In this legal malpractice action, plaintiff sued the attorneys who represented him in connection with a failed residential construction project alleging damages in excess of $4,000,000. He contends his prior counsel negligently negotiated the construction contract and incorrectly advised him he could cancel the contract, resulting in a substantial arbitration award in favor of the architect who designed the project, and unpaid counsel fees owed to subsequent counsel.
After filing this action, plaintiff entered a security agreement with the architect in which he assigned to the architect a portion of his anticipated recovery in this action, after first paying his litigation costs and attorneys' fees, to satisfy the arbitration award. Plaintiff also executed an acknowledgement of attorney charging lien in which he acknowledged a lien on his recovery in this action in favor of subsequent counsel in exchange for their agreement to forebear from collection efforts until resolution of this action.
During jury selection, defendants moved to dismiss arguing plaintiff lacked standing because he impermissibly assigned his tort claim to third parties prior to judgment. The trial court agreed, finding plaintiff "is merely seeking a judgment that is to be paid directly to third parties" and would "receive the benefit of the judgment in name only." The trial court recognized "[t]he language of the agreements at issue does not indicate an assignment of any claims" but found the assignment of future proceeds violates the rule against assignment of tort claims pre-judgment.
The court reversed, concluding plaintiff has standing and did not assign his legal malpractice claim to third parties. Plaintiff has standing because he retains the right to recover a significant portion of any damages award. He will recover his legal costs and attorneys' fees before any amounts are paid to his architect and prior counsel and will retain any excess award. The court also concluded the assignment of the potential recovery in a tort action does not violate the rule against pre-judgment assignment of tort claims if the injured person prosecutes the action in their own name and has standing to do so.