A Bankruptcy Court Order Permitting Creditors to Pursue Legal Malpractice Claims in State Court in the Name of a Debtor’s was an Impermissible Assignment and Violates Public Policy

Joe Garin and Jessica Green 2016By Joseph P. Garin, Esq. and Jessica A. Green, Esq., of Lipson, Neilson, Cole, Seltzer & Garin, P.C., Las Vegas, Nevada; as published in the March 2017 issue of the eAdvisory published by the American Bar Association’s Standing Committee on Lawyers’ Professional Liability

In Tower Homes, LLC v. William H. Heaton, the Nevada Supreme Court concluded a bankruptcy court order permitting a group of creditors to pursue a legal malpractice claim in the debtor’s name constituted an impermissible assignment of the claim which, as a matter of public policy, is prohibited under Nevada law.

Tower Homes, LLC (“Tower”) retained attorney William Heaton to assist with a residential common ownership project. Various individual investors (hereinafter the “Purchasers”) made earnest money deposits before the project was complete and entered into contracts with Tower to reserve condominiums. The project failed and Tower entered Chapter 11 bankruptcy protection.

The Purchasers were among the many creditors in the bankruptcy proceedings. In 2008, the bankruptcy trustee created a plan of reorganization and the bankruptcy court entered a confirmation order. Per the order, the trustee and bankruptcy estate retained all legal claims. In 2010, the bankruptcy trustee entered into a stipulation and order with the Purchasers recognizing the trustee did not have sufficient funds to pursue any legal malpractice claims related to the Purchasers’ lost earnest money deposits, and instead allowed the Purchasers to pursue the claim in Tower’s name.

Pursuant to the 2010 order, in 2012, the Purchasers filed a legal malpractice lawsuit against Heaton, naming Tower as plaintiff. Dissatisfied with the Purchasers’ standing to pursue the legal malpractice claim, the state trial court allowed the Purchasers to seek an amended order from the bankruptcy court. In 2013, the bankruptcy court entered an additional order authorizing the Purchasers to pursue any and all claims on behalf of Tower (specifically including the malpractice case against Heaton) and noted that the recovery “shall be for the benefit of the [P]urchasers.”

Heaton moved for summary judgment in the district court arguing the 2013 bankruptcy stipulation and order constituted an impermissible assignment of a legal malpractice claim. The Purchasers argued federal law permits a Chapter 11 bankruptcy plan to allow named representatives of the estate to bring legal malpractice claims on behalf of the estate, with or without an assignment. The Purchasers also contended that they were assigned only the proceeds, not the entire malpractice claim. The Nevada Supreme Court previously determined that in a personal injury context, the difference between an assignment of an entire claim and an assignment of proceeds was the retention of control; reasoning that when only proceeds are assigned, the original party maintains control over the claim, but when an entire claim is assigned, a new party gains control over it. Despite these arguments, the trial court granted summary judgment in Heaton’s favor on the basis that there was an assignment of the legal malpractice claim contrary to Nevada law. The Purchasers appealed.

The Nevada Supreme Court affirmed summary judgment in favor of the attorney. In its decision, the Nevada Supreme Court reinforced the traditional notion that the assignment of legal malpractice claims is generally prohibited and “[a]s a matter of public policy, [Nevada] cannot permit enforcement of a legal malpractice action which has been transferred by assignment…but which was never pursued by the original client” as “[t]he decision to bring a malpractice action against an attorney is one peculiarly vested in the client.” The Nevada Supreme Court agreed that while a bankruptcy plan may allow an estate representative to pursue the estate’s claim without an assignment so long as the representative is prosecuting the claim “on behalf of the estate,” “[i]f a party seeks to prosecute the action on its own behalf, it must do as an assignee, not a special representative.” The Court reasoned that because the bankruptcy court’s order transferred control and proceeds of the legal malpractice claim to the Purchasers, the Purchasers were not pursuing claim on behalf of the estate as permitted by federal law, but rather pursuing it for their own benefit.

Practice Note: This decision runs contrary to recent decisions in other jurisdictions that seem to relax the standard privity requirements in legal malpractice claims and permit assignments of legal malpractice claims to non-clients in a business context.

Joe Garin to Speak at the 2016 CLM Claims College – School of Professional Lines

Joseph Garin resize 1Joe Garin, Managing Partner of the firm’s Las Vegas office, will be speaking at the CLM 2016 Claims College School of Professional Lines. The 2016 Claims College will be held in Baltimore, Maryland, September 7-10.

