Will the Villanueva opinion really impact Georgia legal malpractice lawsuits?

Assigning Legal Malpractice Claims

On March 18, the Georgia Supreme Court released its opinion in the Villanueva vs. First American Title Company case. The court held that legal malpractice cases involving underlying property and money damages are assignable. Affirming the lower Court of Appeals, the GA Supreme Court wrote that legal malpractice claims are “not per se unassignable.” The big question is whether this outcome will impact the number of legal malpractice claims in the future. I doubt it, and a number of experts agree.

Georgia Supreme Court holds Villanueva case assignable

In summary, Derrick Villanueva was an associate attorney at a real estate closing law firm. He was involved in a loan closing where funds were provided by the lender (Homecomings Financial) to pay off the previous mortgage. First American Title issued title insurance. The funds were stolen by a non-lawyer member of the firm. Homecomings Financial had contractually assigned its rights of action and recovery to First American Title, so First American Title sued everyone involved. You can read the torrid details on Justia.com and view the oral arguments on the Daily Report website, but the issue that attracted the GA Supreme Court’s attention was whether the lawsuit was assignable.

The Court of Appeals held that legal malpractice suits with monetary or contractual damages are “not unassignable” per se, and confirmed that tort actions are not assignable. Villanueva argued unsuccessfully that legal malpractice cases are part tort and part contractual, so they shouldn’t be assignable. The GA Supreme Court disagreed.

Georgia legal malpractice claim assignment – minimal impact expected

The concern among Georgia lawyers is that this recent opinion will open the door to a flood of legal malpractice lawsuits, as rights will be assigned to entities with the resources to sue. The argument continues that professional liability insurance companies will see this as a material risk, and premiums will skyrocket. Articles are being circulated offering advice on ways Attorneys can attempt to preclude assignment by changing client engagement letters and fee agreements. Only time will tell whether these suggestions will actually work, and attorneys are not often in a position to dictate contractual terms. Many of these gloom-and-doom arguments also found their way to courthouse, but were obviously not convincing to the Georgia Supreme Court.

While it remains to be seen whether this case will have the far reaching implications prophesied by some, I don’t think the sky is falling. I spoke to a couple of insurance professionals who specialize in Georgia lawyer coverage, and neither expected any major impact. They agreed that a claim is still a claim, and the merit (or lack thereof) remains the same regardless of who is actually suing. In their opinions, the legal malpractice “case within the case” does not get any better just because it is held by someone else, even someone with greater resources

I also spoke to one of the lawyers involved in the Villanueva case. Although he is intimately familiar with the details of the case as well as the opinions from around the country, he does not necessarily agree that this case will impact the frequency or number of legal malpractice claims in Georgia. He felt that all parties to a Georgia legal malpractice claim would continue to face “choppy waters ahead.”

Focus on avoidance rather than assignability

Coincidently, I received two calls in the past two weeks from lawyers wanting to know if a legal malpractice claim was assignable. These lawyers were not familiar with the Villanueva case history or holdings. Rather than worrying about who is going to sue us, I urged my peers to spend that energy ensuring they have the right documented procedures in place to minimize the risk of a claim. That’s productive. Looking up at the sky is not.

Beyond the Appellate Court opinions, Villanueva teaches us at least two very fundamental lessons. The first is to maintain tighter control over non-lawyer employees. Is it really a best practice to give an employee direct access to escrow accounts? The second lesson is to never represent yourself in any claim or lawsuit. Learn from Villanueva, who was pro se well into discovery, and always seek counsel experienced in professional liability matters. Similarly, we should consider having our law firm operational and practice management procedures reviewed on a regular basis.