an attorney was required to investigate facts
and present them ‘to the best of his knowledge,
information, and belief.’ Courts interpreted this as a
subjective and rather vague requirement of good faith
and were reluctant to impose sanctions under it. In
addition, the only improper purpose for conducting
litigation acknowledged by the original Rule was
delay. The Rule failed to recognize that litigation can be
conducted for other improper purposes, such as to
mislead the court, to harrass an opponent, to impose
defense costs, or to pressure an opponent into a
settlement. Last, courts were reluctant to invoke the
_____________________________________________________________
18 While commentators have noted that the recent trend is against
states modeling their procedural rules on the federal system, the
1983 amendment to rule 11, which as discussed below substantially
bolstered that rule’s breadth and effectiveness at curbing meritless
litigation, was adopted by many states, including Utah. John B.
Oakley, A Fresh Look at the Federal Rules in State Courts, 3 NEV. L.J.
354, 382 (2003).
19 In fact, the 1983 amendments to rule 11 sharpened its fangs so
much that commentators criticized the amendments for “foster[ing]
excessive and costly litigation unrelated to the merits,” and federal
rule 11 was amended in 1993 to address some of these concerns.
Margaret L. Sanner & Carl Tobias, Rule 11 and Rule Revision, 37 LOY.
L.A. L. REV. 573, 582 (2004).
20Julia K. Cowles, Rule 11 of the Federal Rules of Civil Procedure and
the Duty to Withdraw a Baseless Pleading, 56 FORDHAM L. REV. 697, 700
(1988) (“Experience showed that in practice Rule 11 failed to deter
abuses in litigation. Courts found the Rule difficult to apply and
enforce and so were reluctant to use it.” (footnotes omitted)).
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Rule because they viewed the striking of a faulty
pleading as a harsh penalty. 21
¶ 25 But today, the rule has been refined into a tool that courts
use frequently to “deter repetition” in “presenting . . . to the court”
claims that are frivolous and factual contentions that lack
evidentiary support or a likelihood of such support after further
investigation or discovery. 22 We are aware of no court to have
explained why rule 11, in its current form, is insufficient to deal with
whatever increase there might be in frivolous legal malpractice suits
arising from permitting assignment of these claims.
¶ 26 Second, the Goodley court’s concerns about commoditization
spurring an increase in litigation fail to account for the increase in
meritorious litigation that these assignments will enable.
“[P]romot[ing] champerty” is no longer the pressing concern to
courts that it once was. 23 The doctrines of champerty and
maintenance seek to curb powerful intermeddlers from subverting
the legal process by acquiring an interest in litigation that otherwise
does not concern them. 24 These doctrines—with their attendant
suspicion of third parties meddling in litigation—trace their roots to
the English common law. 25 But the primary concerns that motivated
these ancient prohibitions are no longer present in today’s society,
and to the extent they remain, they are adequately addressed by
other legal mechanisms. 26 Courts have accordingly moved away
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21 Id. at 700–01 (footnotes omitted).
22 UTAH R. CIV. P. 11(b), (c)(2).
23 133 Cal. Rptr. at 87.
24 See Note, Modern Views of Champerty and Maintenance, 18 HARV.
L. REV. 222, 222–23 (1905) (“The object [of champerty and
maintenance] was to prevent intimidation of the courts by the great
lords, who by enlisting in suits in which they had no proper interest,
overawed courts and juries, and perverted ‘the remedial process of
the law into an engine of oppression.’” (citation omitted)).
25In fact, their roots go still deeper, likely back to the concept of
“sycophancy” in ancient Greece. See Max Radin, Maintenance by
Champerty, 24 CAL. L. REV. 48, 48–51 (1935).
