January 2003 Term
DELAWARE CWC LIQUIDATION CORP., FORMERLY KNOWN AS
CLEVELAND WRECKING COMPANY, INC., A DELAWARE
CORPORATION, SOVERIGN CONSTRUCTION, INC., A CALIFORNIA
CORPORATION, INVESTMENT RECOVERY SERVICES, INC., A
CALIFORNIA CORPORATION, CLEVELAND ENVIRONMENTAL
SERVICES, INC., A CALIFORNIA CORPORATION, DAMES AND
MOORE GROUP, A DELAWARE CORPORATION, CLEVELAND
WRECKING COMPANY, FORMERLY KNOWN AS CWC
ACQUISITION CORP., A CALIFORNIA CORPORATION, WHO
SUE BY THEIR DULY AUTHORIZED ASSIGNEES, CARLTON E.
THORNTON AND MICHAEL R. JORDAN,
ROBERT P. MARTIN,
Certified Question from the Circuit Court of Putnam County
Honorable N. Edward Eagloski, Judge
Civil Action No. 00-C-192
CERTIFIED QUESTION ANSWERED
Submitted: March 25, 2003
Filed: May 22, 2003
Harvey D. Peyton, Esq.|
The Peyton Law Firm
Nitro, West Virginia
Attorney for Plaintiffs
Gregory H. Schillace, Esq.|
Schillace Law Office
Clarksburg, West Virginia
Attorney for Defendant
DANIEL J. GARLETTS, AND LAURIAN KAY GARLETTS,
HIS WIFE, INDIVIDUALLY AND AS MOTHER AND NEXT
FRIENDS OF RACHEL CHRISTINE GARLETTS, ZACHARY
DONALD GARLETTS AND MATTHEW DAVID GARLETTS,
AND SARAH MARIE GARLETTS, INDIVIDUALLY,
ROBERT D. AITCHESON, ESQ.,
Certified Question from the Circuit Court of Berkeley County
Honorable David H. Sanders, Judge
Civil Action No. 99-C-596
CERTIFIED QUESTIONS ANSWERED
Submitted: March 25, 2003
Filed: May 22, 2003
Thomas C. Schultz, Esq.|
Wheeling, West Virginia
Attorney for Plaintiffs
Gregory H. Schillace, Esq.|
Schillace Law Office
Clarksburg, West Virginia
Attorney for Defendant
JUSTICE McGRAW delivered the Opinion of the Court.
appellate standard of review of questions of law answered and certified by
a circuit court is de novo. Syl. pt. 1, Gallapoo v. Wal-Mart Stores, Inc., 197
W.Va. 172, 475 S.E.2d 172 (1996).
2. The assignment of a legal malpractice claim is contrary to the public policy of West Virginia; therefore, any such assignment is void as a matter of law.
These consolidated cases are before this Court upon certified questions from
the Circuit Courts of Putnam and Berkeley Counties, which address the common issue of
whether the assignment of a legal malpractice claim is valid and enforceable under West
Virginia law, or contrary to public policy and therefore, void. The certified questions, as well
as the circuit courts' respective answers to them, are as follows:
1. Is the assignment of a legal malpractice claim contrary to the public policy of the State of West Virginia and therefore void as a matter of law?
Answer of the Circuit Court of Putnam County: No.
2. Should courts determine the validity of the assignment of a
legal malpractice claim on a case-by-case basis?
Answer of the Circuit Court of Berkeley County: Yes
3. If an attorney's client who is sued for malicious prosecution
settles with the plaintiff under the terms in which the client
receives a full release from the malicious prosecution claim in
exchange for an assignment to the plaintiff of legal malpractice
claims against the client's attorney who filed the prior suit, is the
assignment void as against public policy of the State of West
Answer of the Circuit Court of Berkeley County: No.
For the reasons explained herein, this Court concludes that, as a matter of
public policy, legal malpractice claims are not assignable in West Virginia and that any such
assignment is void as a matter of law.
