Law Office of David J. Stern, P.A. v. Security National Servicing Corp., ___ So. 2d ___, 2007 WL 1932251 (Fla. 2007)

Brief Summary
The court in this case rejected an attempt by a subsequent mortgage assignee to claim standing to sue an attorney for legal malpractice for failing to timely file a foreclosure action. Based on both case precedent and public policy, the court adhered to the majority view that legal malpractice claims are generally not assignable.

Complete Summary
David Stern represented a mortgagee in a foreclosure matter. Mr. Stern filed an untimely foreclosure action and voluntarily dismissed a previously filed, timely foreclosure action on the same mortgage. This “blunder” apparently occurred because Mr. Stern, having realized his error in filing the untimely action, intended to dismiss it but instead dismissed the timely foreclosure action by mistake. Mr. Stern continued to prosecute the untimely foreclosure action, and the trial court entered summary judgment against the mortgagee. Meanwhile, the mortgage and note were assigned several times before Security National finally acquired them during the appeal in the foreclosure action. Id. at *1.

Subsequently, Security National brought a legal malpractice action against Mr. Stern, claiming to have standing as the assignee of the mortgage and note involved in the underlying foreclosure action. The trial court entered summary judgment against Security National, but the intermediate appellate court reversed. Id. at *1. The appellate court allowed the assignment of the malpractice claim and held that Security National has standing to sue Mr. Stern as the assignee of the mortgage and note. See Security National Servicing Corp. v. Law Office of David J. Mr. Stern, P.A., 916 So.2d 934 (Fla. App. 2005).

The Supreme Court reversed, holding that Security National lacked standing to sue Mr. Stern for legal malpractice by assignment. The Court explained that in its decision in Cowan Liebowitz & Latman, P.C. v. Kaplan, 902 So. 2d 755 (Fla. 2005), it did not adopt the minority, case-by-case, approach regarding the assignment of legal malpractice claims, but rather, continued to adhere to the majority view that legal malpractice claims are generally not assignable. 2007 WL 1932251 at *3.

The Court also noted that the facts in Stern are significantly different from those in Kaplan. In Kaplan, the Court found that the attorneys owed a duty to the public when advising their client, MRI, and preparing its private placement memoranda because attorneys were acting not just for the corporation's benefit, but for the benefit of potential shareholders as well. The Court in Kaplan also noted that it was expected that the disclosures made in the private placement memoranda were for the benefit of potential investors who were expected to review the private placement memoranda.   In Stern, however, the attorney did not perform legal work with the intention of directly benefiting Security National or any other third party. Rather, Mr. Stern’s work was solely for its client at the time, EMC. Id. at *5.

The Court also found that the relevant policy considerations in cases such as this weigh against recognizing the assignment of a legal malpractice claim in a general assignment of a note and mortgage. The Court was unwilling to presume that Mr. Stern's relationships with EMC did not involve personal services; that confidential information was not disclosed; that EMC impliedly waived the attorney-client privilege when it conveyed the note and mortgage by general assignment; or that permitting legal malpractice assignments in this context would not tend to create a marketplace for legal malpractice claims. Id. at *6.

Significance of Case
This case solidifies concepts of standing and prohibition of assignments regarding legal malpractice actions and claims under Florida law. This issue will be critically important as the real estate problems continue and assignees of lenders will look to lawyers in foreclosure and other commercial contexts.

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