26For example, in Saladini v. Righellis, the Supreme Judicial Court
of Massachusetts explained that it “no longer [is] persuaded that the
champerty doctrine is needed to protect against the evils once feared:
speculation in lawsuits, the bringing of frivolous lawsuits, or
(Continued)
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Opinion of the Court
from limiting litigation funding in favor of increasing access to
justice. This shift recognizes the inherent inequity in allowing a
citizen’s financial means to curtail his or her ability to vindicate legal
rights. Our decision in Snow, Nuffer, Engstrom & Drake v. Tanasse to
uphold the involuntary assignment of legal malpractice claims
represents one illustration of a broader movement away from
unduly protecting attorneys at the expense of their clients’ ability to
access the courts. 27 We continue to adhere to that view today, and
we reject commoditization concerns as misplaced and out of touch
with the current realities of our society and legal system. We next
discuss why we do not share other courts’ concerns that allowing
assignment of legal malpractice claims imperils the sanctity of the
attorney-client relationship.
B. Concerns About the Effect of Assignment on the “Sanctity of the
Attorney-Client Relationship”
¶ 27 Courts have expressed concern that allowing the assignment
of legal malpractice claims will “embarrass the attorney-client
relationship and imperil the sanctity of the highly confidential and
fiduciary relationship existing between attorney and client.”28
financial overreaching by a party of superior bargaining position.”
687 N.E.2d 1224, 1226 (Mass. 1997). The court reasoned that “[t]here
are now other devices that more effectively accomplish these ends.”
Id. at 1226–27. As examples of these other devices, the Saladini court
pointed to that jurisdiction’s rules of professional conduct and rule
11 of its rules of civil procedure. Id. at 1227.
We also note that it is not at all clear why an investor would
choose to purchase a lawsuit that appeared to be frivolous. See
Anglo-Dutch Petroleum Int’l, Inc. v. Haskell, 193 S.W.3d 87, 104–05
(Tex. App. 2006) (“It is doubtful that litigation funding agreements,
. . . in which the investor has no right to repayment unless the
plaintiff receives a recovery, serve to increase litigation. Presumably,
prior to making an investment . . . , an investor would consider the
merits of the suit and make a calculated risk assessment on the
probability of a return on its investment. An investor would be
unlikely to invest funds in a frivolous lawsuit, when its only chance
of recovery is contingent upon the success of the lawsuit.”).
27 1999 UT 49, ¶ 13 (“We are reluctant to permit the denial of
access to our courts by persons asserting negligence claims against
lawyers in this fashion.”).
28 Goodley, 133 Cal. Rptr. at 87.
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Concerns regarding the attorney-client relationship often trace back
to Picadilly, Inc. v. Raikos, where the Indiana Supreme Court
described two problems it concluded would arise if these
assignments were permitted: 1) the fear of assignment would cause
attorneys to temper their zealous advocacy; and 2) the assignment
would interfere with the attorney-client privilege. 29 We are not
persuaded by either justification.
1. Concerns that Attorneys Will Temper Their Zealous Advocacy
¶ 28 The Picadilly court expressed concern that “[a]n attorney’s
loyalty is likely to be weakened by the knowledge that a client can
sell off a malpractice claim, particularly if an adversary can buy it.”30
According to this line of reasoning, the knowledge that a legal
malpractice claim could be assigned will become “an important
bargaining chip” in settlement negotiations. 31 Courts have also
suggested that permitting assignment would allow an adversary to
“drive a wedge” between client and attorney “by creating a conflict
of interest.”32 We find none of these concerns persuasive.
¶ 29 Regarding zealous advocacy, the Picadilly court suggested
that
If an attorney is providing zealous representation to a
client, the client’s adversary will likely be motivated to
strike back at the attorney in any permissible fashion. If
an adversary can retaliate by buying up a client’s
malpractice action, attorneys will begin to rethink the
wisdom of zealous advocacy. 33
We find this reasoning tenuous. A number of courts have described
this concern as “farfetched,” 34 and we agree. 35 We are not convinced
_____________________________________________________________
29 582 N.E.2d 338, 342 (Ind. 1991).
30 Id.
31 Id. at 343.
32Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313, 317 (Tex. App.
1994).
