Articles Posted in Assignment of Legal Malpractice Claims

One of the longest-running controversies in the legal malpractice cases is whether the owner of a legal malpractice claim may assign it to another party. Once it was black letter law that a legal malpractice claim could not be assigned. In recent years courts have relaxed the rule on the ground that all sorts of other legal claims can be assigned so a legal malpractice claim should be no different.

However, in this case, Nevada held that the assignment was improper and barred the legal malpractice claim.

In this case, an entity, Tower Homes, LLC filed a bankruptcy petition. Among the creditors were prospective condominium purchasers who had paid earnest money to Tower. The bankruptcy court, acting on the recommendation of the Trustee, allowed the creditors to bring the legal malpractice claim against the former attorneys for Tower Homes. The bankruptcy trustee was motivated by the lack of available funds for the trustee to hire a lawyer and prosecute the claim

YCB INTERNATIONAL, INC. v. UCF TRADING CO., LTD., Dist. Court, ND Illinois 2014 – Google Scholar.

This is an opinion by Judge Holderman who held that a judgment creditor cannot force a judgment debtor to assign a potential legal malpractice claim to the creditor. Here, upon obtaining the judgment YCB asked UCF to assign to YCB any legal malpractice claims against UCF’s former counsel, Schopf & Weiss. This is a potentially ugly result for the lawyers, who defended their client before they withdrew, only to risk being thrown to the wolves to fund a settlement. Judge Holderman rejected the proposed assignment.

While Illinois law allows the assignment of a claim held by the debtor, it does not allow the assignment of a potential or unasserted claim. The court explained that under Illinois law permits assignments of claims.