Each school is comprised of three levels and successful completion of all levels in a particular school will earn participants a respected and sought after designation, which will become the industry standard for identifying top-notch claims professionals. For individual schools, levels consist of pre-course reading materials, in-class instruction, group projects and an exam. The Claims College is not an industry seminar or conference, this is a true educational experience designed to help educate and grow the claims profession.

Mr. Garin is consulted nationally on the defense of professional liability claims, ethics, employment, insurance coverage disputes, director and officer claims, and risk management. He is also experienced in handling complex and commercial litigation matters, including cases involving unfair business practices.

Mr. Garin earned a B.G.S. degree from the University of Michigan and received his J.D. degree cum laude from Michigan State University-Detroit College of Law, where he was a member of the Law Review. He is a member of the State Bar of Nevada, the State Bar of Colorado, the State Bar of Michigan and the State Bar of Illinois. He is admitted before the United States District Court the District of Nevada, the District of Colorado, the Eastern and Western District of Michigan, as well as in the Sixth and Ninth Circuit Court of Appeals.

Mr. Garin is the immediate past Chair to the State Bar of Nevada Standing Committee on Professional Responsibility and Ethics and continues to serve as a member of the Committee. He is a member a co-chair to the Professional Liability Committee for the Claims and Litigation Management Alliance.

About the CLM
The Claims and Litigation Management Alliance (CLM) promotes and furthers the highest standards of claims and litigation management and brings together the thought leaders in both industries. CLM’s Members and Fellows include risk and litigation managers, insurance and claims professionals, corporate counsel, outside counsel and third party vendors. The CLM sponsors educational programs, provides resources and fosters communication among all in the industry. To learn more about the CLM, please visit www.theclm.org.

David A. Clark Joins Las Vegas Office as a Partner in the Firm

David ClarkJeffrey Neilson, Managing Partner of the Lipson, Neilson, Cole, Seltzer & Garin, P.C. law firm, is proud to announce that former Bar Counsel for the State Bar of Nevada, David A. Clark, has joined the firm as a Partner in its Las Vegas office. Clark’s practice focuses mainly on professional liability defense, discipline defense, ethics opinions and expert witness testimony; he has worked as Of Counsel for the firm since August 2015.

“David has extensive experience in attorney regulation for professional liability, attorney discipline and commercial litigation. He has prosecuted more than 1,000 attorney grievances from the investigation stage through trial and appeal that resulted in reported decisions, and he filed emergency suspension and reciprocal discipline petitions to the Supreme Court. He’s a great addition,” said Jeffrey Neilson.

Clark worked as a prosecutor for the Office of Bar Counsel for 15 years, including five years as the chief discipline counsel for the State Bar. During this time, Clark obtained several injunctions and contempt orders in state court against parties who practiced law without authorization and successfully defended the bar in California and Nevada federal court against actions over prosecutions. He established the training program for the Southern and Northern Disciplinary Boards, obtained numerous changes to the Nevada Rules of Professional Conduct and the Supreme Court’s rules for attorney discipline, and he drafted the Disciplinary Rules of Procedure that were adopted in July 2014 by a task force and the Board of Governors.

Clark has presented during numerous continuing legal education-certified seminars on attorney ethics, has spoken about ethics and attorney discipline to paralegal groups, and taught paralegal ethics and legal research at the College of Southern Nevada since 2004.

He received a law degree from Loyola Law School in Los Angeles in 1990, and graduated with a bachelor’s degree in 1985 from Claremont McKenna College.

About Lipson Neilson
Founded in 1985, Lipson, Neilson, Cole, Seltzer, Garin, P.C. has offices in Bloomfield Hills, Grand Rapids, Las Vegas and Phoenix. The firm is widely known for its excellence in the professional liability lines, offering invaluable insight and experience to its clients across all industries. The firm represents clients across the USA and around the world. You can learn more about the firm at www.lipsonneilson.com.

Lipson Neilson Attorneys to Speak on Professional Liability Topics at 2016 Claims and Litigation Management Conference

Joe Garin, Karen Smyth, and Dax Watson, will be featured on panels of professional liability industry professionals at the 2016 Claims and Litigation Management Boston Conference held on July 14-15, 2016.