33 Picadilly, 582 N.E.2d at 342.
34New Hampshire Ins. Co., 707 N.E.2d at 336–37 (“It is farfetched to
imagine that a lawyer will be discouraged from zealously
representing a client out of fear that the client may later offer a
malpractice action against the lawyer as a part of the resolution of
(Continued)
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Opinion of the Court
that attorneys will “strike back” at their adversaries by obtaining and
prosecuting unmeritorious legal malpractice actions. If they do so,
they face not only the bulwark of rule 11, but the threat of
professional sanctions for violating the rules of professional
conduct. 36 The desire to “strike back” does not seem likely to
outweigh these significant deterrents. Further, the concern that
attorneys will temper their zeal fails to account for the fact that
attorneys are ethically obligated to act “with zeal in advocacy upon
the client’s behalf.” 37 We find it unlikely that an attorney would
choose not to zealously pursue a client’s claims out of fear of
assignment for the simple reason that by doing so the attorney
would likely be giving the client grounds for bringing a malpractice
claim.
¶ 30 We are also unconvinced by the concern regarding conflicts
of interest. Courts have suggested that, as soon as the topic of
assigning a legal malpractice claim rears its head in settlement talks,
another case.”); Gregory v. Lovlien, 26 P.3d 180, 184 n.6 (Or. Ct. App.
2001) (“We note, as [other] courts have, that some of the concerns
that typically are cited appear overstated. . . . [T]he risk that a future
assignment of the client’s malpractice claim to an adversary will
temper an attorney’s present representation of his or her client seems
remote at best. It may ensure that the attorney provides better
representation.”).
35 Commentators, too, have criticized this argument. See, e.g.,
Kevin Pennell, Note, On the Assignment of Legal Malpractice Claims: A
Contractual Solution to a Contractual Problem, 82 TEX. L. REV. 481, 498
(2003) (“The major flaw in this argument is that it assumes that
parties will not act rationally when settling their disputes. . . . [I]f all
parties behave rationally, then a legal malpractice claim against an
attorney who has zealously and effectively represented his client is
worth nothing. An attorney who fears his client will assign his legal
malpractice claim to the client’s adversary will thus have more
incentive to zealously represent his client, not less.”).
36 UTAH R. PROF’L CONDUCT 3.1 (“A lawyer shall not bring or
defend a proceeding, or assert or controvert an issue therein, unless
there is a basis in law and fact for doing so that is not
frivolous . . . .”).
37 UTAH R. PROF’L CONDUCT 1.3, cmt 1 (“A lawyer must act with
commitment and dedication to the interests of the client and with
zeal in advocacy upon the client’s behalf.”).
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attorneys will be forced to send their clients to receive the
independent advice of another lawyer because of the conflict of
interest inherent in advising a client on the propriety of a settlement
involving the assignment of a legal malpractice claim. 38 We
understand the forces animating this concern, and we recognize that
the need to bring in separate counsel could increase the expense for
parties seeking to negotiate settlement of their disputes. But the
assignment of a legal malpractice claim may be a pertinent
consideration for the parties to the settlement agreement, and if an
attorney would be exposed to a conflict of interest necessitating the
services of an independent attorney to advise the client on the
settlement offer, then that is a necessary cost of litigating a dispute.
Foreclosing this option by prohibiting assignment would frustrate
opposing counsel’s ability to highlight the potential malpractice of
an adversary.
¶ 31 This case illustrates the benefits that would be lost by
prohibiting assignment: the adversary, who may be in the best
position of all to investigate and discover the legal malpractice of an
opponent, can negotiate with the victim in a way that allows the
victim to recognize the value of its legal malpractice claim. We fail to
see how the additional expense that could be incurred if conflicts
arise outweighs the benefits that attend permitting such
assignments.
2. Concerns that Permitting Assignment Will Do Violence to the
Attorney-Client Privilege
¶ 32 The Picadilly court also expressed concern that allowing
assignment could strain attorneys’ duty to maintain client
confidentiality. One court reiterated the concern as follows:
[T]he Picadilly court observed that once a client sues his
attorney, the attorney is permitted to disclose
confidential client information that is reasonably
necessary to establish a defense. So long as the client
maintains control over the suit, the scope of the
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38 Picadilly, 582 N.E.2d at 343 (“An adversary might well make a
favorable settlement offer to a judgment-proof or financially
strapped client in exchange for the assignment of that client’s right to
bring a malpractice claim against his attorney. Lawyers involved in
such negotiations would quickly realize that the interests of their
clients were incompatible with their own self-interest.”).
