New Hampshire Ins. Co., Inc. v. McCann

• Decision Date: 10 March 1999
• Citation: 429 Mass. 202,707 N.E.2d 332
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: NEW HAMPSHIRE INSURANCE COMPANY, INC. v. John McCANN & another. 1 Supreme Judicial Court of Massachusetts, Suffolk

Page 332

707 N.E.2d 332

429 Mass. 202

NEW HAMPSHIRE INSURANCE COMPANY, INC. v. John McCANN & another. ¹ Supreme Judicial Court of Massachusetts Suffolk.

Argued Feb. 1, 1999.

Decided March 10, 1999.

Regina E. Roman, Boston (William L. Boesch with her) for the defendants.

Jonathan Shapiro, Boston, for the plaintiff.

Alison Mills Cloutier & Michael Fredrickson, Boston, for Massachusetts Clients' Security Board, amicus curiae, submitted a brief.

Harvey Weiner & John J. O'Connor, Boston, for Twin City Fire Insurance Company, amicus curiae, submitted a brief.

Present: WILKINS, C.J., ABRAMS, LYNCH, GREANEY, FRIED, & MARSHALL, JJ.

GREANEY, J.

We consider whether the voluntary assignment made in this case of a legal malpractice claim should be enforced. We conclude that the assignment is enforceable.

The following provides the background of the case. Norman W. and Hartley R. Cranton (Crantons) established the Haverhill Realty Trust (trust) by a declaration of trust in 1971. The Crantons were the sole trustees of the trust, and through it they owned and managed a rental apartment building at 27 Webster Street in Haverhill. The insurer for the property during the relevant period was the plaintiff, New Hampshire Insurance Company, Inc. (New Hampshire). Thomas and Deborah Langlois, and their son William, who was born in 1974, rented an apartment at 27 Webster Street from 1974 through 1978.

In 1978, Thomas Langlois, as parent and next friend of William, filed a lawsuit in the District Court against "Norman Cranton and Hartley Cranton, Trustees of Haverhill Realty Trust," alleging that they had violated the lead paint statute, G.L. c. 111, § 199, by "allow[ing] dangerous levels of lead [paint] to exist in residential premises," and by failing to remove or cover the paint. The action sought to recover damages for personal injuries which William had allegedly incurred through his contact with the lead paint. The Crantons joined New Hampshire and "Thomas E. Langlois and [Deborah] Langlois," as third-party defendants in the case. The case was settled in 1978, when New Hampshire paid $3,000 to Thomas Langlois. Thomas signed a document entitled "Parents Release and Indemnity Agreement" which released "Norman Cranton and Hartley Cranton as Trustees of Haverhill Realty Trust, their heirs, successors and assigns of and from any and all actions, causes of action, claims, demands, damages, costs, loss of services, expenses and compensation, on account of, or in any way growing out of, any and all known and unknown personal injuries and property damage which we may now or hereafter have as the parents and/or guardian of [William], and also all claims or rights of action for damages which the said minor has or may hereafter have." The document went on specifically to release those named therein from liability from injuries incurred by William on "a claim for lead paint poisoning." It did not specifically state that the Crantons were released from individual liability. The release was prepared by Thomas's attorney who had not included Deborah as a plaintiff in the lawsuit or had her sign the release. The attorney testified at his deposition that it was his practice at the time to bring a personal injury suit involving a minor only in the name of the minor's father; that he considered Deborah to be his client as well as Thomas; that it was also his practice to discuss the terms of the settlement "with one in her position"; and that Deborah "was anxious that the case be settled." A stipulation of dismissal was filed in the action. New Hampshire was represented in the case by the defendant, John McCann of the defendant law firm, Madan & Madan, who, it can be inferred, received and reviewed the document described above before New Hampshire paid the settlement.

In 1992, some eleven years later, Deborah Langlois, as mother and next friend of William, filed a lawsuit in the Northeast Division of the Housing Court Department against "Norman W. Cranton, Hartley R. Cranton, and G. Hartley Cranton Individually and as Trustees of the Haverhill Realty Trust," alleging, as far as pertinent here, that the defendants had "owned and/or managed" the premises at 27 Webster Street during 1976 and 1977, and had violated the lead paint statute, causing William to incur damages as a result of lead paint poisoning. Deborah was particularly seeking to hold the Crantons personally liable on the basis that the release in the District Court action had not expressly mentioned individual liability.