Meanwhile, Cleveland Wrecking Co. was loaned several million dollars as part of an effort to ease some of its financial problems. For reasons unexplained, as part of the secured transaction, the lending institution failed to perfects its security interest in Cleveland Wrecking Co.'s personal property assets in West Virginia.
Cleveland Wrecking Co. eventually defaulted on the bank loan. A California
corporation, CWC Acquisition Corp., (CWC Acquisition) was formed for the purpose
of buying Cleveland Wrecking Co.'s debt and security interests from the bank. CWC
Acquisition foreclosed on the name Cleveland Wrecking Co. and ultimately, began
operating as Cleveland Wrecking Co. The original Cleveland Wrecking Co., meanwhile,
became known as Delaware CWC Liquidation Corp.
In July 1995, attorney Robert Martin was hired to defend the interests of the
new Cleveland Wrecking Co. in the deliberate intention and wrongful discharge litigation
involving the company and Messieurs Thornton and Jordan. Ultimately, a jury awarded the
pair compensatory and punitive damages totaling approximately $149,500.00. It is
Defendant Martin's alleged post-trial negligence which is the subject of the legal malpractice
claim later assigned to Thornton and Jordan and which is at issue in the instant certified
question from the Circuit Court of Putnam County.
A judgment order in the underlying litigation was entered on April 28, 1998.
On May 8, 1998, Defendant Martin, on behalf of his client, the new Cleveland Wrecking
Co., served Defendant's Motion for Judgment Notwithstanding the Verdict or, in the
Alternative, Motion for a New Trial. Defendant Martin did not file these post-trial motions
with the Circuit Court of Putnam County until May 14, 1998. Defendant Martin was
apparently unaware that, effective April 6, 1998, the West Virginia Rules of Civil Procedure
were amended to require that the foregoing post-trial motions be filed, and not just served,
no later than 10 days after entry of judgment[.] W.Va. R. Civ. P. 50(b). See W.Va. R. Civ.
P. 59(b) Thus, under W.Va. R. Civ. P. 50(b) and 59(b), Defendant Martin's requests for
post-trial relief were not timely filed.
Due to Defendant Martin's failure to timely file post-trial motions, Messrs.
Thornton and Jordan, by counsel, obtained a writ of execution, pursuant to which they began
levying on and taking possession of motor vehicles and demolition equipment owned by the
original Cleveland Wrecking Co. Apparently, the new Cleveland Wrecking Co. had not yet
perfected its security interest in these items.
Ultimately, representatives from the new Cleveland Wrecking Co. negotiated
a settlement with Thornton and Jordan, which included not only a release of the levy on the
company's vehicles and equipment, but also an assignment to Thornton and Jordan of the
company's purported legal malpractice claims against Defendant Martin for damages caused
by his failure to timely file post-trial motions. As a result of this assignment, Thornton and
Jordan filed a Complaint against Defendant Martin. Defendant Martin moved to dismiss the
complaint, or alternatively, for summary judgment. Thornton and Jordan filed a cross motion
for summary judgment on the issue of Defendant Martin's liability. The circuit court denied
the parties' respective motions.
Thereafter, Defendant Martin filed a second motion for summary judgment on
the ground that the assignment of the new Cleveland Wrecking Co.'s purported legal
malpractice claim against Defendant Martin is not permitted as a matter of law. In an Order
entered November 26, 2001, the Circuit Court of Putnam County denied Defendant Martin's
motion for summary judgment and ordered that the disputed legal issues related to the
assignment of legal malpractice claims be certified to this Court. By Order entered April 16,
2002, the following question was certified to this Court, pursuant to W.Va. Code §58-5-2 and
W.Va. R. App. P. 13:
Is the assignment of a legal malpractice claim contrary to the public policy of the State of West Virginia and therefore void as a matter of law?
Answer of the Circuit Court of Putnam County: No.
Both drivers were insured by State Farm Mutual Automobile Insurance Co. (State Farm). State Farm learned Mr. Donne had been intoxicated at the time of the accident and, according to Plaintiff Daniel Garletts, also determined Mr. Donne was clearly at fault. Plaintiff Daniel Garletts made a claim for the $100,000 limits of liability under Mr. Donne's insurance policy. (See footnote 1) State Farm offered Plaintiff the sum of $15,000.