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Opinion of the Court
disclosure can be limited by the client’s power to drop
the claim. Once the client assigns the claim, the client’s
control over the litigation is lost, but the attorney’s
right to defend by revealing client information
survives. 39
¶ 33 But this concern overlooks the fact that the client waives—to
an extent—the attorney-client privilege by bringing a legal
malpractice claim. 40 The waiver is no broader whether it is the client
or the client’s assignee bringing the malpractice claim. 41 We expect
that those courts that have expressed concern about the attorney-
client privilege may have been concerned about overbroad waivers,
but our rules of professional conduct specifically delineate the scope
of waiver for defending against a legal malpractice claim, 42 and we
see no reason to go beyond that by outright prohibiting the
assignment of the claim. Concerns regarding the attorney-client
privilege are just as likely to be implicated when a legal malpractice
claim is involuntarily assigned through the bankruptcy process, but
we have concluded such transfers do not violate public policy as a
general matter. 43 We likewise do not see the attorney-client privilege
concerns as justifying a barrier to voluntary assignments.
¶ 34 In short, concerns regarding the attorney-client relationship
do not justify a blanket prohibition on the assignment of malpractice
_____________________________________________________________
39 Kommavongsa, 67 P.3d at 1074.
40 UTAH R. PROF’L CONDUCT 1.6(b)(5) (“A lawyer may reveal
information relating to the representation of a client to the extent the
lawyer reasonably believes necessary: . . . to establish a claim or
defense on behalf of the lawyer in a controversy between the lawyer
and the client . . . or to respond to allegations in any proceeding
concerning the lawyer’s representation of the client.”).
41 Kommavongsa, 67 P.3d at 1078 (“Although certainly a client who
assigns the legal malpractice claim loses control over the lawsuit,
and cannot drop the lawsuit upon realizing the full extent of the
waiver, the waiver itself is no broader if the claim is assigned than if
the client brings the lawsuit himself or herself—the attorney must
still preserve those confidences and secrets that are not reasonably
necessary to the defense of the claim.”).
42 Supra ¶ 33 n.40.
43 See Tanasse, 1999 UT 49, ¶ 13.
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claims. Next we discuss why we likewise do not see the opportunity
and incentive for collusion to be intolerable.
C. Concerns Regarding the Opportunity and Incentive for Collusion
¶ 35 Courts have expressed concern that permitting the
assignment of legal malpractice claims yields too fertile an
environment for collusion. Courts have reasoned that “[p]ermitting
an assignment of a legal malpractice claim to the adversary in the
underlying litigation that gave rise to the legal malpractice claim . . .
creates the opportunity and incentive for collusion in stipulating to
damages in exchange for an agreement not to execute on the
judgment in the underlying litigation.”44 The concern is that,
“[b]ecause 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.” 45
¶ 36 While courts have phrased the question broadly—whether
any assignment “to an adversary in the underlying litigation” must
be prohibited as fostering an opportunity for collusion—a close
inspection of these cases reveals that they invariably involve the
following: 1) a defendant in the underlying case stipulating to a
consent judgment; 2) an assignment of a legal malpractice claim
against the defendant’s litigation counsel; and 3) a promise not
enforce the judgment as long as there is cooperation in the
malpractice action. 46
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44 Gurski v. Rosenblum & Filan, LLC, 885 A.2d 163, 174 (Conn.
2005).
Edens Techs., LLC v. Kile Goekjian Reed & McManus, PLLC, 675 F.
45
Supp. 2d 75, 79 (D.D.C. 2009).
46 See, e.g., id.; Skipper v. ACE Prop. & Cas. Ins. Co., 775 S.E.2d 37, 38
(S.C. 2015) (“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. . . . 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.”).