Joseph Garin resize 3Joe Garin, Managing Partner of the firm’s Las Vegas office, will discuss “The Lawyers: Global Perspectives on Data Collection, Transfer, Use and Disclosure.” This panel will cover expense and loss exposure to law firms and their clients inherent in data collection, transfer, use and disclosure; describe the emerging legal, regulatory and ethical issues facing the legal profession; and explore techniques to manage and transfer these risks. Joe Garin is consulted nationally on the defense of professional liability claims, ethics, employment, insurance coverage disputes, director and officer claims, and risk management. He is also experienced in complex and commercial litigation matters, including cases involving breach of contract and unfair business practices. Joe is a graduate of the Litigation Management Institute.

_DSC9496-8_0x10_0-03A-Q01Karen Smyth, a Partner in the firm’s Bloomfield Hills office and President of the Michigan Claims and Litigation Management Chapter, will discuss “Cyber Attacks on Professionals – How Far Will They Raise The Standard of Care?” This session will discuss types of attacks against professionals that give rise to claims by their clients, how to prevent and then defend lawsuits relating to such attacks, and the quandary of the standard of care: The more we improve how we deal with attackers the higher the standard becomes for everyone. Karen Smyth has considerable experience in the defense of professional liability cases, including legal malpractice, medical malpractice, and employment practices litigation. Karen is a graduate of the Litigation Management Institute.

Dax 81 x 81 compressedDax Watson, Managing Partner of the firm’s Phoenix office, will discuss “Ripped From the Headlines, Don’t Be Next!” Panelists will discuss case studies and volunteer commentary on legal issues and ethical implications. This presentation focuses on identifying these social media risks through recent headlines. The panel will emphasize how lawyers, insureds, claim professionals, and risk managers can successfully navigate social media. Dax Watson’s practice is focused in commercial litigation with an emphasis in real estate matters and professional liability defense. He defends professionals in the fields of real estate, law, accounting, architecture, and engineering. He also defends officers, directors and employers in employment practice liability disputes. Dax has appeared and represented clients in every county in Arizona; and has extensive litigation and civil trial experience, having tried dozens of jury trials.

About Lipson Neilson
Founded in 1985, Lipson, Neilson, Cole, Seltzer & Garin, P.C. has offices in Bloomfield Hills, Las Vegas, Phoenix and Grand Rapids. The firm is widely known for its professional liability lines, offering invaluable insight and experience to its clients across all industries. The firm represents clients throughout the USA and around the world. You can learn more at www.lipsonneilson.com.

Dax Watson Teaches Class Titled “An Accountant’s Guide to Minimizing Professional Liability” at 2016 Scaling New Heights Conference

Dax Watson compressedDax Watson, Managing Partner of the Lipson Neilson law firm’s Phoenix office was selected to teach a class titled “An Accountant’s Guide to Minimizing Professional Liability” during the prestigious Woodard Scaling New Heights conference held May 22-25 at the Atlantis on Paradise Island, Bahamas. Joining Dax in teaching this session was John Torvi, Vice President of Marketing & Sales at the Herbert H. Landy Insurance agency.

This session provided an in-depth understanding of specific issues and circumstances that lead to lawsuits and other negative consequences of practice errors as well as practical knowledge and tips to avoid malpractice claims or complaints. The session also covered the “ins & outs” of a professional liability insurance policy so that an insured will be covered, and what to do if your firm is sued or accused of malpractice. This session was approved for 2 Continuing Professional Education (CPE) credits for those attending.

Unfortunately, accounting professionals continue to get sued for common malpractice issues. These include allegations of not applying prudent standards of care (especially when multiple standards may apply), exposure under securities laws, missed deadlines and missed or late filings, failure to develop, implement and consistently practice quality control measures, failure to detect fraud and the negligent preparation of tax returns or giving improper tax advice. In addition, they face a growing threat to their practice in the form of a privacy or cyber security breach.

No longer just a concern for large corporations, the consequences of a privacy breach can be devastating to any business. Whereas a malpractice claim may “only” involve a lawsuit, an event involving loss of data could also include civil penalties and state-mandated notifications and credit monitoring; if your firm practices or has clients in multiple states, the complexities of compliance and remediation can be staggering.

This conference attracted nationally renowned speakers such as Daymond John, star of the business reality show Shark Tank. The overall purpose was to provide education for small business owners and managers, and for accounting professionals that work with small businesses.

Dax Watson has extensive litigation and professional liability defense experience. In addition to his legal practice, Watson is approved to teach legal issues, agency and disclosure, and property management by the Arizona Department of Real Estate. He regularly teaches risk-reduction classes to, and seminars for, real estate Brokers throughout Arizona.