Due to the severity of Plaintiff Daniel Garletts' injuries, which includes a brain
injury, Plaintiff Daniel Garletts, his wife and four children instituted the underlying
negligence and bad faith action. State Farm retained counsel to defend Mr. Donne and Mr.
Donne retained separate counsel, Defendant Robert D. Aitcheson, for the purpose of
pursuing a counterclaim against Plaintiffs.
Defendant Aitcheson filed a counterclaim against Plaintiffs alleging, inter alia,
that Plaintiff Daniel Garletts carelessly, recklessly and negligently operated his vehicle left
of center causing the subject accident, and seeking $250,000 in damages. Plaintiffs maintain,
however, that Defendant Aitcheson never made a demand for insurance proceeds from State
Farm on his client's behalf and he never obtained the statement his client gave to the adjuster
for Enterprise Rent-A-Car, in which Mr. Donne basically admitted fault. Mr. Aitcheson
could have taken a few minutes to call State Farm's adjuster, but he admits he didn't do that
either. Had he done that he could have learned of State Farm's clear liability determination
and of the fact that his client was seriously intoxicated [at the time of the accident]. Brief
of the Petitioners, p.3. According to Plaintiffs, Defendant Aitcheson failed to conduct any
investigation into Mr. Donne's own liability in the accident and failed to attend his client's
May 19, 2000 deposition.
On June 12, 2000, Defendant Aitcheson filed a motion to withdraw as Mr.
Donne's counsel. On July 7, 2000, the circuit court entered an order dismissing, with
prejudice, the counterclaim filed on behalf of Mr. Donne. Thereafter, Plaintiffs amended
their complaint to include, among other allegations, the claim of malicious prosecution
arising out of the dismissed counterclaim. Ultimately, Plaintiffs entered into a settlement
agreement with Mr. Donne, which released him from the malicious prosecution claim in
exchange for an assignment of, inter alia, any professional negligence claims he may have
against Mr. Aitcheson. Mr. Donne also executed an authorization for the release of legal,
insurance and medical documents generated in connection with the subject accident.
Pursuant to the assignment of rights, Plaintiffs again amended their complaint
to include a claim for legal malpractice against Defendant Aitcheson based upon his
representation of Mr. Donne in the underlying case. Defendant Aitcheson filed a motion for
summary judgment, challenging the validity of the assignment of the legal malpractice claim.
The issue was certified to this Court in the form of the following questions:
Should courts determine the validity of the assignment of a legal malpractice claim on a case-by-case basis?
If an attorney's client who is sued for malicious prosecution settles with the plaintiff under the terms in which the client receives a full release from the malicious prosecution claim in exchange for an assignment to the plaintiff of legal malpractice claims against the client's attorney who filed the prior suit, is the assignment void as against public policy of the State of West Virginia?
The Circuit Court of Berkeley County answered the first question in the affirmative and, similarly, answered the second question favorably to Plaintiffs. (See footnote 2)
As indicated above, this case was consolidated with Delaware CWC
Liquidation Corp. v. Martin, No. 30985, supra, by Order of this Court entered February 3,
Most courts view the unique personal nature of the relationship between an
attorney and his client to be the most compelling public policy reason for prohibiting the
assignment of legal malpractice claims. See Picadilly, Inc. v. Raikos, 482 N.E.2d 338, 342
(Ind. 1991) (Our own conclusion that legal malpractice claims should not be assigned is
based on . . . our particular concern about . . . the need to preserve the sanctity of the client-
lawyer relationship[.]); Bank IV Wichita, Nat'l Ass'n v. Arn, Mullins, Unruh, Kuhn &
Wisson, 827 P.2d 758 (Kan. 1992); MNC Credit Corp. v. Sickels, 497 S.E.2d 331, 334 (Va.
1998) (prohibiting assignments of legal malpractice claims safeguards the attorney-client
relationship which is an indispensable component of our adversarial system of justice. . . .