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Opinion of the Court
¶ 37 We first note that we are not faced with such an
arrangement here. In this case, there is no contractual term providing
that the City will owe nothing to Cedar Valley if it signs over its
legal malpractice claim. We cannot see how the opportunity and
incentive for collusion are intolerably strong where the defendant in
the underlying proceeding still feels the sting of the original
judgment. 47 If the assignor does not obtain a promise that the
assignee will not execute, its incentive to collude is drastically
diminished, because the assignor will remain responsible for the
judgment.
¶ 38 So the most realistic collusion concerns are not present here.
But even if they were, we do not view this concern as necessitating a
blanket ban on assignment. To do so, we would have to ignore our
legal system’s significant procedural safeguards that operate to
expose and extinguish unmeritorious claims. We have discussed a
number of these above, and we reiterate them briefly here.
¶ 39 As noted above, rule 11 operates to cull frivolous lawsuits
and impose sanctions on parties and attorneys who foster them.48
Second, a party who brings a malpractice action that is the product
of collusion will have to survive motions to dismiss and for
summary judgment. Even if the claim can survive these procedural
gatekeepers, the plaintiff bringing the collusive suit will have to face
the jury, and the facts regarding the opportunity and incentive for
collusion will be on full display. Attorneys who bring collusive,
frivolous claims will be subject to ethical repercussions. 49
¶ 40 We have confidence that these serious deterrents are
sufficient to discourage attorneys considering concocting a scheme to
inflate damages and then bring a legal malpractice action against a
former adversary’s attorney. To conclude that the assignment of
_____________________________________________________________
47See, e.g., Edens, 675 F. Supp. 2d at 79 (“Edens had no incentive
to contest the extent of damages, because as long as it secured from
Golf Tech a promise not to execute on the judgment, Edens would
never have to pay anything. It is evident from the Settlement
Agreement that there was no reason for Edens to try to minimize
damages.”).
48 See supra ¶ 25.
49 UTAH R. PROF’L CONDUCT 3.1 (“A lawyer shall not bring or
defend a proceeding, or assert or controvert an issue therein, unless
there is a basis in law and fact for doing so that is not
frivolous . . . .”).
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Opinion of the Court
legal malpractice claims must be prohibited assumes that our legal
system is insufficient to ferret out unmeritorious claims. We are not
so skeptical of the process that we would ban these assignments out
of fear of potential collusion.
D. Concerns Regarding a Public Loss of Respect for the Legal System
¶ 41 Finally, courts have expressed concern that the public may
lose respect for the legal system if they observe lawyers
“shameless[ly] shift [] positions” between an underlying action and a
subsequent malpractice trial. 50 The problem arises when the assignee
of a legal malpractice claim attempts to prove causation. To do so,
the assignee must prove that the judgment it obtained in the
underlying proceeding was obtained solely due to the malpractice of
litigation counsel in that underlying case, and not because the
defendant was indeed liable.
¶ 42 To illustrate, consider a personal injury action. After
securing a judgment against the defendant, the plaintiff promises not
to execute on it in exchange for the defendant’s assignment of a
malpractice action based upon the defendant’s attorney’s
purportedly negligent conduct in that action. The subsequent
malpractice action’s trial-within-a-trial will feature the assignee
attempting to show that, but for the defendant’s attorney’s negligent
performance in the underlying case, no judgment would have been
obtained. That would require the plaintiff to show that the defendant
was not negligent, or that the defendant’s negligence did not cause
the plaintiff’s injury—diametrically opposite positions to those taken
in the underlying suit. 51
¶ 43 Courts have identified this switch of positions as intolerable
because in their view it demeans the legal profession. One court
expressed the concern as follows:
