Shifting the Collectibility Burden for Legal Malpractice
By Lisa R. Hasday, Litigation News Associate Editor – December 31, 2014

Another state has held that the uncollectibility of an underlying judgment is an affirmative defense that attorneys sued for malpractice may plead and prove. The Washington Supreme Court held that public policy supports placing the burden of proving uncollectibility on defendant-attorneys, joining a growing trend that already includes Alaska, Indiana, Maine, Michigan, New Jersey, New Hampshire, and Pennsylvania. Schmidt v. Coogan. This trend marks a departure from the traditional rule that the plaintiff must prove the collectibility of the underlying judgment as part of the plaintiff’s prima facie case.

A Tale of Two Slips: Client and Attorney
The original case began in 1995, when the plaintiff slipped and fell at a grocery store. The attorney whom the plaintiff retained to represent her in a lawsuit against the store filed a complaint naming the wrong defendant just days before the statute of limitations ran. After the case was dismissed, the plaintiff sued the attorney for negligence and breach of contract, and a jury found in favor of the plaintiff. However, the trial court granted a new trial on the issue of damages only, finding that the attorney had been denied a fair trial.

After the plaintiff rested her case in the second trial, the defense made an oral motion for judgment as a matter of law, arguing that the plaintiff failed to present evidence that a judgment against the grocery store would have been collectible. The court denied the motion, finding that collectibility was outside the scope of the damages-only trial, and the plaintiff’s malpractice claim once again prevailed. She was awarded $3,733 for past economic damage and $80,000 for noneconomic damage. The Washington Supreme Court ultimately affirmed the court’s decision.

A Defensive Burden
Deciding an issue of first impression, the high court held that the burden of establishing that a judgment on the underlying claim would be uncollectible falls on the defendant. The court explained that several public policy considerations supported its holding. Placing the burden of proving collectibility on plaintiffs “unfairly presumes that an underlying judgment is uncollectible when the record is silent,” the court wrote, and would unfairly force many plaintiffs to prove collectibility long after their initial injury.

The court determined that, as compared to plaintiffs, defendant-attorneys are equally, if not better, positioned to discover and prove uncollectibility. Attorneys have a duty to investigate collectibility at the outset of a case, the court noted. The court further found that placing the burden of proving uncollectibility on the negligent attorney recognizes the attorney’s and the client’s “important fiduciary relationship,” by not placing every burden in a malpractice case on the client. Finally, the court reasoned that its holding was more consistent with rules generally prohibiting evidence of liability insurance in negligence cases because such evidence would be introduced only when an attorney raises uncollectibility as an affirmative defense.

“It doesn’t make any sense to put the burden on the plaintiff,” remarks Phillip A. Cole, Minneapolis, MN, cochair of the Attorneys’ Liability Subcommittee of the ABA Section of Litigation’s Professional Services Liability Litigation Committee. “The plaintiff would have to in all cases make a big case for the wealth of the former party being sued. It would just elevate the verdict potential if you give that to the plaintiff and it would be prejudicial to the defense,” Cole says.

Not all Section of Litigation leaders agree, however. “One of the reasons for leaving collectibility as an element of proof for the plaintiff is to make sure that the plaintiff doesn’t get a windfall,” states Susan K. McIntosh, Seattle, WA, another cochair of the Attorneys’ Liability Subcommittee of the Section’s Professional Services Liability Litigation Committee. “This decision will change how I answer plaintiffs’ complaints,” McIntosh adds. “I’ll plead uncollectibility as an affirmative defense in any case where I think it is appropriate.” Cole cautions attorneys to be careful before representing the plaintiff in cases where the issue of collectibility strongly favors the defense.

The court’s concurring justices argued that the court should not have addressed the collectibility issue, because the attorney did not raise the matter in the first trial and because he invited any error when he successfully moved at the second trial to exclude evidence of his malpractice insurance policy. The majority was “sympathetic” to the concurrence but still addressed the collectibility issue, “because it is important and in order to provide guidance on legal malpractice cases in the future.”

Emotional Distress Damages Exceptional
Deciding another issue of first impression, the Washington Supreme Court held that plaintiffs may recover emotional distress damages for legal malpractice “when significant emotional distress is foreseeable from the sensitive or personal nature of representation or when the attorney’s conduct is particularly egregious.” The court explained that ordinary malpractice, such as the case at issue, does not justify an award for emotional distress.

“The court just clarified what practitioners have assumed,” explains McIntosh. “The opinion gives lawyers a case to cite to say you don’t get emotional distress damages except in the very unusual case,” McIntosh observes, “and the Washington Supreme Court has not yet seen that case.” Cole advises attorneys that most states also do not allow emotional distress damages in legal malpractice suits except in very limited circumstances and that attorneys should therefore assess cases based on the pecuniary damage element.

Keywords: affirmative defense, collectibility, emotional distress, legal malpractice, Washington

This article presents the views of the author alone and not necessarily those of her employer, the U.S. Department of Justice.

 
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