The Crantons once again looked to New Hampshire for their defense, and New Hampshire retained a new attorney to defend them under its insurance policy. This lawyer prepared an "Attorney Status Report" for the claims adjustor acting on behalf of New Hampshire in which he mentioned that "[t]he insured's [namely, New Hampshire's] theories include the affirmative defense of a prior release," and that "[w]e have discussed impleading [Madan & Madan] as a third party defendant." Based on the document of release and the settlement in the earlier lawsuit, the attorney filed a motion for summary judgment.

A judge in the Housing Court denied the motion for summary judgment, indicating that he was doing so "on the authority of Cram v. Town of Northbridge, 410 Mass. 800, 575 N.E.2d 747 (1991), and for the reasons stated in the plaintiffs' opposition memorandum." ² After this decision, and consideration of the new attorney's litigation plan New Hampshire elected to settle with Deborah by paying her $220,000 on William's behalf. As a part of the terms of the settlement, New Hampshire and the Crantons agreed to: "sell, assign, and transfer to ... William ... any and all of our rights, claims, demands and causes of action of any kind whatsoever ... which we have had, or may have against ... attorney John W. McCann and the law firm of Madan & Madan ... and any and all other person [sic ] who acted for us and/or represented us in the [earlier] case of Langlois v. Cranton et al.," and to cooperate fully with William's attorney in the pursuit of "claims or court actions against ... John W. McCann and/or Madan & Madan."

In 1995, this legal malpractice action was filed in the Superior Court. New Hampshire was named as the plaintiff, but, consistent with the terms of the assignment set forth above, the complaint stated that William was "the assignee of the rights [held by] New Hampshire" against the defendants. New Hampshire asserted that the release in the first lawsuit against the Crantons covered them only in their capacity as trustees, not individually, and that the defendants had committed malpractice in failing to demand and obtain a broader release. New Hampshire also claimed that the defendants' malpractice caused it to incur damages by reason of the $220,000 settlement and associated costs of defense.

The defendants, John McCann and the Madan & Madan law firm, filed a motion for summary judgment, arguing that the assignment of a legal malpractice claim is void as against public policy, and, as a result, that New Hampshire's assignment of the legal malpractice claim to William should not be enforced. In the alternative, the defendants argued that they could not be held liable for malpractice, because the release executed in connection with the settlement of the District Court case barred any further claims against the Crantons as matter of law. Deborah opposed the motion, filing with her opposition excerpts from the depositions of the Crantons and the claims adjuster who settled her Housing Court case on behalf of New Hampshire, and a memorandum from Bertrand which indicated that one of the Crantons was aware of the lead paint contamination when the Crantons rented the apartment and that Deborah's Housing Court case had a "verdict value" of $250,000. Deborah's oppositionalso included an affidavit from a lawyer who could qualify as an expert in the defense of insurance claims. The affidavit stated that the defendants had acted below the requisite standard of care with respect to the release given in the settlement of the District Court action.

The defendants' motion for summary judgment was denied by a judge in the Superior Court. In his memorandum of decision, the judge noted that our appellate courts had not yet addressed whether a voluntary assignment of a legal malpractice claim can be enforced. The judge, without elaboration, indicated that he was unwilling to rule "that a legal malpractice case can never be assigned as a matter of law." He then concluded that a genuine issue or issues of material fact existed as to whether the defendants had committed malpractice with respect to the scope of the release which effectuated the settlement of the District Court lawsuit against the Crantons. The defendants appealed from the order denying their motion for summary judgment to a single justice of the Appeals Court pursuant to G.L. c. 231, § 118, first par. A single justice granted them leave to pursue an interlocutory appeal. We granted a joint application for direct appellate review.

1. We have not decided whether there can be an assignment of a legal malpractice claim in circumstances like those presented here. ³ Many jurisdictions that have considered the subject in various contexts have concluded that the assignment of a legal malpractice claim should not be enforced. These courts have not differentiated between voluntary and involuntary assignments. They have based their decisions primarily on public policy considerations, such as the need to preserve the sanctity of the attorney-client relationship and to maintain the integrity of the judicial process. ⁴ Some of the courts have expressed fear that the voluntary assignment of malpractice claims will create commodities to be traded on the open market, thereby degrading the legal profession and potentially increasing the number of frivolous claims brought by assignees seeking to tap the "deep pockets" of...