[and] to do so would undermine the important [attorney-client] relationship[.]); Kiley v.
Jennings, Strouss & Salmon, 927 P.2d 796, 800 (Ariz.Ct.App. 1996) (any such assignment
would negate the attorney's fiduciary and ethical duty to his client because the assignee is
not the client); Goodley v. Wank & Wank, Inc., 133 Cal. Rptr. 83, 87 (Cal. Ct. App. 1976)
(to allow the assignment would embarrass the attorney-client relationship and imperil the
sanctity of the highly confidential and fiduciary relationship existing between attorney and
client.) ; Washington v. Firemen's Fund Ins. Co., 459 So.2d 1148 (Fla.Dist.Ct.App. 1984)
(agreeing with the majority of jurisdictions which prohibit assignments because of the
personal nature of legal services which involve highly confidential relationships.);
Christison v. Jones, 405 N.E.2d 8, 11 (Ill.App.Ct. 1980) (prohibiting assignment due to the
personal nature of the [attorney-client] relationship and the duty imposed upon the attorney,
coupled with public policy considerations surrounding that relationship[.]); Joos v. Drillock,
338 N.W.2d 736 (Mich. Ct. App. 1982); Wagener v. McDonald, 509 N.W.2d 188,
191(Minn.Ct.App. 1993) (allowing assignment of legal malpractice claims would be
incompatible with the attorney's duty to act loyally towards the client . . . . and to maintain
It is beyond cavil that this Court recognizes the attorney-client relationship to be ' of the highest fiduciary nature, calling for the utmost good faith and diligence on the part of [the] attorney.' Syl. pt. 3, Committee on Legal Ethics v. Cometti, 189 W.Va. 262, 430 S.E.2d 320 (1993) (quoting Syl. pt. 2, Rodgers v. Rodgers, 184 W.Va. 82, 399 S.E.2d 664 (1990) and syl. pt. 4, Bank of Mill Creek v. Elk Horn Coal Corp., 133 W.Va. 639, 57 S.E.2d 736 (1950).). An attorney's nondelegable duty of loyalty to his client and the level of trust a client places in his attorney are also essential elements of the attorney-client relationship. Lawyer Disciplinary Bd. v. Artimez, 208 W.Va. 288, 299, 540 S.E.2d 156, 167 (2000) (citing W.Va. Rules of Prof. Conduct Rule 1.7 cmt. Loyalty to a Client). See Id., 208 W.Va. at. 300, 540 S.E.2d at 168 (the trust a client places in his/her lawyer is so highly esteemed, and deemed so integral to a successful attorney-client relationship, that it has been afforded a status of privilege.). Therefore, in considering whether legal malpractice claims should be assignable, this Court is ever mindful of its role in ensuring that the sanctity of this confidential relationship is preserved and protected.
Other public policy considerations are also involved in determining whether
legal malpractice claims should be assignable. Some courts have cautioned that permitting
the assignment of legal malpractice claims would encourage the commercialization of such
claims, Alcman Services Corp. v. Bullock, 925 F.Supp. 252, 258 (D.N.J. 1996), aff'd 124
F.3d 185 (3rd Cir. 1997), would lead to baseless and excessive legal malpractice claims[,]
Id., 925 F.Supp. at 258, Roberts v. Holland & Hart, 857 P.2d 492, 496 (Col. Ct. App. 1993),
which would burden the legal profession, the court system and the public, Curtis v. Kellogg
& Andelson, 86 Cal. Rptr. 2d 536, 545 (Calif. Ct. App. 1999), and would make insolvent,
underinsured, judgment-proof defendants extremely unattractive clients, thereby making it
harder for them to obtain legal representation. Alcman, 925 F.Supp. at 258-59. In addition,
allowing such assignments would increase the risk of collusion between the assignor and
assignee. Coffey v. Jefferson County Bd. of Educ., 750 S.W.2d 155, 157 (Ky. Ct. App. 1988)
(holding assignment of defendant's legal malpractice claim as part of settlement in
negligence action was void and describing the assignment as a contrived and elaborate
In the oft-cited case of Goodley v. Wank & Wank, Inc., the California Court of
Appeals summarized the foregoing public policy considerations as follows:
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. The endless complications and litigious intricacies arising out of such commercial activities would place an undue burden not only on the legal profession but the already overburdened judicial system, restrict the availability of competent legal services, embarrass the attorney-client relationship and imperil the sanctity of the highly confidential and fiduciary relationship existing between attorney and client.