To learn about the Lipson Neilson law firm please visit www.lipsonneilson.com.

Contact: Dax Watson
Phone: 602-626-8888
Email: DWatson@lipsonneilson.com

Joe Garin and Jessica Green Selected as 2016 Mountain States Super Lawyers

super-lawyersOnce again, the annual list of Mountain States Super Lawyers includes Lipson, Neilson, Cole, Seltzer & Garin, P.C. attorneys Joe Garin and Jessica Green. This is Joe Garin’s tenth consecutive year on the Super Lawyers list and Jessica Green’s third consecutive year as a Super Lawyers’ Rising Star.

Joseph Garin resize 3Joe Garin is the Managing Partner of the firm’s Las Vegas office. He is consulted nationally on the defense of professional liability claims, ethics, employment, insurance coverage disputes, director and officer claims, and risk management. Joe is also experienced in complex and commercial litigation matters, including cases involving breach of contract and unfair business practices. He serves as the Chair to the State Bar of Nevada Standing Committee on Professional Responsibility and Ethics, and is a co-chair to the Professional Liability Committee for the Claims and Litigation Management Alliance. Joe is a member of the State Bar of Michigan, the State Bar of Illinois, the State Bar of Nevada and the State Bar of Colorado.

Jessica Green resize 2Jessica Green has defended many lawyers and law firms throughout the country during her career and is recognized as an emerging leader in Errors and Omissions (E&O), Employment, and Insurance Coverage law. Jessica is also well versed in education law and she serves as an Educational Surrogate Parent and Transition Specialist for the Legal Aid Center of Southern Nevada. In doing so, she advocates for children with disabilities, ensuring their schools are meeting their disability-related needs. Jessica is a national liaison for the Defense Research Institute Lawyers’ Professionalism and Ethics Committee.

Published by Thomson Reuters, the world’s leading source of information for the legal industry, Super Lawyers uses a patented multiphase selection process that includes peer nominations, evaluations and independent research. The selection process for the Rising Stars list is the same as the Super Lawyers, with one exception: to be eligible for inclusion in Rising Stars, a candidate must be either 40 years old or younger or in practice for 10 years or less.

About the Firm
Founded in 1985, Lipson, Neilson, Cole, Seltzer, Garin, P.C. has offices in Las Vegas, Phoenix, Bloomfield Hills and Grand Rapids. The firm is widely known for its excellence in the professional liability lines, offering invaluable insight and experience to its clients across all industries. The firm represents clients in Nevada, across the USA, and around the world. You can learn more www.lipsonneilson.com.

Contact
Joe Garin – Lipson, Neilson, Cole, Seltzer & Garin, P.C.
Phone: 702-382-1500
Email: jgarin@lipsonneilson.com

Karen Smyth to Discuss “EEOC & LGBT Employment Matters: Accommodations, Harassment, Title VII & Impact of Obergefell” at the Second Annual Employment Practices Liability Insurance ExecuSummit

cropped-Karen_Smyth_headshotKaren Smyth, a Partner at Lipson, Neilson, Cole, Seltzer, Garin, P.C. will be featured on a panel of leading industry professionals discussing “EEOC & LGBT Employment Matters: Accommodations, Harassment, Title VII &+ Impact of Obergefell” at the second annual Employment Practices Liability Insurance ExecuSummit held in Chicago at the Dana Hotel on April 12-13, 2016.

This summit will provide attendees a unique opportunity to learn from distinguished presenters who will be discussing current issues and trends impacting Employment Practices Liability underwriting and claims. Attendees will include insurance industry executives, corporate counsel and attorneys from across the USA.

Karen has considerable experience in the defense of professional liability cases, including legal malpractice, medical malpractice, and employment practices litigation. She is a licensed attorney in Michigan and New York, a graduate of the Litigation Management Institute and the President of the Michigan Chapter of the Claims & Litigation Management Alliance.

About Lipson Neilson
Founded in 1985, Lipson, Neilson, Cole, Seltzer, Garin, P.C. has offices in Bloomfield Hills, Grand Rapids, Las Vegas and Phoenix. The firm is widely known for its professional liability lines, offering invaluable insight and experience to its clients across all industries. The firm represents clients in throughout the USA and around the world. You can learn more at www.lipsonneilson.com.

Contact Karen Smyth
Phone: 248-593-5000
Email: ksmyth@lipsonneilson.com