first count charges Bullock with negligence. The second count asserts that Bullock lied to Majek about its actions on Majek's behalf and seeks punitive damages. The Complaint does not assert beach of contract.
Defendant Bullock moves for summary judgment on the grounds that New Jersey law prohibits the assignment of a cause of action for attorney malpractice. Plaintiff, in its opposition briefs, counters that such an assignment is permitted in New Jersey and that, if not, the contract should be construed under Pennsylvania law despite the choice of law provision to which plaintiff itself agreed.
II. STANDARD OF REVIEW
Under Fed. R. Civ. P. 56(c), "summary judgment is proper 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). A non-moving party may not rest upon mere allegations, general denials, or vague statements in opposition to a summary judgment motion. If the non-moving party's evidence is merely colorable, or is not significantly probative, summary judgment may be granted. Bixler v. Central Penna. Teamsters Health & Welfare Fund, 12 F.3d 1292 (3d Cir. 1993); Trap Rock Indus. Inc. v. Local 825, Int'l Union of Operating Engineers, 982 F.2d 884, 890-91 (3d Cir. 1992).
It is not the role of the judge at the summary judgment stage to weigh the evidence or to evaluate its credibility, but to determine "whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The Court must draw all inferences in the light most favorable to the non-moving party, and where the non-moving party's evidence contradicts the movant's, the Court must accept the non-movant's version as true. Pastore v. Bell Tel. Co. of Penna., 24 F.3d 508, 512 (3d Cir. 1994).
The substantive law governing the dispute will determine which facts are material, and only disputes over those facts "that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. A genuine issue of material fact for trial does not exist "unless the party opposing the motion can adduce evidence which, when considered in light of that party's burden of proof at trial, could be the basis for a jury finding in that party's favor." J.E. Mamiye & Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 618 (3d Cir. 1987) (Becker, J., concurring).
A. Judicial Estoppel and Legal Malpractice
In obtaining its $ 7 million default judgment in the Philadelphia Court of Common Pleas, Alcman filed an affidavit swearing that Majek rightfully owed Alcman the full $ 7 million.
Alcman now seeks to come before this Court and argue, in essence, that Majek did not actually owe the full $ 7 million, but, rather, that some portion of that $ 7 million was a result of Bullock's malpractice. We hold that the doctrine of judicial estoppel bars Alcman from arguing such fundamentally contradictory positions.
Under the doctrine of judicial estoppel, a party is bound by his representations to a court and may not contradict them in a subsequent proceeding involving the same issues or representations. Vogel v. Red Star Express Lines, 73 N.J. Super. 534, 180 A.2d 351 (1962), aff'd 40 N.J. 44, 190 A.2d 666 (1963). New Jersey courts have thus held that, "a party will not be permitted to play fast and loose with the courts, nor to assume a position in one court entirely different or inconsistent with that taken by him in another court or proceeding with reference to the same subject matter or thing." Koppel v. Olaf Realty Corp., 56 N.J. Super. 109, 151 A.2d 577, 583 (1959), aff'd 62 N.J. Super. 103, 162 A.2d 306 (1960) (holding that "the doctrine of equitable estoppel applies here because the defendant has heretofore performed acts and admissions inconsistent with its present claim." 151 A.2d at 583).
In order to establish a claim for legal damages as Majek's assignee, Alcman would be compelled to argue that the $ 7 million judgment against Majek was obtained, not because Majek owed Alcman the money, but at least in part because of Bullock's negligence. This is so because, under the law of legal malpractice, both in New Jersey and elsewhere, it is not enough to prove that a lawyer was negligent. A plaintiff must also establish that he suffered damages proximately caused by the lawyer's negligence. Lamb v. Barbour, 188 N.J. Super. 6, 455 A.2d 1122 (N.J. Super. A.D., 1982); Lieberman v. Employers Ins. of Wausau, 171 N.J. Super. 39, 407 A.2d 1256 (1979), aff'd 84 N.J. 325, 419 A.2d 417 (1980); Cotton v. Travaline, 179 N.J. Super. 362, 432 A.2d 122 (1981); Snyder v. Baumecker, 708 F. Supp. 1451 (D.N.J. 1989). Even if a lawyer's malpractice is obvious, a client may not prevail in a suit against the lawyer where the underlying claim is meritless and no damages were caused by the lawyer's negligence. Vort v. Hollander, 257 N.J. Super. 56, 607 A.2d 1339 (N.J. Super A.D., 1992).
If Majek was actually liable to Alcman for the full amount of the $ 7 million judgment, as Alcman has previously avowed, then Majek has no legal malpractice claim because it suffered no damages. Alcman would therefore have to argue before this Court that Majek's liability arose because of Bullock's negligence, while having previously sworn before the Pennsylvania court that Majek's liability arose solely, and rightfully, from Majek's failure to fulfill its contractual obligations towards Alcman.
In Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313 (Tex. App. Ct. 1994), the court forbade a similar assignment as a "transparent device to replace a judgment-proof, uninsured defendant with a solvent defendant." Id. at 317. In decrying the "demeaning reversal of roles" such assignments would create, the Court argued that,
The two litigants would have to take positions diametrically opposed to their positions during the underlying litigation because the legal malpractice case requires a "suit within a suit". . . . For the law to countenance this abrupt and shameless shift of positions would give prominence (and substance) to the image that lawyers will take any position, depending upon where the money lies, and that litigation is a mere game and not a search for truth. It is one thing for lawyers in our adversary system to represent clients with whom they personally disagree; it is something quite different for lawyers (and clients) to switch positions concerning the same incident simply because an assignment and the law of proximate cause have given them a financial interest in switching.
Id. at 318 (internal citations omitted). We agree with this reasoning.
We therefore hold that the doctrine of judicial estoppel bars Alcman from arguing that its $ 7 million default judgment is the product of Bullock's malpractice, where Alcman argued in a previous forum that the judgment was entirely the product of Majek's contractual liability. Because Alcman is barred by its previous affidavit from arguing that any portion of its $ 7 million default judgment is attributable to Bullock's negligence, it cannot show that Majek suffered any damage, which is a necessary component of a legal malpractice claim. This alone is enough to warrant dismissal with prejudice.
B. Assignment of a Claim for Attorney Malpractice Under New Jersey Law
Courts in different jurisdictions have disagreed as to whether or not claims for legal malpractice are assignable. Under the common law, generally speaking, contracts claims were assignable, but torts' claims were not. Courts which have forbidden assignment of legal malpractice claims have reasoned that such claims should not be assignable because of the close personal relationship between attorney and client and have likened the claims to torts involving personal injury. Courts which have upheld assignment have argued that legal malpractice claims are based on contract. See 40 A.L.R. 4th 684.
Neither the New Jersey courts nor the legislature has decided the matter explicitly. The only New Jersey statute dealing with assignability is N.J.S.A. 2A:25-1, which provides in relevant part:
All contracts for sale and conveyance of real estate, all judgments and decrees recovered in any of the courts of this state or of the United States or in any of the courts of any other state of the United States and all choses in action arising on contract shall be assignable, and the assignee may sue thereon in his own name.
It is clear, however, that in New Jersey claims arising out of tort are not assignable prior to judgment. United States Casualty Co. v. Hyrne, 117 N.J.L. 547, 189 A. 645 (1937); East Orange Lumber Co. v. Feiganspan, 120 N.J.L. 410, 199 A. 778 (1938). Although plaintiff asserts that judgment has already been entered in this matter, judgment has been entered only against Majek, not against Bullock.
It is equally clear in New Jersey that legal malpractice actions are grounded in tort. Circle Chevrolet Co. v. GH&C, 274 N.J. Super. 405, 413, 644 A.2d 626 (App. Div. 1994), aff'd 142 N.J. 280, 662 A.2d 509 (1995) ("professional malpractice actions are grounded in the tort of negligence"; Grunwald v. Bronkesh, 131 N.J. 483, 492, 621 A.2d 459 (1993) ("[a] legal malpractice action derives from the tort of negligence."). Plaintiff's argument that a legal malpractice action also sounds in contract has some foundation in other jurisdictions and in legal theory, but it has no foundation in the law of New Jersey.
A simple syllogism thus dictates the conclusion that New Jersey prohibits the assignment of claims for legal malpractice: a tort claim is not assignable; legal malpractice is a tort claim; therefore, a legal malpractice claim is not assignable.
In addition, we believe that New Jersey courts, if faced with this issue directly, would prohibit the assignment of claims for legal malpractice under any circumstances for compelling reasons of public policy. A party should not be permitted to transmute a claim against a penniless adversary into a claim against the adversary's wealthier lawyer based on the lawyer's supposed negligence towards the adversary. A legal malpractice action is not a commodity to be sold to a bidder who has never even had a relationship with the lawyer. The decision to bring a legal malpractice action "is one peculiarly vested in the client." Chaffee v. Smith, 98 Nev. 222, 645 P.2d 966 (Nev. Sup. Ct. 1982). There is, in addition, a high risk that the plaintiff and defendant in the underlying litigation will collude to the detriment of the defendant's lawyer. See e.g., Coffey v. Jefferson County Board of Education, 756 S.W.2d 155 (Ky. App. Ct. 1988); Wagener v. McDonald, 509 N.W.2d 188 (Minn. App., 1993). Permitting this sort of alchemy would lead to baseless and excessive legal malpractice claims and would undermine the personal confidence that must exist between lawyers and clients. See, e.g., Goodley v. Wank & Wank, Inc., 62 Cal. App. 3d 389, 133 Cal. Rptr. 83 (1976).
The Supreme Court of Indiana, in finding such assignments to be invalid, expressed the risks of an agreement between former adversaries succinctly:
If assignments were permitted, we suspect that they would become an important bargaining chip in the negotiation of settlements -- particularly for clients without a deep pocket. 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. The court in Washington has suggested that attorneys representing such clients would be bound by loyalty to sacrifice their own hides (and the deep pockets of their malpractice insurance carriers) in order to secure a favorable settlement for their client.