Id., 133 Cal. Rptr. at 87. See e.g., Picadilly, 582 N.E.2d at 342; Can Do, Inc., 922 S.W.2d
at 868; MNC Credit Corp., 497 S.E.2d at 333-34; Roberts, 857 P.2d at 495-96; Christison,
405 N.E.2d at 11; Wagener, 509 N.W.2d at 191.
In contrast, a minority of jurisdictions have allowed the voluntary assignment of legal malpractice claims on a case-by-case, a position advocated by the plaintiffs/assignees in the two cases now before us. See Richter v. Analex Corp., 940 F.Supp. 353 (D.D.C. 1996); Thurston v. Continental Cas. Co., 567 A.2d 922 (Me. 1989); New Hampshire Ins. Co. v. McCann, 707 N.E.2d 332 (Mass. 1999); Gregory v. Lovlein, 26 P.3d 180 (Or. Ct. App. 2001). These courts have refused to adopt a broad prohibition on such assignments because, they reason, the public policy concerns upon which the majority of jurisdictions rely are not implicated in every case. See e.g., Gregory, 26 P.3d at 184 (citing Richter, 940 F.Supp. at 357-58) (An assignment of a [legal] malpractice claim by one corporation to another as part of a merger or acquisition does not present these concerns.); Thurston, 567 A.2d at 923 (The argument that legal services are personal and involve confidential attorney-client relationships does not justify preventing a client like [this one] from realizing the value of its malpractice claim in what may be the most efficient way possible, namely, its assignment to someone else with a clear interest in the claim who also has the time, energy and resources to bring the suit.).
We are not persuaded by the reasoning of the small number of courts which
have allowed the assignment of legal malpractice claims. It is of particular concern to this
Court that the relationship between an attorney and his client remain a confidential, fiduciary
relationship of the very highest character. Indeed, [r]ules which discourage an attorney
from acting loyally and confidentially should not be erected without very good cause.
Picadilly, 582 N.E.2d at 343.
This Court holds each and every attorney to the inflexible requirement that he diligently, faithfully and legitimately perform every act necessary to protect, conserve and advance the interests of his client. Bank of Mill Creek v. Elk Horn Coal Corp., 133 W.Va. 639, 657, 57 S.E.2d 736, 748 (1950). An attorney who deviates from this duty is subject to disciplinary action, see Rules of Professional Conduct, and/or civil liability, the latter of which may be pursued only by the client injured by his counsel's negligence or malfeasance. See Armor v. Lantz, 207 W.Va. 672, 681, 535 S.E.2d 737, 746 (2000) (plaintiff in legal malpractice claim must prove, inter alia, that he employed the defendant lawyer to represent him). To permit the assignment of a claim that is firmly rooted in the highly personal attorney-client relationship would denigrate both the legal profession and the justice system. We will not allow this most certain consequence. Accordingly, we hold that the assignment of a legal malpractice claim is contrary to the public policy of West Virginia; therefore, any such assignment is void as a matter of law.
In summary, based upon our holding that the assignment of a legal malpractice
claim is contrary to the public policy of the State of West Virginia and, therefore, void as a
matter of law, we answer in the affirmative the certified question of the Circuit Court of
Putnam County, in the case of Delaware CWC Liquidation Corp. v. Martin, No. 30985.
Having determined that any assignment of a legal malpractice claim is prohibited, courts
should not determine the validity of such assignments on a case-by-case basis. Therefore,
we answer the first certified question of the Circuit Court of Berkeley County, in Garletts v.
Aitcheson, No. 31113, in the negative, and the remaining certified question, in the