[T]he “trial within a trial” that necessarily characterizes
most legal malpractice claims arising from the same
litigation that gave rise to the malpractice claim would
lead to abrupt and shameless shift of positions that
would give prominence (and substance) to the
perception that lawyers will take any position,
depending upon where the money lies, and that
_____________________________________________________________
50 See, e.g., Zuniga, 878 S.W.2d at 318.
51 See id.
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Opinion of the Court
litigation is a mere game and not a search for truth,
thereby demeaning the legal profession. 52
Courts have expressed concern that jurors seeing such a position
shift “would rightly leave the courtroom with less regard for the law
and the legal profession than they had when they entered.” 53
¶ 44 We note first that the identified “shameless shift of
positions” is not present in all legal malpractice assignments. “The
fact that an attorney might be called on to defend against an
assigned malpractice claim does not always mean that the attorney’s
former adversary will compromise the strength of his underlying
claim, resulting in some sort of role reversal which diminishes public
confidence in the legal profession.” 54 Even the Picadilly court—one of
the first to raise this concern—recognized that “[s]hifts in position
are inevitable as long as clients are allowed to bring malpractice
claims, and attorneys are permitted to fight them.” 55
¶ 45 The case before us does not feature a shameless shift of
positions. Here, no attorney needs to take a position directly
contrary to one argued earlier. The attorneys defending Parsons
Kinghorn may present the same theory of the Capacity Purchase
_____________________________________________________________
52 Kommavongsa, 67 P.3d at 1078.
53 Picadilly, 582 N.E.2d at 345.
54 New Hampshire Ins. Co., 707 N.E.2d at 337. The New Hampshire
Ins. Co. court went on to recognize that
It could be argued just as forcefully that, providing shelter for
attorneys by prohibiting the voluntary assignment of malpractice
claims, would actually diminish public confidence in the
profession by creating the perception that the system provides
attorneys with unjustified special protection. . . . “Rather than
helping the image of the legal profession, a rule of non-
assignability would give the impression that the profession has
something to hide, that the courts are taking care of their own. A
more favorable image will be projected by an acknowledgement
that [the legal] profession, like any other, must face its problems
and answer its accusers. Vindication after a full airing of the facts
is a much better result than the suspicion that would follow a
suppression of the facts.”
Id. (second alteration in original) (citations omitted).
55 582 N.E.2d at 345 n.10.
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Opinion of the Court
Agreement that Parsons Kinghorn advised the City to take regarding
the City’s contractual obligations. And Snell & Wilmer may continue
to advocate the same theory of that contract that it advised Cedar
Valley to take. So no attorney will be required to advocate for a
position that he or she did not advocate for in the underlying case.
The only role reversal here is by the City, the alleged malpractice
victim. And though the City is switching positions, this is the kind of
switch that, as the Picadilly court recognized, is inherent in a legal
malpractice action. There is nothing shameless or disreputable about
a client who was the victim of an attorney’s negligent advice
repudiating the position that it took as a result of that bad advice.
¶ 46 Further, we are not persuaded that the concern about
position shifting is significant enough to ban altogether the
assignment of legal malpractice claims. As a practical matter, an
attorney who shifts positions can expect to have that shift
highlighted for the jury. 56 The exposure of the shift of positions
would present a significant risk of the jury concluding that no
malpractice had occurred. So an attorney who plans to so shift
positions would need a convincing explanation to account for the
shift in positions. That explanation may well ameliorate whatever
loss of respect a jury might otherwise experience.
¶ 47 In sum, the public policy concerns that have been voiced by
courts on the subject of assigned legal malpractice claims are not
present on these facts. But even if they were, we are not persuaded
that these concerns are sufficiently clear and compelling to justify
prohibiting the assignment of legal malpractice claims.
Conclusion
¶ 48 We conclude that the rationales that have been offered
against the assignment of legal malpractice claims are unpersuasive
in view of our jurisdiction’s procedural safeguards, including our
rules of civil procedure and rules of professional conduct. We
accordingly hold that legal malpractice claims are presumed to be
voluntarily assignable. We do not foreclose, however, the possibility
that a future case could present an assignment that violates clearly
defined and compelling public policy concerns and therefore be
deemed invalid. The contractual arrangement between the City and
_____________________________________________________________
56See Pennell, supra ¶ 29 n.35 at 502; Michael Sean Quinn, On the
Assignment of Legal Malpractice Claims, 37 S. TEX. L. REV. 1203, 1233
(1996).
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Opinion of the Court
Cedar Valley does not implicate any such concerns. We therefore
reverse the grant of summary judgment and remand for further
proceedings.
24